Exhibit 10.13
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NOTE PURCHASE AGREEMENT
Dated as of September 27, 2000
Among
MIDWAY AIRLINES CORPORATION,
ALLFIRST BANK,
as Pass Through Trustee under each of the
Pass Through Trust Agreements
ALLFIRST BANK,
as Subordination Agent
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
as Escrow Agent
and
ALLFIRST BANK,
as Paying Agent
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INDEX TO NOTE PURCHASE AGREEMENT
Page
SECTION 1. Financing of New Aircraft...................................... 2
SECTION 2. Conditions Precedent........................................... 6
SECTION 3. Representations and Warranties................................. 6
SECTION 4. Covenants...................................................... 10
SECTION 5. Notices........................................................ 10
SECTION 6. Expenses....................................................... 11
SECTION 7. Further Assurances............................................. 11
SECTION 8. Miscellaneous.................................................. 12
SECTION 9. Governing Law.................................................. 12
Schedules
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Schedule I New Aircraft and Scheduled Delivery Months
Schedule II Pass Through Trust Agreements
Schedule III Deposit Agreements
Schedule IV Escrow and Paying Agent Agreements
Schedule V Mandatory Document Terms
Schedule VI Mandatory Economic Terms
Schedule VII Aggregate Amortization Schedule
Annex
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Annex A Definitions
Exhibits
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Exhibit A-1 Form of Leased Aircraft Participation Agreement
Exhibit A-2 Form of Lease
Exhibit A-3 Form of Leased Aircraft Indenture
Exhibit A-4 Form of Leased Aircraft Trust Agreement
Exhibit B Form of Delivery Notice
Exhibit C-1 Form of Owned Aircraft Participation Agreement
Exhibit C-2 Form of Owned Aircraft Indenture
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT, dated as of September 27, 2000, among
(i) MIDWAY AIRLINES CORPORATION, a Delaware corporation (the "Company"), (ii)
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ALLFIRST BANK ("Allfirst"), a Maryland state-chartered commercial bank, not in
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its individual capacity except as otherwise expressly provided herein, but
solely as trustee (in such capacity together with its successors in such
capacity, the "Pass Through Trustee") under each of the three separate Pass
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Through Trust Agreements (as defined below), (iii) ALLFIRST BANK, a Maryland
state-chartered commercial bank, as subordination agent and trustee (in such
capacity together with its successors in such capacity, the "Subordination
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Agent") under the Intercreditor Agreement (as defined below), (iv) FIRST UNION
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TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as Escrow
Agent (in such capacity together with its successors in such capacity, the
"Escrow Agent"), under each of the Escrow and Paying Agent Agreements (as
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defined below) and (v) ALLFIRST BANK, a Maryland state-chartered commercial
bank, as Paying Agent (in such capacity together with its successors in such
capacity, the "Paying Agent") under each of the Escrow and Paying Agent
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Agreements.
W I T N E S S E T H:
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WHEREAS, capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in Annex A hereto;
WHEREAS, the Company has obtained commitments from the Manufacturer
pursuant to the Aircraft Purchase Agreement for the delivery of the eight
aircraft listed in Schedule I hereto (together with any aircraft substituted
therefor in accordance with an Aircraft Purchase Agreement prior to the delivery
thereof, the "New Aircraft");
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WHEREAS, pursuant to the Pass Through Trust Agreements set forth in
Schedule II hereto, and concurrently with the execution and delivery of this
Agreement, separate grantor trusts (collectively, the "Pass Through Trusts" and,
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individually, a "Pass Through Trust") have been created to facilitate certain of
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the transactions contemplated hereby, including, without limitation, the
issuance and sale of pass through certificates pursuant thereto (collectively,
the "Certificates") to provide for a portion of the financing of the New
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Aircraft;
WHEREAS, the Company has entered into the Placement Agreement dated
September 22, 2000 (the "Placement Agreement") with the two placement agents
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(the "Placement Agents") named therein, which provides that the Company will
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cause each Pass Through Trust to issue and sell the Certificates to the
Placement Agents;
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) the Escrow Agents and the Depositary entered into the Deposit
Agreements set forth in Schedule III hereto (the "Deposit Agreements") whereby
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the applicable Escrow Agent agreed to direct the Placement Agents to make
certain deposits referred to therein on the Issuance Date (the "Initial
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Deposits") and to permit the applicable Pass Through Trustee to make additional
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deposits from time to time thereafter (the Initial Deposits together with such
additional deposits are collectively referred to as the "Deposits") and (ii) the
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Pass Through Trustees, the Placement Agents, the Paying Agents and the Escrow
Agents entered into the Escrow and Paying Agent Agreements set forth in Schedule
IV hereto (the "Escrow and Paying Agent Agreements") whereby, among other
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things, (a) the Placement Agents agreed to deliver an amount equal to the amount
of the Initial Deposits to the Depositary on behalf of the applicable Escrow
Agent and (b) the applicable Escrow Agent, upon the Depositary receiving such
amount, has agreed to deliver escrow receipts to be affixed to each Certificate;
WHEREAS, prior to the delivery of each New Aircraft, the Company will
determine whether to enter into a leveraged lease transaction as lessee with
respect to such New Aircraft (a "Leased Aircraft") or to purchase as owner such
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New Aircraft (an "Owned Aircraft") and will give to the Pass Through Trustee a
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Delivery Notice (as defined below) specifying its election;
WHEREAS, upon receipt of a Delivery Notice with respect to a New
Aircraft, subject to the terms and conditions of this Agreement, the applicable
Pass Through Trustees will enter into the applicable Financing Agreements
relating to such New Aircraft;
WHEREAS, upon the delivery of each New Aircraft, each Pass Through
Trustee will fund its purchase of Equipment Notes with the proceeds of one or
more Deposits withdrawn by the applicable Escrow Agent under the related Deposit
Agreement bearing the same interest rate as the Certificates issued by such Pass
Through Trust; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital Services Inc. (the "Liquidity Provider"),
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has entered into three revolving credit agreements (each, a "Liquidity
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Facility"), one each for the benefit of the Certificateholders of each Pass
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Through Trust, with the Subordination Agent, as agent for the Pass Through
Trustee on behalf of each such Pass Through Trust and (ii) the Pass Through
Trustee, the Liquidity Providers and the Subordination Agent have entered into
the Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
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Agreement");
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NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements herein contained and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Financing of New Aircraft. (a) The Company confirms that
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it has entered into the Aircraft Purchase Agreement with the Manufacturer
pursuant to which the Company has agreed to purchase, and the Manufacturer has
agreed to deliver, the New Aircraft in the months specified in Schedule I
hereto, all on and subject to terms and conditions specified in the applicable
Aircraft Purchase Agreement. The Company agrees to finance the New Aircraft in
the manner
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provided herein, all on and subject to the terms and conditions hereof and of
the relevant Financing Agreements.
(b) In furtherance of the foregoing, the Company agrees to give the
parties hereto, the Depositary and each of the Rating Agencies not less than two
Business Days' prior notice substantially in the form of Exhibit B hereto (a
"Delivery Notice") of the scheduled financing date (the "Scheduled Delivery
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Date") (or, in the case of a substitute Delivery Notice under Section 1(d) or
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(e) hereof, one Business Day's prior notice or in the case of the delivery of
any Aircraft on the date hereof, the same Business Day notice) in respect of
each New Aircraft under the Aircraft Purchase Agreement, which notice shall:
(i) specify whether the Company has elected to treat such New
Aircraft as a Leased Aircraft or an Owned Aircraft;
(ii) specify the Scheduled Delivery Date of such New Aircraft
(which shall be a Business Day before the Cut-off Date and, except as
provided in Section 1(e) hereof, the date (the "Funding Date") on
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which the financing therefor in the manner provided herein shall be
consummated);
(iii) instruct the Pass Through Trustee to instruct the relevant
Escrow Agent to provide a Notice of Purchase Withdrawal to the
Depositary with respect to the Equipment Notes to be issued in
connection with the financing of such New Aircraft;
(iv) instruct the Pass Through Trustee to enter into the
Participation Agreement included in the Financing Agreements with
respect to such Aircraft in such form and at such a time on or before
the Funding Date specified in such Delivery Notice and to perform its
obligations thereunder;
(v) specify the aggregate principal amount of each series of
Equipment Notes to be issued, and purchased by the Pass Through
Trustees, in connection with the financing of such New Aircraft
scheduled to be delivered on such Funding Date (which shall in all
respects comply with the Mandatory Economic Terms); and
(vi) if such New Aircraft is to be a Leased Aircraft, certify
that the related Owner Participant (A) is not an Affiliate of the
Company and (B) based on the representations of such Owner
Participant, is either (1) a Qualified Owner Participant or (2) any
other person the obligations of which under the Owner Participant
Agreements (as defined in the applicable Participation Agreement) are
guaranteed by a Qualified Owner Participant.
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(c) Upon receipt of a Delivery Notice, the Pass Through Trustees
shall, and shall cause the Subordination Agent to, enter into and perform their
obligations under the Participation Agreement specified in such Delivery Notice;
provided that, such Participation Agreement and the other Lease Financing
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Agreements or Owner Financing Agreements to be entered into pursuant to such
Participation Agreement shall be in the forms thereof annexed hereto in all
material respects with such changes therein as shall have been requested by the
related Owner Participant (in the case of Lease Financing Agreements), agreed to
by the Company, the Pass Through Trustees and the Subordination Agent (to the
extent the interests of the Pass Through Trustees or the Subordination Agent are
adversely affected thereby) and, if modified in any material respect, as to
which Rating Agency Confirmation shall have been obtained from each Rating
Agency by the Company (to be delivered by the Company to the applicable Pass
Through Trustee on or before the relevant Delivery Date, it being understood
that if Rating Agency Confirmation shall have been received with respect to any
Financing Agreements and such Financing Agreements are utilized for subsequent
New Aircraft without material modifications, no additional Rating Agency
Confirmation shall be required); provided, however, that the relevant Financing
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Agreements as executed and delivered shall not vary the Mandatory Economic Terms
and shall contain the Mandatory Document Terms. Notwithstanding the foregoing,
if any Financing Document annexed hereto shall not have been reviewed by either
Rating Agency prior to the Issuance Date, then, prior to the use thereof in
connection with the financing of any Aircraft hereunder, the Company shall
obtain from each Rating Agency a confirmation that the use of such Financing
Documents would not result in (i) a reduction of the rating for any Class of
Certificates below the then current rating for such Class of Certificates or
(ii) a withdrawal or suspension of the rating of any Class of Certificates. With
respect to each New Aircraft, the Company shall cause Allfirst (or such other
person that meets the eligibility requirements to act as loan trustee under the
Leased Aircraft Indenture or Owned Aircraft Indenture) to execute as Loan
Trustee the Financing Agreements relating to such Aircraft to which such Loan
Trustee is intended to be a party, and shall concurrently therewith execute such
Financing Agreements to which the Company is intended to be a party and perform
its respective obligations thereunder. Upon the request of either Rating Agency,
the Company shall deliver or cause to be delivered to each Rating Agency a true
and complete copy of each Financing Agreement relating to the financing of each
New Aircraft together with a true and complete set of the closing documentation
(including legal opinions) delivered to the related Loan Trustee, Subordination
Agent and Pass Through Trustee under the related Participation Agreement.
(d) If after giving any Delivery Notice, there shall be a delay in the
delivery of a New Aircraft, or if on the Scheduled Delivery Date of a New
Aircraft the financing thereof in the manner contemplated hereby shall not be
consummated for whatever reason, the Company shall give the parties hereto
prompt notice thereof. Concurrently with the giving of such notice of
postponement or subsequently, the Company shall give the parties hereto a
substitute Delivery Notice specifying the date to which such delivery and
related financing shall have been re-scheduled (which shall be a Business Day
before the Cut-off Date on which the Escrow Agents shall be entitled to withdraw
one or more Deposits under each of the applicable Deposit Agreements to enable
each applicable Pass Through Trustee to fund its purchase of the related
Equipment Notes). Upon receipt
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of any such notice of postponement, each applicable Pass Through Trustee shall
comply with its obligations under Section 2.01 of each of the Pass Through Trust
Agreements and thereafter the financing of the relevant New Aircraft shall take
place on the re-scheduled Delivery Date therefor (all on and subject to the
terms and conditions of the relevant Financing Agreements) unless further
postponed as provided herein.
(e) Anything in this Section 1 to the contrary notwithstanding, the
Company shall have the right at any time on or before the Scheduled Delivery
Date of any New Aircraft, and subsequent to its giving a Delivery Notice
therefor, to postpone the Scheduled Delivery Date of such New Aircraft so as to
enable the Company to change its election to treat such New Aircraft as a Leased
Aircraft or an Owned Aircraft by written notice of such postponement to the
other parties hereto. The Company shall subsequently give the parties hereto a
substitute Delivery Notice complying with the provisions of Section 1(b) hereof
and specifying the new Funding Date for such postponed New Aircraft (which shall
be a Business Day occurring before the Cut-off Date and on which the Escrow
Agent shall be entitled to withdraw Deposits under each of the applicable
Deposit Agreements sufficient to enable each applicable Pass Through Trustee to
fund its purchase of the related Equipment Notes). In addition, the Company
shall have the further right, anything in this Section 1 to the contrary
notwithstanding, to accept delivery of a New Aircraft under the applicable
Aircraft Purchase Agreement on the Delivery Date thereof by utilization of
bridge financing of such New Aircraft and thereafter give the parties hereto a
Delivery Notice specifying a Funding Date not later than 60 days after the
Delivery Date of such New Aircraft and no later than the Cut-off Date and
otherwise complying with the provisions of Section 1(b) hereof. All other terms
and conditions of this Note Purchase Agreement shall apply to the financing of
any such New Aircraft on the re-scheduled Funding Date therefor except (i)the
re-scheduled Funding Date shall be deemed the Delivery Date of such New Aircraft
for all purposes of this Section 1 and (ii)the related Financing Agreements
shall be amended to reflect the original delivery of such New Aircraft to the
Company.
(f) The Company shall have no liability for the failure of the Pass
Through Trustees to purchase Equipment Notes with respect to any New Aircraft,
other than the Company's obligation, if any, to pay the Deposit Make-Whole
Premium pursuant to Section 4(a)(i) of this Agreement.
(g) The parties agree that if, in connection with the delivery of a
New Aircraft, any Owner Participant who is to be a party to any Lease Financing
Agreement shall not be a "Citizen of the United States" within the meaning of
Section 40102(a)(15) of the Act, then the applicable Lease Financing Agreements
shall be modified, consistent with the Mandatory Document Terms, to require such
Owner Participant to enter into a voting trust, voting powers or similar
arrangement satisfactory to the Company that (A) enables such New Aircraft to be
registered in the United States and (B) complies with the FAA regulations issued
under the Act applicable thereto.
(h) Anything herein to the contrary notwithstanding, the Company shall
not have the right, and shall not be entitled, at any time to request the
issuance of Equipment Notes of any
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series to any Pass Through Trustee in an aggregate principal amount in excess of
the amount of the Deposits then available for withdrawal by the Escrow Agent
under and in accordance with the provisions of the related Deposit Agreement.
(i) The Company hereby agrees to give notice to the Pass Through
Trustee on the date on which Equipment Notes issued with respect to all New
Aircraft have been purchased by the Pass Through Trustee in accordance with this
Agreement; the Pass Through Trustee hereby agrees to give a copy of such notice
to the Escrow Agent and the Paying Agent.
(j) In the event that an increase in the interest rate applicable to
the Certificates shall become effective pursuant to the Registration Rights
Agreement, the Company shall give immediate notice thereof to the Escrow Agent
and the Pass Through Trustee, indicating the effective date of such increase.
Immediately upon receipt of such notice, the Escrow Agent shall deliver the
Increase Notice (in the form of Exhibit C to the Deposit Agreement) to the
Depositary. In the event that, at any time thereafter, the foregoing increase
in interest rate is no longer required by the terms of the Registration Rights
Agreement, the Company shall give immediate notice thereof to the Escrow Agent
and the Pass Through Trustee, indicating, the effective date of such decrease.
Immediately upon receipt of such notice, the Escrow Agent shall deliver the
Rescission Notice (in the form of Exhibit D to the Deposit Agreement) to the
Depositary.
SECTION 2. Conditions Precedent. The obligation of the Pass Through
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Trustees to enter into, and to cause the Subordination Agent to enter into, any
Participation Agreement as directed pursuant to a Delivery Notice and to perform
its obligations under such Participation Agreement is subject to satisfaction of
the following conditions:
(a) no Triggering Event shall have occurred; and
(b) the Company shall have delivered a certificate to each such Pass
Through Trustee, the Subordination Agent and each Liquidity Provider stating
that (i) such Participation Agreement and the other Financing Agreements to be
entered into pursuant to such Participation Agreement do not vary the Mandatory
Economic Terms and contain the Mandatory Document Terms and (ii) any substantive
modification of such Financing Agreements from the forms thereof attached to
this Agreement do not materially and adversely affect the Certificateholders or
the Liquidity Provider and such certification shall be true and correct (it
being agreed that a shortening of (x) any grace period specified in the
definition of "Event of Loss" or (y) any of the grace periods relating to Events
of Default, in each case in the form of Lease attached hereto, would not
materially adversely affect the Certificateholders or the Liquidity Provider).
The Pass Through Trustee shall be entitled to rely upon such certificate and
shall have no duty to determine the truth or accuracy of any representation made
therein.
Anything herein to the contrary notwithstanding, the obligation of
each Pass Through Trustee to purchase Equipment Notes shall terminate on the
Cut-off Date.
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SECTION 3. Representations and Warranties. (a) The Company
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represents and warrants that:
(i) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware
and is a "citizen of the United States" as defined in 49 U.S.C.
Section 40102, and has the full corporate power, authority and legal
right under the laws of the State of Delaware to execute and deliver
this Agreement and each Financing Agreement to which it will be a
party and to carry out the obligations of the Company under this
Agreement and each Financing Agreement to which it will be a party;
(ii) the execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations under
this Agreement have been duly authorized by the Company and will not
violate its Certificate of Incorporation or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it is bound; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity,
whether considered in a proceeding at law or in equity.
(b) Allfirst represents and warrants that:
(i) Allfirst is a Maryland state-chartered commercial bank
duly incorporated, validly existing and in good standing under the
laws of the State of Maryland, and has the full corporate power,
authority and legal right under the laws of the State of Maryland and
the United States pertaining to its banking and trust powers to
execute and deliver this Agreement and each Financing Agreement to
which it will be a party and to carry out the obligations of Allfirst,
in its capacity as Subordination Agent, Pass Through Trustee or Paying
Agent, as the case may be, under this Agreement and each Financing
Agreement to which it will be a party;
(ii) the execution and delivery by Allfirst, in its capacity as
Subordination Agent, Pass Through Trustee or Paying Agent, as the case
may be, of this Agreement and the performance by Allfirst, in its
capacity as Subordination Agent, Pass Through Trustee or Paying Agent,
as the case may be, of its obligations under this Agreement have been
duly authorized by Allfirst, in its capacity as Subordination Agent,
Pass Through Trustee or Paying Agent, as the case may be, and will not
violate its articles of association or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which it is a
party or by which it is bound;
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(iii) this Agreement constitutes the legal, valid and binding
obligations of Allfirst, in its capacity as Subordination Agent, Pass
Through Trustee or Paying Agent, as the case may be, enforceable
against it in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally
and by general principles of equity, whether considered in a
proceeding at law or in equity; and
(iv) Allfirst has made a filing with the New York State Banking
Department pursuant to Section 131.3 of the New York State Banking Law
with respect to each Pass Through Trust.
(c) The Pass Through Trustee hereby confirms to each of the other
parties hereto that its representations and warranties set forth in Section 7.15
of the Pass Through Trust Agreements are true and correct as of the date hereof.
(d) The Subordination Agent represents and warrants that:
(i) the Subordination Agent is a Maryland state-chartered
commercial bank duly incorporated, validly existing and in good
standing under the laws of the State of Maryland, and has the full
corporate power, authority and legal right under the laws of the State
of Maryland and the United States pertaining to its banking and trust
powers to execute and deliver this Agreement and each Financing
Agreement to which it is or will be a party and to perform its
obligations under this Agreement and each Financing Agreement to which
it is or will be a party;
(ii) this Agreement has been duly authorized, executed and
delivered by the Subordination Agent; this Agreement constitutes the
legal, valid and binding obligations of the Subordination Agent
enforceable against it in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity, whether
considered in a proceeding at law or in equity;
(iii) none of the execution, delivery and performance by the
Subordination Agent of this Agreement contravenes any law, rule or
regulation of the State of Maryland or any United States governmental
authority or agency regulating the Subordination Agent's banking or
trust powers or any judgment or order applicable to or binding on the
Subordination Agent and do not contravene the Subordination Agent's
articles of association or by-laws or result in any breach of, or
constitute a default under, any agreement or instrument to which the
Subordination Agent is a party or by which it or any of its properties
may be bound;
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(iv) neither the execution and delivery by the Subordination
Agent of this Agreement nor the consummation by the Subordination
Agent of any of the transactions contemplated hereby requires the
consent or approval of, the giving of notice to, the registration
with, or the taking of any other action with respect to, any Maryland
governmental authority or agency or any federal governmental authority
or agency regulating the Subordination Agent's banking or trust
powers;
(v) there are no Taxes payable by the Subordination Agent
imposed by the State of Maryland or any political subdivision or
taxing authority thereof in connection with the execution, delivery
and performance by the Subordination Agent of this Agreement (other
than franchise or other taxes based on or measured by any fees or
compensation received by the Subordination Agent for services rendered
in connection with the transactions contemplated by the Intercreditor
Agreement or any of the Liquidity Facilities), and there are no Taxes
payable by the Subordination Agent imposed by the State of Maryland or
any political subdivision thereof in connection with the acquisition,
possession or ownership by the Subordination Agent of any of the
Equipment Notes (other than franchise or other taxes based on or
measured by any fees or compensation received by the Subordination
Agent for services rendered in connection with the transactions
contemplated by the Intercreditor Agreement or any of the Liquidity
Facilities); and
(vi) there are no pending or threatened actions or proceedings
against the Subordination Agent before any court or administrative
agency which individually or in the aggregate, if determined adversely
to it, would materially adversely affect the ability of the
Subordination Agent to perform its obligations under this Agreement.
(e) The Escrow Agent represents and warrants that:
(i) the Escrow Agent is a national banking association duly
incorporated, validly existing and in good standing under the laws of
the United States and has the full corporate power, authority and
legal right under the laws of the United States pertaining to its
banking, trust and fiduciary powers to execute and deliver this
Agreement, each Deposit Agreement and each Escrow and Paying Agent
Agreement (collectively, the "Escrow Agent Agreements") and to carry
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out the obligations of the Escrow Agent under each of the Escrow Agent
Agreements;
(ii) the execution and delivery by the Escrow Agent of each of
the Escrow Agent Agreements and the performance by the Escrow Agent of
its obligations hereunder and thereunder have been duly authorized by
the Escrow Agent and will not violate its articles of association or
by-laws or the provisions of any indenture,
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mortgage, contract or other agreement to which it is a party or by
which it is bound; and
(iii) each of the Escrow Agent Agreements constitutes the legal,
valid and binding obligations of the Escrow Agent enforceable against
it in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by
general principles of equity, whether considered in a proceeding at
law or in equity.
(f) The Paying Agent represents and warrants that:
(i) the Paying Agent is a Maryland state-chartered commercial
bank duly incorporated, validly existing and in good standing under
the laws of the State of Maryland and has the full corporate power,
authority and legal right under the laws of the State of Maryland
pertaining to its banking and trust powers to execute and deliver this
Agreement and the Escrow and Paying Agent Agreement (collectively, the
"Paying Agent Agreements") and to carry out the obligations of the
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Paying Agent under each of the Paying Agent Agreements;
(ii) the execution and delivery by the Paying Agent of each of
the Paying Agent Agreements and the performance by the Paying Agent of
its obligations hereunder and thereunder have been duly authorized by
the Paying Agent and will not violate its articles of association or
by-laws or the provisions of any indenture, mortgage, contract or
other agreement to which it is a party or by which it is bound; and
(iii) each of the Paying Agent Agreements constitutes the legal,
valid and binding obligations of the Paying Agent enforceable against
it in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by
general principles of equity, whether considered in a proceeding at
law or in equity.
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SECTION 4. Covenants. The Company covenants with each of the other
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parties hereto that:
(i) on the date that the Depositary is obligated to pay the
amount of the Final Withdrawal to the Paying Agent pursuant to a
Deposit Agreement relating to any Trust, the Company shall pay to the
Pass Through Trustee of such Trust no later than 12:30 p.m. (New York
time) an amount equal to the Deposit Make-Whole Premium, if any,
required to be paid in respect of such Final Withdrawal amount;
(ii) Sections 5.01 and 5.02 of each Pass Through Trust
Agreement are hereby incorporated by reference herein; and
(iii) the Company agrees to provide written notice to each of
the parties hereto of the occurrence of the Cut-off Date no later than
one Business Day after the date thereof.
SECTION 5. Notices. Unless otherwise specifically provided herein,
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all notices required or permitted by the terms of this Agreement shall be in
English and in writing, and any such notice shall become effective upon being
delivered personally or, if promptly confirmed by mail, when dispatched by
facsimile or other written telecommunication, addressed to such party hereto at
its address or facsimile number set forth below the signature of such party at
the foot of this Agreement.
SECTION 6. Expenses. (a) The Company agrees to pay to the
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Subordination Agent when due an amount or amounts equal to the fees payable to
the relevant Liquidity Provider under Section 2.3 of each Liquidity Facility
multiplied by a fraction the numerator of which shall be the then outstanding
aggregate amount of the Deposits under the Deposit Agreements and the
denominator of which shall be the sum of (x) the then outstanding aggregate
principal amount of the Series A Equipment Notes, Series B Equipment Notes and
Series C Equipment Notes issued under all of the Indentures and (y) the then
outstanding aggregate amount of the Deposits under the Deposit Agreements.
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(b) So long as no Equipment Notes have been issued in respect of any
Aircraft, the Company agrees to pay (i) to the Subordination Agent when due (A)
the amount equal to interest on any Downgrade Advance (other than any Applied
Downgrade Advance) payable under Section 3.7(a) of each Liquidity Facility minus
Investment Earnings while such Downgrade Advance shall be outstanding, (B) the
amount equal to interest on any Non Extension Advance (other than any Applied
Non-Extension Advance) payable under Section 3.7(a) of each Liquidity Facility
minus Investment Earnings while such Non-Extension Advance shall be outstanding
and (C) any other amounts owed to the Liquidity Provider by the Subordination
Agent as borrower under each Liquidity Facility (other than amounts due as
repayment of advances thereunder or as interest on such advances, except to the
extent payable pursuant to clause (A) or (B) above), (ii) all compensation and
reimbursement of expenses, disbursements and advances payable by the Company
under the Pass Through Trust Agreements, (iii) all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with any fees or other
compensation payable to the Subordination Agent for services rendered by it
pursuant to the terms of the Intercreditor Agreement or the Participation
Agreement and (iv) in the event the Company requests any amendment to any
Operative Agreement, all reasonable fees and expenses (including, without
limitation, fees and disbursements of counsel) of the Pass Through Trustee, the
Subordination Agent, the Escrow Agent and/or the Paying Agent in connection
therewith. For purposes of this Section 6(b), the terms "Applied Downgrade
Advance", "Applied Non-Extension Advance", "Downgrade Advance", "Investment
Earnings" and Non-Extension Advance" shall have the meanings specified in each
Liquidity Facility.
SECTION 7. Further Assurances. Each party hereto shall duly execute,
------------------
acknowledge and deliver, or shall cause to be executed, acknowledged and
delivered, all such further agreements, instruments, certificates or documents,
and shall do and cause to be done such further acts and things, in any case, as
any other party hereto shall reasonably request in connection with its
administration of, or to carry out more effectually the purposes of, or to
better assure and confirm unto it the rights and benefits to be provided under,
this Agreement.
SECTION 8. Miscellaneous. (a) Provided that the transactions
-------------
contemplated hereby have been consummated, and except as otherwise provided for
herein, the representations, warranties and agreements herein of the Company,
the Subordination Agent, the Escrow Agent, the Paying Agent and the Pass Through
Trustee, and the Company's, the Subordination Agent's, the Escrow Agent's, the
Paying Agent's and the Pass Through Trustee's obligations under any and all
thereof, shall survive the expiration or other termination of this Agreement and
the other agreements referred to herein.
(b) This Agreement may be executed in any number of counterparts (and
each of the parties hereto shall not be required to execute the same
counterpart). Each counterpart of this Agreement, including a signature page
executed by each of the parties hereto, shall be an original counterpart of this
Agreement, but all of such counterparts together shall constitute one
instrument.
-12-
Neither this Agreement nor any of the terms hereof 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. The index preceding this Agreement
and the headings of the various Sections of this Agreement are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof. The terms of this Agreement shall be binding upon, and
shall inure to the benefit of, the Company and its successors and permitted
assigns, the Pass Through Trustee and its successors as Pass Through Trustee
(and any additional trustee appointed) under any of the Pass Through Trust
Agreements, the Escrow Agent and its successors as Escrow Agent under the Escrow
and Paying Agent Agreements, the Paying Agent and its successors as Paying Agent
under the Escrow and Paying Agent Agreement and the Subordination Agent and its
successors as Subordination Agent under the Intercreditor Agreement.
(c) This Agreement is not intended to, and shall not, provide any
person not a party hereto (other than the Placement Agents and each of the
beneficiaries of Section 6 hereof) with any rights of any nature whatsoever
against any of the parties hereto, and no person not a party hereto (other than
the Placement Agents and each of the beneficiaries of Section 6 hereof) shall
have any right, power or privilege in respect of, or have any benefit or
interest arising out of, this Agreement.
SECTION 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[The remainder of this page is intentionally left blank]
-13-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
MIDWAY AIRLINES CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
General Counsel
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
ALLFIRST BANK, not in its individual capacity,
except as otherwise provided herein, but solely as
Pass Through Trustee, Subordination Agent and
Paying Agent
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code 101-591
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Department
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
-14-
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION
as Escrow Agent
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Address: One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Administration
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
-15-
SCHEDULE I TO
NOTE PURCHASE AGREEMENT
-----------------------
NEW AIRCRAFT AND SCHEDULED DELIVERY MONTHS
------------------------------------------
New Aircraft Aircraft Tail Scheduled
Type Number* Delivery Months**
-------------- --------------- -----------------
Boeing 737-700 N361ML September, 2000
Boeing 737-700 N362ML October, 2000
Boeing 737-700 N363ML November, 2000
Boeing 737-700 N364ML January, 2001
Boeing 737-700 N365ML February, 2001
Boeing 737-700 N366ML April, 2001
Boeing 737-700 N367ML June, 2001
Boeing 737-700 N368ML August, 2001
________
* The tail number identified with respect to each Aircraft is a projection
only, based on the current manufacturing schedule of the manufacturer. A
different aircraft may actually be delivered to the Company by the manufacturer
on any delivery date and in such case such substituted aircraft shall be an
"Aircraft" for purposes of the Note Purchase Agreement.
** The dates reflect the scheduled delivery months under the Aircraft Purchase
Agreement. The actual delivery date for any such Aircraft may be subject to
delay by the manufacturer.
SCHEDULE II TO
NOTE PURCHASE AGREEMENT
-----------------------
PASS THROUGH TRUST AGREEMENTS
-----------------------------
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of Midway Airlines Pass Through Trust,
Series 2000-1A.
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of Midway Airlines Pass Through Trust,
Series 2000-1B.
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of Midway Airlines Pass Through Trust,
Series 2000-1C.
SCHEDULE III TO
NOTE PURCHASE AGREEMENT
-----------------------
DEPOSIT AGREEMENTS
------------------
Deposit Agreement (Class A) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
Deposit Agreement (Class B) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
Deposit Agreement (Class C) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
SCHEDULE IV TO
NOTE PURCHASE AGREEMENT
-----------------------
ESCROW AND PAYING AGENT AGREEMENTS
----------------------------------
Escrow and Paying Agent Agreement (Class A) dated as of the Issuance Date among
the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying
Agent.
Escrow and Paying Agent Agreement (Class B) dated as of the Issuance Date among
the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying
Agent.
Escrow and Paying Agent Agreement (Class C) dated as of the Issuance Date among
the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying
Agent.
SCHEDULE V TO
NOTE PURCHASE AGREEMENT
-----------------------
MANDATORY DOCUMENT TERMS
------------------------
1. May not modify in any material adverse respect as regards the interests of
the Holders, the Subordination Agents, the Liquidity Provider or the
Indenture Trustee, the Granting Clause of the Indenture Form so as to
deprive the Holders of a first priority security interest in and mortgage
lien on the Aircraft, the Lease and certain of Midway's rights under the
Aircraft Purchase Agreement or to eliminate any of the obligations intended
to be secured thereby or otherwise modify in any material adverse respect
as regards the interests of the Holders, the Subordination Agent, the
Liquidity Providers or the Loan Trustee the provisions of Article II, V, or
VI or Section 7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07, 15.04,
15.13 or Article VIII of the Indenture Form;
2. May not modify in any material adverse respect as regards the interests of
the Holders, the Subordination Agent, the Liquidity Providers or the
Indenture Trustee the provisions of Section 3(b), 3(e), 3(f), 3(g),
8(d)(vii), the first sentence of Section 9(c), 20(b) or 23(e) of the Lease
or otherwise modify the terms of the Lease so as to deprive the Loan
Trustee of rights expressly granted to the "Indenture Trustee" therein;
3. May not modify in any material adverse respect as regards the interests of
the Holders, the Subordination Agent, the Pass Through Trustee, the
Liquidity Providers or the Loan Trustee the provisions of Section 3.01(i),
3.01(j), 3.01(k), 3.01(l), 3.01(r), 4.02(a), 15.08, 15.09 or 15.10 of the
Participation Agreement or of the provisions of Section 3.01(b)(xviii) of
the Participation Agreement so as to eliminate the requirement to deliver
to the Loan Trustee the legal opinions to be provided to such Persons
thereunder (recognizing that the lawyers rendering such opinions may be
changed) or of the provisions of Section 4.02(b) of the Participation
Agreement as regards the rights of the Loan Trustee thereunder or otherwise
modify the terms of the Participation Agreement to deprive, the Pass
Through Trustee, the Subordination Agent, the Liquidity Providers or the
Loan Trustee of any indemnity or right of reimbursement in its favor for
Expenses or Taxes; and
4. May not modify in any material adverse respect as regards the interests of
the holders of the Pass Through Certificates, the Pass Through Trustee, the
Subordination Agent, the Liquidity Providers or the Loan Trustee, the
definition of "Supplemental Rent" in Appendix A to the Participation
Agreement.
Notwithstanding the foregoing, any such Mandatory Document Term may be
modified to correct or supplement any such provision which may be defective or
to cure any ambiguity or correct any mistake, provided that any such action
--------
shall not materially adversely affect the interests of the Holders, the Pass
Through Trustee the Subordination Agent, the Liquidity Providers, the Indenture
Trustee or the holders of the Pass Through Certificates.
SCHEDULE VI TO
NOTE PURCHASE AGREEMENT
-----------------------
MANDATORY ECONOMIC TERMS
------------------------
Equipment Notes
---------------
(i) The maximum principal amount of all the Equipment Notes issued
with respect to an Aircraft shall not exceed the maximum principal amount of
Equipment Notes indicated for each such Aircraft as set forth in the Offering
Memorandum under "Offering Memorandum Summary -- Equipment Notes and the
Aircraft" under the column "Maximum Principal Amount of Equipment Notes";
(ii) The initial loan to aircraft value with respect to an Aircraft
(with the assumed value of any Aircraft for these purposes to equal the value
for such Aircraft set forth in the Offering Memorandum under "Offering
Memorandum Summary -- Equipment Notes and the Aircraft" under the column
"Appraised Value"), at the time of the issuance of the related Equipment Notes
and on any Regular Distribution Date thereafter, not exceed 42% in the case of
Series A Equipment Notes, 56% in the case of Series B Equipment Notes, and 63%
in the case of Series C Equipment Notes.
(iii) The initial average life of the Series A Equipment Notes shall
not extend beyond 12.5 years, of the Series B Equipment Notes shall not extend
beyond 9.2 years, of the Series C Equipment Notes shall not extend beyond 3.5
years, in each case from the Issuance Date;
(iv) As of the first Regular Distribution Date immediately following
the Delivery Period Termination Date (or if earlier, the date of the occurrence
of a Triggering Event), and after giving effect to any Regular Distribution
required to be made on such date, the average life of the Class A Certificates,
the Class B Certificates and the Class C Certificates shall not extend beyond,
respectively, 12.4 years, 8.3 years and 3.0 years from the Issuance Date
(computed without regard to the acceleration of any Equipment Notes and after
giving effect to any special distribution on the Certificates thereafter
required in respect of unused Deposits);
(v) The final maturity date of each Series of Equipment Notes shall
not be later than the final expected distribution date (as specified on the
cover of the Offering Memorandum) of the related Class of Certificates;
(vi) The original aggregate principal amount of all of the Equipment
Notes of each Series shall not exceed the original aggregate face amount of the
Certificates issued by the corresponding Trust;
(vii) The interest rate and the April 1 and October 1 payment dates
for the Equipment Notes may not be changed;
(viii) Basic Rent and Termination Values under the related Lease must
be sufficient to pay amounts due with respect to the Equipment Notes;
(ix) The amounts payable under the all-risk aircraft hull insurance
maintained with respect to the Aircraft must be sufficient to pay the
Termination Value, subject to certain rights of self-insurance; and
(x) (i) the Past Due Rate in the Indenture and the Lease;
(ii) the Make-Whole Premium payable under the Indenture;
(iii) the provisions relating to the prepayment and purchase of
the Equipment Notes in the Indenture;
(iv) the Minimum Liability Amount; and
(v) the indemnification of the Loan Trustee, Subordination
Agent, Liquidity Providers, the Escrow Agents, the Pass-
Through Trustee and the Holders of the Equipment Notes with
respect to certain taxes and expenses;
in each case, must be provided as set forth in the Participation
Agreement, Lease and Indenture, as the case may be (or in the case of
clause (iv), may be in a greater amount, or in the case of clause (v), may
provide for modifications to such indemnification provisions so long as
such modifications are not materially adverse to the Loan Trustee,
Subordination Agent, Liquidity Providers or the Pass Through Trustee).
-2-
SCHEDULE VII TO
NOTE PURCHASE AGREEMENT
-----------------------
AGGREGATE AMORTIZATION SCHEDULE
-------------------------------
2000-1A Trust 2000-1B Trust 2000-1C Trust
Equipment Equipment Equipment
Notes Notes Notes
Scheduled Scheduled Scheduled
Payments of Payments of Payments of
Principal Principal Principal
--------------- ------------- -------------
ANNEX A TO
NOTE PURCHASE AGREEMENT
-----------------------
DEFINITIONS
-----------
"Act" means 49 U.S.C. (S)(S) 40101-46507.
---
"Adjusted Treasury Yield" means the Treasury Yield plus, in the case of a
-----------------------
distribution to holders of Class A Certificates, 300 basis points, in the case
of a distribution to holders of Class B Certificates 425 basis points and in the
case of a distribution to holders of Class C Certificates, 515 basis points.
"Affiliate" means, with respect to any person, any other person directly or
---------
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means 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 and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"Aircraft Purchase Agreement" means Aircraft Purchase Agreement No. 2235 dated
---------------------------
as of June 11, 1999, as amended, between the Company and the Manufacturer
(including all exhibits thereto, together with all letter agreements entered
into that by their terms constitute part of any such Aircraft Purchase
Agreement);
"Aircraft Purchase Agreement Assignment" means the "Purchase Agreement
--------------------------------------
Assignment" as defined in the Lease Financing Agreements.
"Allfirst" has the meaning set forth in the Preamble of the Note Purchase
--------
Agreement.
"Assumed Amortization Schedule" means Schedule VII to the Note Purchase
-----------------------------
Agreement.
"Average Life Date" means, for any Equipment Note, the date which follows the
-----------------
time of determination by a period equal to the Remaining Weighted Average Life
of such Equipment Note.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C. (S) (S) 102
---------------
et seq.
"Business Day" means any day, other than a Saturday, Sunday or other day on
------------
which commercial banks are authorized or required by law to close in New York,
New York, Charlotte, North Carolina, Baltimore, Maryland or Wilmington,
Delaware.
"Certificate" has the meaning set forth in the third recital to the Note
-----------
Purchase Agreement.
"Certificateholder" means the Person in whose name a Certificate is registered
-----------------
in the Register.
"Class" means the class of Certificates issued by each Pass Through Trust.
-----
"Class A Certificates" means the Class A Certificates issued by the Midway
--------------------
Airlines Pass Through Trust, Series 2000-1A.
"Class B Certificates" means the Class B Certificates issued by the Midway
--------------------
Airlines Pass Through Trust, Series 2000-1B.
"Class C Certificates" means the Class C Certificates issued by the Midway
--------------------
Airlines Pass Through Trust, Series 2000-1C.
"Class A Trust" means the Midway Airlines Pass Through Trust, Series 2000-1A.
-------------
"Class B Trust" means the Midway Airlines Pass Through Trust, Series 2000-1B.
-------------
"Class C Trust" means the Midway Airlines Pass Through Trust, Series 2000-1C.
-------------
"Company" means Midway Airlines, Inc., a Delaware corporation.
-------
"Corporate Trust Office" with respect to any Pass Through Trustee or any Loan
----------------------
Trustee, means the office of such trustee in the city at which at any particular
time its corporate trust business shall be principally administered.
"Cut-off Date" means the earlier of (a) the day after the Delivery Period
------------
Termination Date and (b) the date on which a Triggering Event occurs.
"Delivery Period Termination Date" means November 30, 2001 (provided that, if a
--------------------------------
labor strike occurs at the Manufacturer prior to such date, such date shall be
extended by adding thereto the number of days that such strike has continued in
effect).
"Delivery Date" means the Business Day on which a New Aircraft is delivered to
-------------
and accepted by the Company as contemplated by the Note Purchase Agreement
(subject to the provisions of Section 1(e)).
"Delivery Notice" has the meaning set forth in Section 1(b) of the Note Purchase
---------------
Agreement.
"Deposit" has the meaning set forth in the fifth recital to the Note Purchase
-------
Agreement.
"Deposit Agreement" has the meaning set forth in the fifth recital to the Note
-----------------
Purchase Agreement.
"Deposit Make-Whole Premium" means, with respect to the distribution of unused
--------------------------
Deposits to holders of any Class of Certificates, as of any date of
determination, an amount equal to the excess, if any, of (a) the present value
of the excess of (i) the scheduled payment of principal and interest
A-2
to maturity of the related series of Equipment Notes, assuming the maximum
principal amount thereof (the "Maximum Amount") minus the sum of (x) such Class
of Certificates' proportionate share (in the same proportion that the amount of
unused Deposits with respect to such Class of Certificates bears to the unused
Deposits with respect to all Classes of Certificates) of the Par Redemption
Amount (after deducting any Non-Delivery Redemption Amount) and (y) the portion
of the Non-Delivery Redemption Amount attributable to such Class were issued, on
each remaining Regular Distribution Date for such Class under the Assumed
Amortization Schedule over (ii) the scheduled payment of principal and interest
to maturity of the Equipment Notes actually acquired by the Pass Through Trustee
for such Class on each such Regular Distribution Date, such present value
computed by discounting such excess on a semiannual basis on each Regular
Distribution Date (assuming a 360-day year of twelve 30-day months) using a
discount rate equal to the Adjusted Treasury Yield over (b) the amount of such
unused Deposits to be distributed to the holders of such Certificates, minus the
sum of (x) such Class of Certificates' proportionate share of the Par Redemption
Amount and (y) the portion of the Non-Delivery Redemption Amount attributable to
such Class, plus accrued and unpaid interest on such net amount to but excluding
the date of determination from and including the preceding Regular Distribution
Date (or, if such date of determination precedes the first Regular Distribution
Date, the Issuance Date).
"Depositary" means Allfirst Bank, a Maryland state-chartered commercial bank.
----------
"Engine Warranty Assignment" means the "Engine Warranty Assignment" as defined
--------------------------
in the Lease Financing Agreements.
"Equipment Notes" means and includes any equipment notes issued under any
---------------
Indenture in the form specified in Section 2.01 thereof (as such form may be
varied pursuant to the terms of such Indenture) and any Equipment Note issued
under any Indenture in exchange for or replacement of any other Equipment Note.
"Escrow Agent" has the meaning set forth in the Preamble of the Note Purchase
------------
Agreement.
"Escrow and Paying Agent Agreement" has the meaning set forth in the fifth
---------------------------------
recital to the Note Purchase Agreement.
"FAA" means the Federal Aviation Administration of the United States.
---
"Final Withdrawal" with respect to each Escrow and Paying Agent Agreement, has
----------------
the meaning set forth in Section 1.02 thereof.
"Financing Agreements" means, collectively, the Lease Financing Agreements and
--------------------
the Owner Financing Agreements.
"Funding Date" has the meaning specified in Section 1(b)(ii).
------------
A-3
"Government Entity" means (a) any federal, state, provincial or similar
-----------------
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"H.15(519)" means the weekly statistical release designated as such, or any
---------
successor publication, published by the Board of Governors of the Federal
Reserve System.
"Indentures" means, collectively, the Leased Aircraft Indentures and the Owned
----------
Aircraft Indentures.
"Intercreditor Agreement" has the meaning set forth in the ninth recital to the
-----------------------
Note Purchase Agreement.
"Issuance Date" means the date of the original issuance of the Certificates.
-------------
"Law" means (a) any constitution, treaty, statute, law, decree, regulation,
---
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"Lease" means a Lease Agreement substantially in the form of Exhibit A-2 to the
-----
Note Purchase Agreement.
"Lease Financing Agreements" means, collectively, the Aircraft Purchase
--------------------------
Agreement Assignment, the Engine Warranty Assignment, the Leased Aircraft
Participation Agreement, the Lease, the Leased Aircraft Indenture, the Equipment
Notes issued thereunder and the Trust Agreement relating to the financing of a
Leased Aircraft.
"Leased Aircraft" means a New Aircraft subject to a Lease.
---------------
"Leased Aircraft Indenture" means a Trust Indenture and Security Agreement
-------------------------
substantially in the form of Exhibit A-3 to the Note Purchase Agreement.
"Leased Aircraft Participation Agreement" means a Participation Agreement
---------------------------------------
substantially in the form of Exhibit A-1 to the Note Purchase Agreement.
"Liquidity Facility" has the meaning set forth in the ninth recital to the Note
------------------
Purchase Agreement.
"Liquidity Provider" has the meaning set forth in the ninth recital to the Note
------------------
Purchase Agreement.
A-4
"Loan Trustee" means (i) in the case of the Lease Financing Agreements, the
------------
"Indenture Trustee" as defined therein and (ii) in the case of the Owner
Financing Agreements, the "Indenture Trustee" as defined therein.
"Mandatory Document Terms" means the terms set forth on Schedule V to the Note
------------------------
Purchase Agreement.
"Mandatory Economic Terms" means the terms set forth on Schedule VI to the Note
------------------------
Purchase Agreement.
"Manufacturer" means The Boeing Company, a Washington corporation, solely in its
------------
capacity as manufacturer of the New Aircraft.
"New Aircraft" has the meaning set forth in the second recital to the Note
------------
Purchase Agreement.
"Non-Delivery Redemption Amount" means the aggregate amount of Deposits relating
------------------------------
to Aircraft that are not or will not be delivered by the manufacturer prior to
the Delivery Period Termination Date due to any reason not occasioned by the
Company's fault or negligence.
"Note Purchase Agreement" means the Note Purchase Agreement to which this Annex
-----------------------
A is attached.
"Notice of Purchase Withdrawal" with respect to each Deposit Agreement, has the
-----------------------------
meaning set forth in Section 2.3 thereof.
"Offering Memorandum" means the Offering Memorandum dated September 22, 2000 of
-------------------
Midway relating to the Certificates.
"Operative Agreements" means, collectively, the Pass Through Trust Agreements,
--------------------
the Escrow and Paying Agent Agreements, the Deposit Agreements, the Liquidity
Facilities, the Intercreditor Agreement, the Trust Agreements, the Equipment
Notes, the Certificates and the Financing Agreements.
"Owned Aircraft" means a New Aircraft subject to an Owned Aircraft Indenture.
--------------
"Owned Aircraft Indenture" means a Trust Indenture and Mortgage substantially in
------------------------
the form of Exhibit C-2 to the Note Purchase Agreement.
"Owned Aircraft Participation Agreement" means a Participation Agreement
--------------------------------------
substantially in the form of Exhibit C-1 to the Note Purchase Agreement.
"Owner Financing Agreements" means, collectively, the Owned Aircraft
--------------------------
Participation Agreement, the Owned Aircraft Indenture and the Equipment Notes
issued thereunder.
A-5
"Owner Participant" means, with respect to any Leased Aircraft, the Person named
-----------------
as the Owner Participant in the Participation Agreement with respect to such
Leased Aircraft.
"Owner Trust" means with respect to any Leased Aircraft, the trust created by
-----------
the "Trust Agreement" referred to in the Leased Aircraft Indenture related
thereto.
"Owner Trustee" means with respect to any Leased Aircraft, the "Owner Trustee"
-------------
party to the "Trust Agreement" referred to in the Leased Aircraft Indenture
related thereto.
"Par Redemption Amount" means $3,000,000.
---------------------
"Participation Agreements" means, collectively, the Leased Aircraft
------------------------
Participation Agreements and the Owned Aircraft Participation Agreements.
"Pass Through Trusts" has the meaning set forth in the third recital to the Note
-------------------
Purchase Agreement.
"Pass Through Trust Agreements" means each of the three separate Pass Through
-----------------------------
Trust Agreements, each dated as of the Issuance Date, by and between the Company
and Pass Through Trustee.
"Pass Through Trustee" has the meaning set forth in the Preamble of the Note
--------------------
Purchase Agreement.
"Paying Agent" has the meaning set forth in the first Preamble of the Note
------------
Purchase Agreement.
"Person" means any individual, firm, partnership, joint venture, trust, trustee,
------
Government Entity, organization, association, corporation, government agency,
committee, department, authority and other body, corporate or incorporate,
whether having distinct legal status or not, or any member of any of the same.
"Placement Agents" has the meaning set forth in the fourth recital to the Note
----------------
Purchase Agreement.
"Qualified Owner Participant" means any bank, trust company, insurance company,
---------------------------
financial institution or corporation (other than, without the Company's consent,
a commercial air carrier, a commercial aircraft operator, a freight forwarder or
Affiliate of any of the foregoing), in each case with a combined capital and
surplus or net worth of at least $50,000,000.
"Rating Agencies" means, collectively, at any time, each nationally recognized
---------------
rating agency which shall have been requested to rate the Certificates and which
shall then be rating the Certificates. The initial Rating Agencies will be
▇▇▇▇▇'▇ Investors Service, Inc. and Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies Inc.
"Rating Agency Confirmation" means, with respect to any Financing Agreement that
--------------------------
has been modified in any material respect from the forms thereof attached to the
Note Purchase Agreement, a written confirmation from each of the Rating Agencies
that the use of such Financing Agreement
A-6
with such modifications would not result in (i) a reduction of the rating for
any Class of Certificates below the then current rating for such Class of
Certificates or (ii) a withdrawal or suspension of the rating of any Class of
Certificates.
"Register" means the register maintained pursuant to Sections 3.04 and 7.12 of
--------
the Pass Through Trust Agreements.
"Regular Distribution Dates" shall mean April 1 and October 1 of each year,
--------------------------
commencing April 1, 2001.
"Remaining Weighted Average Life" means, on a given date with respect to any
-------------------------------
Equipment Note, the number of days equal to the quotient obtained by dividing
(a) the sum of each of the products obtained by multiplying (i) the amount of
each then remaining scheduled payment of principal of such Equipment Note by
(ii) the number of days from and including such determination date to but
excluding the date on which such payment of principal is scheduled to be made,
by (b) the then outstanding principal amount of such Equipment Note.
"Scheduled Delivery Date" has the meaning set forth in Section 1(b) of the Note
-----------------------
Purchase Agreement.
"Section 1110" means 11 U.S.C. (S) 1110 of the Bankruptcy Code or any successor
------------
or analogous Section of the federal bankruptcy Law in effect from time to time.
"Series A Equipment Notes" means Equipment Notes issued under an Indenture and
------------------------
designated as "Series A" thereunder.
"Series B Equipment Notes" means Equipment Notes issued under an Indenture and
------------------------
designated as "Series B" thereunder.
"Series C Equipment Notes" means Equipment Notes issued under an Indenture and
------------------------
designated as "Series C" thereunder.
"Subordination Agent" has the meaning set forth in the Preamble of the Note
-------------------
Purchase Agreement.
"Taxes" means all license, recording, documentary, registration and other
-----
similar fees and all taxes, levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever imposed by any Taxing Authority, together
with any penalties, additions to tax, fines or interest thereon or additions
thereto.
"Taxing Authority" means any federal, state or local government or other taxing
----------------
authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority or
any territory or possession of the United States or any taxing authority
thereof.
A-7
"Treasury Yield" means, as of any date of determination, with respect to any
--------------
Equipment Note (utilizing the Assumed Amortization Schedule applicable thereto),
the interest rate (expressed as a decimal and, in the case of United States
Treasury bills, converted to a bond equivalent yield) determined to be the per
annum rate equal to the semi-annual yield to maturity for United States Treasury
securities maturing on the Average Life Date (of such Equipment Note) and
trading in the public securities markets either as determined by interpolation
between the most recent weekly average yield to maturity for two series of
United States Treasury securities, trading in the public securities markets, (A)
one maturing as close as possible to, but earlier than, the Average Life Date
(of such Equipment Note) and (B) the other turning as close as possible to, but
later than, the Average Life Date (of such Equipment Note), in each case as
published in the most recent H.15(519) or, if a weekly average yield to maturity
for United States Treasury securities maturing on the Average Life Date (of such
Equipment Note) is reported on the most recent H.15(519), such weekly average
yield to maturity as published in such H.15(519).
"Triggering Event" has the meaning assigned to such term in the Intercreditor
----------------
Agreement.
"Trust Agreement" means a Trust Agreement substantially in the form of Exhibit
---------------
A-5 to the Note Purchase Agreement.
A-8
EXHIBIT B
to Note Purchase Agreement
--------------------------
FORM OF DELIVERY NOTICE
-----------------------
Dated as of [________________]
To each of the addresses listed
in Schedule A hereto
Re: Delivery Notice in accordance with Note Purchase
Agreement referred to below
Gentlemen:
Reference is made to the Note Purchase Agreement, dated as of September 27,
2000 among Midway Airlines Corporation (the "Company"), Allfirst Bank, as Pass
Through Trustee under each of the Pass Through Trust Agreements (as defined
therein) (the "Pass Through Trustee"), Allfirst Bank, as Subordination Agent
(the "Subordination Agent"), First Union Trust Company, National Association, as
Escrow Agent (the "Escrow Agent") and Allfirst Bank, as Paying Agent (the
"Paying Agent") (as in effect from time to time, the "Note Purchase Agreement").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings set forth in the Note Purchase Agreement or, to the extent not defined
therein, the Intercreditor Agreement.
Pursuant to Sections 1(b) of the Note Purchase Agreement, the undersigned
hereby notifies you, in respect of the Boeing 737-700 aircraft with
manufacturer's serial number [ ] (the "Aircraft"), of the following:
(1) The Company has elected to treat the Aircraft as [a Leased Aircraft] [an
Owned Aircraft];
(2) The Scheduled Delivery Date of the Aircraft is [ ];
(3) The Funding Date for the Aircraft shall be [ ]; and
(4) The aggregate amount of each series of Equipment Notes to be issued, and
purchased by the respective Pass Through Trustees, on the Funding Date, in
connection with the financing of such Aircraft is as follows:
(a) the Class A Trustee shall purchase Series A Equipment Notes in the
amount of $[ ];
(b) the Class B Trustee shall purchase Series B Equipment Notes in the
amount of $[ ]; and
(c) the Class C Trustee shall purchase Series C Equipment Notes in the
amount of $[ ].
The Company hereby instructs the Class A Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated as of [ ] and attach
thereto a Notice of Purchase Withdrawal dated such date completed as set forth
on Annex B-1 hereto and (ii) deliver such Withdrawal Certificate and Notice of
Purchase Withdrawal to the applicable Escrow Agent.
The Company hereby instructs the Class B Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated as of [ ] and
attach thereto a Notice of Purchase Withdrawal dated such date completed as set
forth on Annex B-2 hereto and (ii) deliver such Withdrawal Certificate and
Notice of Purchase Withdrawal to the applicable Escrow Agent.
The Company hereby instructs the Class C Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated as of [ ]
and attach thereto a Notice of Purchase Withdrawal dated such date completed as
set forth on Annex B-3 hereto and (ii) deliver such Withdrawal Certificate and
Notice of Purchase Withdrawal to the applicable Escrow Agent.
The Company hereby instructs each Pass Through Trustee to (i) purchase
Equipment Notes of a series and in an amount set forth opposite such Pass
Through Trustee in clause (4) above with a portion of the proceeds of the
withdrawals of Deposits referred to in the applicable Notice of Purchase
Withdrawal referred to above and (ii) re-deposit with the Depositary the excess,
if any, of the amount so withdrawn over the purchase price of such Equipment
----
Notes.
The Company hereby instructs each Pass Through Trustee to (a) enter into
the Participation Agreement [N ML] dated as of [ ] among the
Company, [as Lessee,]* the Subordination Agent, the Pass Through Trustee,
Allfirst Bank, as Indenture Trustee, First Union Trust Company, National
Association, as Owner Trustee and [ ], as [Owner Participant,]* (b)
perform its obligations thereunder and (c) deliver such certificates, documents
and legal opinions relating to such Pass Through Trustee as required thereby.
[The Company hereby certifies that the Owner Participant with respect to
the Aircraft (A) is not an Affiliate of the Company and (B) based on the
representations of such Owner Participant, is either a Qualified Owner
Participant or a person whose obligations under the Operative Agreements (as
defined in the Participation Agreement) to which the Owner Participant is a
party are guaranteed by a Qualified Owner Participant.]*
Very truly yours,
Midway Airlines Corporation
By:_____________________
Name:
Title:
__________
* Only to be included for Leased Aircraft
SCHEDULE A
Allfirst Bank, as
Pass Through Trustee, Subordination
Agent and Paying Agent
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code 101-591
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
First Union Trust Company, National Association
One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Standard & Poor's Ratings Services,
a division of the ▇▇▇▇▇▇-▇▇▇▇ Companies Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10041
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ANNEX A
WITHDRAWAL CERTIFICATE
(Class ____)
First Union Trust Company, National Association
as Escrow Agent
Ladies and Gentlemen:
Reference is made to the Escrow and Paying Agent Agreement, dated as
of September 27, 2000 (the "Agreement"). We hereby certify to you that the
conditions to the obligations of the undersigned to execute a Participation
Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant
to Section 1.02(c) of the Agreement, please execute the attached Notice of
Purchase Withdrawal and immediately transmit by facsimile to the Depositary, at
Allfirst Bank, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (facsimile no.
(▇▇▇) ▇▇▇-▇▇▇▇).
Capitalized terms used herein but not defined herein shall have the
meanings set forth in the Agreement.
Very truly yours,
ALLFIRST BANK, not in its individual capacity by
solely as Pass Through Trustee
By ___________________________________
Name:
Title:
Dated: As of [ ]
ANNEX B-1
NOTICE OF PURCHASE WITHDRAWAL
Allfirst Bank
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code 101-591
Baltimore, Maryland
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Gentlemen:
Reference is made to the Deposit Agreement (Class A) dated as of
September 27, 2000 (the "Deposit Agreement") between First Union Trust Company,
National Association, as Escrow Agent, and Allfirst Bank, as Depositary (the
"Depositary") and to Account No. ________ (the "Account").
In accordance with Section 2.3(a) of the Deposit Agreement, the
undersigned hereby requests the withdrawal of $_________ from the Account on
______________.
The undersigned hereby directs the Depositary to pay the proceeds of
the Deposit to Allfirst Bank, ABA No. ▇▇▇▇▇▇▇▇▇, Account No. 090-02764,
Attention: Credit Trust Receipts, Reference Midway 2000 EETC on _______, 200_,
upon the telephonic request of a representative of the Pass Through Trustee.
First Union Trust Company, National Association
as Escrow Agent
By __________________________
Name:
Title:
Dated: As of [ ]
ANNEX B-2
NOTICE OF PURCHASE WITHDRAWAL
Allfirst Bank
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code 101-591
Baltimore, Maryland
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Gentlemen:
Reference is made to the Deposit Agreement (Class B) dated as of
September 27, 2000 (the "Deposit Agreement") between First Union Trust Company,
National Association, as Escrow Agent, and Allfirst Bank, as Depositary (the
"Depositary") and to Account No. ________ (the "Account").
In accordance with Section 2.3(a) of the Deposit Agreement, the
undersigned hereby requests the withdrawal of $_________ from the Account on
______________.
The undersigned hereby directs the Depositary to pay the proceeds of
the Deposit to Allfirst Bank, ABA No. ▇▇▇▇▇▇▇▇▇, Account No. 090-02764,
Attention: Credit Trust Receipts, Reference Midway 2000 EETC on _______, 200_,
upon the telephonic request of a representative of the Pass Through Trustee.
First Union Trust Company, National Association
as Escrow Agent
By __________________________
Name:
Title:
Dated: As of [ ]
ANNEX B-3
NOTICE OF PURCHASE WITHDRAWAL
Allfirst Bank
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code 101-591
Baltimore, Maryland
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Gentlemen:
Reference is made to the Deposit Agreement (Class C) dated as of
September 27, 2000 (the "Deposit Agreement") between First Union Trust Company,
National Association, as Escrow Agent, and Allfirst Bank, as Depositary (the
"Depositary") and to Account No. ________ (the "Account").
In accordance with Section 2.3(a) of the Deposit Agreement, the
undersigned hereby requests the withdrawal of $_________ from the Account on
______________.
The undersigned hereby directs the Depositary to pay the proceeds of
the Deposit to Allfirst Bank, ABA No. ▇▇▇▇▇▇▇▇▇, Account No. 090-02764,
Attention: Credit Trust Receipts, Reference Midway 2000 EETC on _______, 200_,
upon the telephonic request of a representative of the Pass Through Trustee.
First Union Trust Company, National Association
as Escrow Agent
By __________________________
Name:
Title:
Dated: As of [ ]
[Exhibit A-1 to Note Purchase Agreement
Form of Leased Aircraft Participation Agreement]
================================================================================
PARTICIPATION AGREEMENT [N3__ML]
Dated as of __________ __, 200_
among
MIDWAY AIRLINES CORPORATION,
Lessee
____________________
as Owner Participant,
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity (except as otherwise
expressly set forth herein) but solely as,
Owner Trustee
ALLFIRST BANK,
Indenture Trustee
ALLFIRST BANK,
Pass-Through Trustee
and
ALLFIRST BANK,
Subordination Agent
===============================================================================
COVERING ONE BOEING MODEL 737-700 AIRCRAFT
BEARING U.S. REGISTRATION NUMBER N3__ML
AND MANUFACTURER'S SERIAL NUMBER _____
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) Leasing....................................................................... 3
(c) Owner Participant's Equity Investment......................................... 3
(d) Secured Loan.................................................................. 3
(e) Delivery Date................................................................. 3
Section 2.02. Closing Procedure............................................................. 4
(a) Time and Place................................................................ 4
(b) Actions of the Owner Trustee.................................................. 4
(c) Actions of the Lessee......................................................... 4
ARTICLE 3. CONDITIONS PRECEDENT............................................................................... 5
Section 3.01. Conditions Precedent to Obligations of Participants........................... 5
(a) Notice........................................................................ 5
(b) Delivery of Documents......................................................... 5
(c) Airworthiness................................................................. 8
(d) Other Commitments............................................................. 9
(e) Violation of Law.............................................................. 9
(f) Tax Law Change................................................................ 9
(g) No Event of Default........................................................... 9
(h) No Event of Loss.............................................................. 9
(i) Title......................................................................... 9
(j) Certification................................................................. 9
(k) Section 1110.................................................................. 9
(l) Filings....................................................................... 9
(m) Financing Statements.......................................................... 10
(n) Precautionary Financing Statements............................................ 10
(o) No Proceedings................................................................ 10
(p) Governmental Action........................................................... 10
(q) Note Purchase Agreement....................................................... 10
-i-
(r) Perfected Security Interest................................................... 10
Section 3.02. Conditions Precedent to Obligations of Lessee................................. 11
(a) Documents..................................................................... 11
(b) Other Conditions Precedent.................................................... 11
(c) Tax Law Change................................................................ 11
Section 3.03. Post-Registration Opinion..................................................... 11
ARTICLE 4. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS................................................. 11
Section 4.01. Lessee's Representations and Warranties....................................... 11
Section 4.02. Certain Covenants of Lessee................................................... 14
(a) Filings and Recordings........................................................ 14
(b) Registration.................................................................. 14
(c) Information................................................................... 16
(d) Corporate Existence........................................................... 16
(e) Merger and Consolidation...................................................... 16
(f) Change of Location............................................................ 18
(g) Financial Statements.......................................................... 18
(h) Notice of Sublease............................................................ 19
Section 4.03. Survival of Representations and Warranties.................................... 19
ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS........................................... 19
Section 5.01. Representations, Warranties and Covenants of
Owner Participant............................................................. 19
(a) Representations and Warranties................................................ 19
(b) Lessor's Liens................................................................ 20
(c) Assignment of Interests of Owner Participant.................................. 21
(d) Actions with Respect to Lessor's Estate, Etc.................................. 22
(e) Citizenship................................................................... 22
Section 5.02. Citizenship................................................................... 23
(a) Generally..................................................................... 23
(b) Owner Trustee................................................................. 23
Section 5.03. Representations, Warranties and Covenants of Trust
Company and the Owner Trustee................................................. 23
(a) Representations and Warranties................................................ 23
(b) Lessor's Liens................................................................ 25
(c) Indemnity for Lessor's Liens.................................................. 25
(d) Securities Act................................................................ 26
(e) Actions With Respect to Lessor's Estate, Etc.................................. 26
Section 5.04. Representations, Warranties and Covenants of the
-ii-
Indenture Trustee............................................................. 26
(a) Representations and Warranties................................................ 26
(b) Indenture Trustee's Liens..................................................... 27
(c) Indemnity for Indenture Trustee's Liens....................................... 27
Section 5.05. Indenture Trustee's Notice of Default......................................... 27
Section 5.06. Releases from Indenture....................................................... 27
Section 5.07. The Lessee's Right of Quiet Enjoyment......................................... 27
Section 5.08. Pass-Through Trustee's Representations and Warranties......................... 28
Section 5.09. Survival of Representations, Warranties and Covenants......................... 29
Section 5.10. Lessee's Assumption of the Equipment Notes.................................... 29
Section 5.11. Compliance with Trust Agreement, Etc.......................................... 31
Section 5.12. Subordination Agent's Representations, Warranties and
Covenants..................................................................... 32
(a) Representations and Warranties................................................ 32
(b) Covenants..................................................................... 33
Section 5.13. Amendments to the Indenture................................................... 34
ARTICLE 6. TAXES.............................................................................................. 34
Section 6.01. Lessee's Obligation to Pay Taxes.............................................. 34
(a) Generally..................................................................... 34
(b) Exceptions.................................................................... 35
(c) Withholding................................................................... 38
Section 6.02. All Tax Obligations; After-Tax Basis.......................................... 38
Section 6.03. Time of Payment............................................................... 39
Section 6.04. Contests...................................................................... 39
Section 6.05. Refunds....................................................................... 41
Section 6.06. [Reserved].................................................................... 41
Section 6.07. Reports; Survival of Obligations.............................................. 41
Section 6.08. Payment of Taxes.............................................................. 41
Section 6.09. Reimbursements by Indemnitees Generally....................................... 42
Section 6.10. Forms......................................................................... 42
Section 6.11. Verification.................................................................. 42
Section 6.12. Non-Parties................................................................... 42
ARTICLE 7. GENERAL INDEMNITY ................................................................................. 43
Section 7.01. Generally..................................................................... 43
(a) Indemnity..................................................................... 43
(b) Exceptions.................................................................... 44
Section 7.02. Notice and Payment............................................................ 45
Section 7.03. Defense of Claims............................................................. 45
-iii-
Section 7.04. Insured Claims................................................................ 46
Section 7.05. Subrogation................................................................... 46
Section 7.06. Survival of Obligations....................................................... 47
Section 7.07. Effect of Other Indemnities................................................... 47
Section 7.08. Waiver of Certain Claims...................................................... 47
Section 7.09. Certain Limitations........................................................... 47
ARTICLE 8. TRANSACTION COSTS.................................................................................. 47
Section 8.01. Transaction Costs and Other Costs................................................... 47
(a) Transaction Costs............................................................. 47
(b) Continuing Expenses........................................................... 48
(c) Amendments and Supplements.................................................... 48
ARTICLE 9. SUCCESSOR OWNER TRUSTEE ........................................................................... 49
Section 9.01. Appointment of Successor Owner Trustee........................................ 49
(a) Resignation and Removal....................................................... 49
(b) Conditions to Appointment..................................................... 49
ARTICLE 10. LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND
HOLDERS............................................................................................ 50
Section 10.01. Liabilities of the Owner Participant.......................................... 50
Section 10.02. Interest of Holders of Equipment Notes........................................ 50
ARTICLE 11. OTHER DOCUMENTS.................................................................................... 50
Section 11.01. Consent of Lessee to Other Documents.......................................... 50
Section 11.02. Pass-Through Trustee's and Subordination Agent's
Acknowledgment................................................................ 51
ARTICLE 12. NOTICES............................................................................................ 51
Section 12.01. Notices....................................................................... 51
ARTICLE 13. REFINANCING........................................................................................ 52
Section 13.01. Refinancing................................................................... 52
ARTICLE 14. [RESERVED]......................................................................................... 55
ARTICLE 15. MISCELLANEOUS ..................................................................................... 55
Section 15.01. Counterparts.................................................................. 55
Section 15.02. No Oral Modifications......................................................... 55
Section 15.03. Captions...................................................................... 55
-iv-
Section 15.04. Successors and Assigns........................................................ 55
Section 15.05. Concerning the Owner Trustee, Indenture Trustee and the
Pass-Through Trustee.......................................................... 56
Section 15.06. Severability.................................................................. 56
Section 15.07. Certain Limitations on Reorganization......................................... 56
Section 15.08. GOVERNING LAW................................................................. 57
Section 15.09. Section 1110 Compliance....................................................... 58
Section 15.10. Reliance of Liquidity Providers............................................... 58
Section 15.11. Agreement Regarding Engine.................................................... 58
Schedule I Commitments
Schedule II Wire Instructions
Appendix A Definitions
Exhibit A-1(a) Form of Opinion of General Counsel of Lessee
Exhibit A-1(b) Form of Opinion of Special North Carolina counsel
Exhibit A-2 Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Exhibit A-3 Form of Opinion of Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a
Professional Corporation, as special counsel to
Indenture Trustee, Subordination Agent and Pass-Through
Trustee
Exhibit A-4 Form of Opinion of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇
LLP, as special counsel to the Owner Trustee
Exhibit A-5 Form of Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C.
Exhibit B Form of Assignment and Assumption Agreement
-v-
PARTICIPATION AGREEMENT [N3__ML] dated as of __________, 200_
(this "Agreement") among MIDWAY AIRLINES CORPORATION, a Delaware corporation
(herein, together with its successors and permitted assigns, the "Lessee"),
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity, except as otherwise expressly stated herein, but
solely as owner trustee under the Trust Agreement referred to below (in such
capacity as trustee, together with its successors and permitted assigns, the
"Owner Trustee"), ____________________, a _____________________ (together with
its successors and permitted assigns, the "Owner Participant", ALLFIRST BANK, a
Maryland state- chartered commercial bank, as indenture trustee under the
Indenture referred to below (together with its successors and permitted assigns,
the "Indenture Trustee"), ALLFIRST BANK, a Maryland state- chartered commercial
bank, as pass-through trustee of three separate Pass-Through Trusts (together
with its successors and permitted assigns, the "Pass-Through Trustee"), and
ALLFIRST BANK, a Maryland state-chartered commercial bank, as subordination
agent (together with its successors and permitted assigns, the "Subordination
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, capitalized terms used herein shall have the
respective meanings set forth or referred to in Article 1 hereof; and
WHEREAS, pursuant to the Purchase Agreement the Manufacturer
agreed to manufacture and sell to the Lessee and the Lessee agreed to purchase
from the Manufacturer the Aircraft; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant and First Union Trust Company, National
Association, are entering into the Trust Agreement whereby, among other things,
First Union Trust Company, National Association, is appointed as Owner Trustee
and has undertaken to acquire and hold the Trust Estate in trust for the benefit
of the Owner Participant; and
WHEREAS, subject to the terms and conditions of this
Agreement, the Owner Trustee is willing to purchase the Aircraft from the Seller
for immediate lease to the Lessee pursuant to the Lease; and
WHEREAS, subject to the terms and conditions of this Agreement
and the Trust Agreement, the Owner Participant is willing to make the equity
investment provided for herein to fund such purchase by the Owner Trustee; and
WHEREAS, the Owner Trustee and the Indenture Trustee are
concurrently entering into the Indenture for the benefit of the holders of the
Equipment Notes, pursuant to which Indenture the Owner Trustee shall, subject to
the terms and conditions set forth therein, issue to the Pass-Through Trustee
under each of the Pass-Through Trust Agreements, as a Loan Participant,
Equipment Notes substantially in the form set forth in the Indenture as evidence
of the loan to be made by each such Loan Participant to the Owner Trustee to
finance a portion of Lessor's Cost for the Aircraft, all as more particularly
described herein and in the Indenture; and
WHEREAS, subject to the terms and conditions of this
Agreement, the Lessee has agreed to assign to the Owner Trustee, upon the terms
and conditions contained in the Purchase Agreement Assignment and the Engine
Warranty Assignment, respectively, certain of the Lessee's rights and interests
in and to the Purchase Agreement and the CFM Warranty, respectively;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration and receipt and
adequacy of which is hereby acknowledged, and intending to be legally bound, the
parties do hereby agree as follows:
ARTICLE 1.
INTERPRETATION
Section 1.01. Definitions. Capitalized terms used herein and
-----------
defined in Appendix A shall, except as such definitions may be specifically
modified in the body of this Agreement for the purposes of a particular section,
paragraph or clause, have the meanings given such terms in Appendix A.
Section 1.02. References. References in this Agreement to
----------
sections, paragraphs, clauses, appendices, schedules and exhibits are to
sections, paragraphs, clauses, appendices, schedules and exhibits in and to this
Agreement unless otherwise specified.
Section 1.03. Headings. The headings of the various sections,
--------
paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 1.04. Appendices Schedules and Exhibits. The
---------------------------------
appendices, schedules and exhibits are part of this Agreement.
ARTICLE 2.
SALE, LEASING AND SECURED LOAN TRANSACTIONS
Section 2.01. Participation. Subject to all of the terms and
-------------
conditions of this Agreement, the parties agree to participate in the sale,
leasing and secured loan transactions with respect to the Aircraft provided for
in this Section 2.
-2-
(a) Sale and Purchase. The Owner Trustee agrees to purchase
-----------------
the Aircraft from the Seller on the Delivery Date for a purchase price equal to
Lessor's Cost.
(b) Leasing. The Owner Trustee agrees to lease to the Lessee,
-------
and the Lessee agrees to lease from the Owner Trustee, the Aircraft pursuant to
the Lease, such leasing to take place concurrently with the purchase of the
Aircraft by the Owner Trustee on the Delivery Date.
(c) Owner Participant's Equity Investment. The Owner
-------------------------------------
Participant agrees to provide immediately available funds in the amount
determined by multiplying Lessor's Cost by the percentage set forth opposite its
name on Schedule I (the Owner Participant's "Commitment") by paying such amount
to the Owner Trustee by 11:00 a.m. New York City local time on the Delivery Date
at the account specified by the Lessee on or prior to the Delivery Date, such
amount to be held and applied toward the Owner Trustee's payment of Lessor's
Cost for the Aircraft on the Delivery Date (and if not so applied, to be
promptly returned to the Owner Participant). Such funds, once so applied, shall
constitute an equity investment by the Owner Participant in the Trust Estate.
(d) Secured Loan. Each Loan Participant agrees to provide
------------
immediately available funds in the amount determined by multiplying Lessor's
Cost by the percentage set forth opposite its name on Schedule I (each such
commitment being referred to as a Loan Participant's "Commitment") to or on
behalf of the Owner Trustee by paying or causing to be paid such amount to the
Owner Trustee, at the account specified by the Lessee on or prior to the
Delivery Date such amount to be held and applied toward the Owner Trustee's
payment to the Lessee of Lessor's Cost for the Aircraft on the Delivery Date
(and if not so applied, to be promptly returned to the Loan Participants). Such
funds, once so applied, shall constitute a loan to the Owner Trustee to be
evidenced by the Equipment Notes and secured as provided in the Indenture.
(e) Delivery Date. The "Delivery Date" shall be the date fixed
-------------
by the Lessee in accordance with this Section 2.01(e) for the closing of the
sale, leasing and loan transactions with respect to the Aircraft contemplated
hereby, except that following such closing the "Delivery Date" shall mean the
date on which such transactions actually closed. The Lessee shall give at least
two Business Days' notice to each other party hereto of the Delivery Date, which
notice shall also specify the amount of the Owner Participant's Commitment and
each Loan Participant's Commitment. The Lessee may postpone a scheduled Delivery
Date from time to time, for any reason by notice given to the other parties
hereto not later than 3:00 p.m. on the date last scheduled as the Delivery Date,
such notice to specify a new Delivery Date. In the event that a Participant
shall have provided the amount of its Commitment to the Owner Trustee prior to
such a postponement, the Owner Trustee shall promptly return such amount to such
Participant unless such Participant shall have agreed otherwise in writing. The
making available by the Owner Participant of its Commitments at the closing
shall be deemed a waiver of notice of the Delivery Date by the Owner Participant
and the Owner Trustee, and the making available by the Loan Participants of
their Commitment at the closing shall be deemed a waiver of notice of the
Delivery Date by such Loan Participants respectively and the Indenture Trustee.
-3-
Section 2.02. Closing Procedure.
-----------------
(a) Time and Place. The closing shall take place at 11:00 a.m.
--------------
New York City local time on the Delivery Date at the offices of Fulbright &
▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time and
place as the parties may agree. The closing shall be preceded by a pre-closing
at the same place, the time for which shall be fixed by the Lessee, at which the
forms of the Operative Agreements to be executed, the certificates and other
documents to be delivered and the forms of the legal opinions to be delivered at
the closing by each party or its counsel pursuant to this Agreement shall be
available for inspection by the parties and their respective counsel.
(b) Actions of the Owner Trustee. Upon receipt in full by the
----------------------------
Owner Trustee (or tender by a Participant to the Lessee on behalf of the Owner
Trustee) of the Commitment of each Participant together with instructions (which
may be oral) from each Participant or its special counsel that the applicable
conditions precedent set forth in Section 3.01 have been satisfied or waived by
such Participant, the Owner Trustee on the Delivery Date shall purchase the
Aircraft from the Seller, lease the Aircraft to the Lessee, issue the Equipment
Notes to the Pass-Through Trustee and make a security assignment of all of its
right, title and interest in and to the Indenture Estate to the Indenture
Trustee. To accomplish such transactions, the Owner Trustee shall, concurrently
with the actions of the Lessee pursuant to Section 2.02(c), take the following
actions: (i) pay or cause to be paid an amount equal to Lessor's Cost to the
Lessee (or at the direction of the Lessee, to the Seller) for the purchase of
the Aircraft by transferring such amount in immediately available funds to the
account specified by the Lessee on or prior to the Delivery Date; (ii) authorize
its representative or representatives, who shall be a person or persons
designated by the Lessee and acceptable to the Owner Trustee, to accept delivery
of the Aircraft pursuant to this Agreement; (iii) accept the Bills of Sale for
the Aircraft; (iv) execute, and cause to be authenticated and delivered to each
Loan Participant with respect to each Pass-Through Trust Agreement, the
Equipment Notes specified, by reference to principal amounts, maturity dates and
interest rates, in the Indenture; (v) execute and deliver the Lease, the Lease
Supplement, the Indenture and the Indenture Supplement; (vi) deliver the
Aircraft to the Lessee pursuant to the Lease; and (vii) execute and deliver all
other documents or certificates and take such other actions as may be required
of the Owner Trustee on or before the Delivery Date pursuant to any Operative
Agreement. In addition, the Owner Trustee shall take such actions as may be
requested by the Lessee to effect the due registration of the Aircraft with the
FAA in the name of the Owner Trustee and to file and perfect the security
interest of the Indenture Trustee in all or any part of the Indenture Estate.
(c) Actions of the Lessee. Upon satisfaction or waiver by the
---------------------
Lessee of the conditions precedent set forth in Section 3.02, the Lessee shall
on the Delivery Date sell the Aircraft (or cause the Aircraft to be sold) to the
Owner Trustee, lease the Aircraft from the Owner Trustee pursuant to the Lease,
assign to the Owner Trustee pursuant to the Purchase Agreement Assignment
certain of the Lessee's rights and interests in and to the Purchase Agreement
and the CFM Warranty,
-4-
respectively. To accomplish such transactions the Lessee shall, concurrently
with the actions of the Owner Trustee pursuant to Section 2.02(b), take the
following actions:
(i) execute and deliver the Lease and the Lease Supplement;
(ii) authorize its representative or representatives (who
shall be the same person or persons designated by the Lessee for
purposes of clause (ii) of Section 2.02(b)), to accept delivery of the
Aircraft from the Owner Trustee pursuant to the Lease; and
(iii) execute and deliver all other documents or certificates
and take such other actions as may be required of the Lessee on or
before the Delivery Date pursuant to any Operative Agreement.
ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to Obligations of
--------------------------------------
Participants. The obligation of each Participant to make the Dollar amount of
------------
its respective Commitment available for payment as directed by the Owner Trustee
on the Delivery Date is subject to satisfaction or waiver by each such
Participant, on or prior to the Delivery Date, of the conditions precedent set
forth below in this Section 3.01; provided, that it shall not be a condition
--------
precedent to the obligation of any Participant that any document be produced or
action taken that is to be produced or taken by such Participant or by a Person
within such Participant's control; provided, further, that Sections
-------- -------
3.01(b)(iii), (xii) and (xviii)(H) shall not be conditions precedent to the
obligation of Loan Participant and Sections 3.01(q) and 3.01(r) shall not be
conditions precedent to the obligation of Owner Participant:
(a) Notice. Such Participant shall have received the notice of
------
the Delivery Date as provided in Section 2.01(e), or shall have waived such
notice.
(b) Delivery of Documents. Such Participant shall, except as
---------------------
noted below, have received executed counterparts of the following agreements,
instruments, certificates or documents, and such counterparts (a) shall have
been duly authorized, executed and delivered by the respective party or parties
thereto, (b) shall be reasonably satisfactory in form and substance to such
Participant and (c) shall be in full force and effect:
(i) the Lease; provided that, only the Indenture Trustee
-------- ----
shall receive the sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; provided that, only the
-------- ----
Indenture Trustee shall receive the sole executed chattel paper
original thereof;
-5-
(iii) the Tax Indemnity Agreement; provided that, only Owner
-------- ----
Participant and Lessee shall receive copies of the Tax Indemnity
Agreement;
(iv) the Trust Agreement;
(v) the Indenture;
(vi) Indenture Supplement No. 1;
(vii) the Purchase Agreement Assignment and the Engine
Warranty Assignment;
(viii) the PAA Consent and the Engine Manufacturer's Consent;
(ix) the Equipment Notes dated the Delivery Date; provided
--------
that, only the Subordination Agent shall receive the authenticated
----
Equipment Notes;
(x) the Bills of Sale;
(xi) the broker's report and insurance certificates
required by Section 9 of the Lease;
(xii) an appraisal or appraisals from an appraiser, which
appraisal or appraisals shall be satisfactory in form and substance to
Owner Participant; provided, that only Owner Participant and Lessee
--------
shall receive copies of such appraisal or appraisals;
(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; (B) an incumbency
certificate of Lessee, Owner Participant, Allfirst and Trust Company as
to the person or persons authorized to execute and deliver the relevant
Operative Agreements on behalf of such party; and (C) a copy of the
Certificate of Incorporation or Articles of Incorporation or Articles
of Association and By-Laws and general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of Owner Participant, Allfirst and Trust
Company, certified as of the Delivery Date by the Secretary or an
Assistant Secretary of Owner Participant, Allfirst and Trust Company,
respectively, which authorize the execution, delivery and performance
by Owner Participant, Allfirst and Trust Company,
-6-
respectively, of each of the Operative Agreements to which it is a
party, together with such other documents and evidence with respect to
it as Lessee or any Participant may reasonably request in order to
establish the consummation of the transactions contemplated by this
Agreement and the taking of all corporate proceedings in connection
therewith;
(xiv) an Officer's Certificate of Lessee, dated as of the
Delivery Date, stating that its representations and warranties set
forth in this Agreement are true and correct as of the Delivery Date
(or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xv) an Officer's Certificate of Trust Company, dated as
of the Delivery Date, stating that its representations and warranties,
in its individual capacity and as Owner Trustee, set forth in this
Agreement are true and correct as of the Delivery Date (or, to the
extent that any such representation and warranty expressly relates to
an earlier date, true and correct as of such earlier date);
(xvi) an Officer's Certificate of Owner Participant, dated
as of the Delivery Date, stating that its representations and
warranties set forth in this Agreement are true and correct as of the
Delivery Date (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of
such earlier date);
(xvii) an Officer's Certificate of Allfirst, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity or as Indenture Trustee, a Pass-Through Trustee or
Subordination Agent, as the case may be, set forth in this Agreement
are true and correct as of the Delivery Date (or, to the extent that
any such representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date);
(xviii) the following opinions of counsel, in each case dated
the Delivery Date:
(A) (I) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President and
General Counsel of the Lessee substantially in the form of Exhibit
A-1(a) hereto and (II) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special
North Carolina counsel to the Lessee, substantially in the form of
Exhibit A-1(b) hereto, in each case addressed to the Owner Participant,
the Owner Trustee, the Subordination Agent, the Pass-Through Trustee,
each Liquidity Provider and the Indenture Trustee.
(B) Fulbright & ▇▇▇▇▇▇▇▇, L.L.P. special counsel for
the Lessee substantially in the form of Exhibit A-2 hereto addressed to
the Owner Participant,
-7-
the Indenture Trustee, the Owner Trustee, the Subordination Agent, the
Pass-Through Trustee, each Liquidity Provider and the Lessee;
(C) Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, special
counsel for the Owner Trustee substantially in the form of Exhibit A-3
hereto addressed to the Owner Participant, the Indenture Trustee, the
Owner Trustee, the Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Lessee;
(D) Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation, special counsel for the Indenture Trustee, Pass-Through
Trustee and Subordination Agent in the form of Exhibit A-4 hereto and
addressed to the Indenture Trustee, the Owner Participant, the Owner
Trustee, the Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Lessee;
(E) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special aviation counsel,
substantially in the form of Exhibit A-5 hereto and addressed to the
Owner Participant, the Indenture Trustee, the Owner Trustee, the
Subordination Agent, the Pass-Through Trustee, each Liquidity Provider
and the Lessee;
(F) special counsel for the Manufacturer, in a form
reasonably acceptable to the Owner Participant and addressed to the
Owner Participant, the Indenture Trustee, the Owner Trustee, the
Subordination Agent, the Pass-Through Trustee, each Liquidity Provider
and the Lessee;
(G) special counsel for the Engine Manufacturer, in a
form reasonably acceptable to the Owner Participant and addressed to
the Owner Participant, the Indenture Trustee, the Owner Trustee, the
Subordination Agent, the Pass-Through Trustee, each Liquidity Provider
and the Lessee;
(H) in the case of the Owner Participant only, tax
counsel to the Owner Participant, addressed to the Owner Participant,
with respect to tax matters; and
(I) special counsel for the Owner Participant and the
Owner Participant Guarantor, if any, and the General Counsel's Office
of the Owner Participant and the Owner Participant, if any, in each
case in customary form, addressed to the Indenture Trustee, the Owner
Trustee, the Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Lessee.
(c) Airworthiness. Each Participant shall receive a
-------------
copy of a current, valid Standard Certificate of Airworthiness for the Aircraft
duly issued by the FAA.
-8-
(d) Other Commitments. Each other Participant shall
-----------------
have made available the Dollar amount of its Commitment as directed by Owner
Trustee in accordance with Section 2.01(c) or 2.01(d), as the case may be.
(e) Violation of Law. No change shall have occurred after
----------------
the date of this Agreement in any Applicable Law that makes it a violation of
law for (a) Lessee, any Participant, Subordination Agent, Owner Trustee or the
Indenture Trustee to execute, deliver and perform the Operative Agreements to
which any of them is a party or (b) any Participant to make the Dollar amount of
its Commitment available or, in the case of any Loan Participant, to acquire an
Equipment Note or to realize the benefits of the security afforded by the
Indenture.
(f) Tax Law Change. In the case of the Owner Participant,
--------------
there shall not have occurred since _____________________ any Change in Tax Law
which, in the reasonable opinion of the Owner Participant, renders it
disadvantageous or inadvisable for the Owner Participant to consummate the
transactions contemplated hereby, including, without limitation, its judgment
that the assumed tax benefits set forth in Section 1 of the Tax Indemnity are
rendered doubtful or invalid.
(g) No Event of Default. On the Delivery Date, no event
-------------------
shall have occurred and be continuing, or would result from the sale, mortgage
or lease of the Aircraft, which constitutes a Default, Event of Default,
Indenture Default or Indenture Event of Default.
(h) No Event of Loss. No Event of Loss with respect to
----------------
the Airframe or any Engine shall have occurred and no circumstance, condition,
act or event that, with the giving of notice or lapse of time or both, would
give rise to or constitute an Event of Loss with respect to the Airframe or any
Engine shall have occurred.
(i) Title. Owner Trustee shall have good title (subject
-----
to filing and recordation of the FAA ▇▇▇▇ of Sale with the FAA) to the Aircraft,
free and clear of Liens, except Permitted Liens.
(j) Certification. The Aircraft shall have been duly
-------------
certificated by the FAA as to type and airworthiness as required by the terms of
the Lease.
(k) Section 1110. Owner Trustee, as lessor under the
------------
Lease (and Indenture Trustee, as assignee of Owner Trustee under the Indenture),
shall be entitled to the benefits of Section 1110 (as currently in effect) with
respect to the right to take possession of the Airframe and Engines as provided
in the Lease in the event of a case under Chapter 11 of the Bankruptcy Code in
which Lessee is a debtor.
(l) Filings. On the Delivery Date (i) application for
-------
registration of the Aircraft in the name of the Owner Trustee shall have been
duly made with the FAA in compliance with the provisions of the Transportation
Code; and (ii) the Indenture, Indenture Supplement No. 1, the
-9-
Lease, Lease Supplement No. 1 and the FAA ▇▇▇▇ of Sale shall have been duly
filed for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Transportation Code.
(m) Financing Statements. A Uniform Commercial Code
--------------------
financing statement or statements covering the security interest contemplated by
the Indenture shall have been executed and delivered by the Owner Trustee as
debtor and by the Indenture Trustee as secured party, and such financing
statement or statements shall have been duly filed in all places necessary or
desirable within the State of Delaware.
(n) Precautionary Financing Statements. A Uniform
----------------------------------
Commercial Code "precautionary" financing statement or statements describing the
Lease as a lease but covering any security interest in favor of the Owner
Trustee (and the Indenture Trustee as assignee of the Owner Trustee) which may
be created thereby, shall have been executed and delivered by the Lessee and the
Owner Trustee (naming the Owner Trustee as Lessor and secured party and
Indenture Trustee as assignee), and shall have been duly filed in all places
necessary or desirable within the State of North Carolina.
(o) No Proceedings. No action or proceeding shall have
--------------
been instituted, nor shall any action be threatened in writing, before any
governmental authority, nor shall any order, judgment or decree have been issued
or proposed to be issued by any governmental authority, to set aside, restrain,
enjoin or prevent the completion and consummation of this Agreement or any other
Operative Agreement or the transactions contemplated hereby or thereby.
(p) Governmental Action. All appropriate action required
-------------------
to have been taken prior to the Delivery Date by the FAA, or any governmental or
political agency, subdivision or instrumentality of the United States, in
connection with the transactions contemplated by this Agreement shall have been
taken, and all orders, permits, waivers, authorizations, exemptions and
approvals of such entities required to be in effect on the Delivery Date in
connection with the transactions contemplated by this Agreement shall have been
issued.
(q) Note Purchase Agreement. The conditions precedent
-----------------------
to the obligations of the Loan Participants and the other requirements relating
to the Aircraft and the Equipment Notes set forth in the Note Purchase Agreement
shall have been satisfied.
(r) Perfected Security Interest. On the Delivery Date,
---------------------------
after giving effect to the filing of the documents referenced in Section
3.01(l)(ii) and the financing statements referenced in Sections 3.01(m) and (n),
the Indenture Trustee shall have received a duly perfected first priority
security interest in all of Owner Trustee's right, title and interest in the
Aircraft and the Lease, subject only to Permitted Liens.
-10-
Section 3.02. Conditions Precedent to Obligations of Lessee.
---------------------------------------------
The obligation of Lessee to lease the Aircraft on the Delivery Date is subject
to the satisfaction or waiver by Lessee, on or prior to the Delivery Date, of
the conditions precedent set forth below in this Section 3.02.
(a) Documents. Executed originals of the agreements,
---------
instruments, certificates, documents and opinions described in Section 3.01(b)
shall have been received by Lessee, except as specifically provided therein, and
shall be satisfactory to Lessee, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Lessee.
(b) Other Conditions Precedent. Each of the conditions set
--------------------------
forth in Sections 3.01(c), (d) (as to all Participants), (e), (g) (as to
Indenture Defaults and Indenture Events of Default not arising from Defaults or
Events of Default, as the case may be), (h), (i), (j), (k), (l), (m), (n) and
(o) shall have been satisfied or waived by Lessee, unless the failure of any
such condition to be satisfied is the result of any action or inaction by
Lessee.
(c) Tax Law Change. There shall not have occurred any
--------------
Change in Tax Law since _________ which, in the reasonable opinion of the
Lessee, renders it disadvantageous or inadvisable for the Lessee to consummate
the transactions contemplated hereby, including, without limitation, its
judgment that there will be an increased risk that it may be required to
indemnify the Owner Participant under the Tax Indemnity Agreement.
Section 3.03. Post-Registration Opinion. Promptly upon the
-------------------------
registration of the Aircraft and the recordation of the documents referenced in
Section 3.01(l)(ii), Lessee will direct ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special counsel in
Oklahoma City, Oklahoma, to deliver to Lessee, each Participant, Owner Trustee
and the Indenture Trustee a favorable opinion or opinions addressed to each of
them with respect to such registration and recordation.
ARTICLE 4.
LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01. Lessee's Representations and Warranties. The
---------------------------------------
Lessee represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Lessee represents and warrants as of such earlier date):
(a) the Lessee is a corporation duly organized and validly
existing and is in good standing under the laws of Delaware, has its principal
place of business and chief executive office (as such terms are used in Article
9 of the Uniform Commercial Code) in Morrisville, North Carolina at the address
set forth in Section 12.01(a), and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the failure to be
so qualified or in good standing would have a materially adverse effect on its
business or would impair its ability to perform its obligations under the Lessee
Documents;
-11-
(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 Sections 3.01(b)(xviii)(E) and the
filings referred to in Section 3.01(l)(ii);
(g) neither the execution, delivery or performance by the
Lessee of the Lessee Documents nor compliance with the terms and provisions
hereof or thereof, conflicts or will conflict with or results or will result in
a breach or violation of any of the terms, conditions or provisions of, or will
require any consent (other than the PAA Consent and the Engine Manufacturer's
Consent) or approval under, any law, governmental rule or regulation or the
charter documents, as amended, or bylaws, as amended, of the Lessee or any
order, writ, injunction or decree of any court or governmental authority against
the Lessee or by which it or any of its properties is bound or any indenture,
mortgage or contract or other agreement or instrument to which the Lessee is a
party or by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder or results or will result in the imposition of
any Lien upon the Aircraft or any of its properties (other
-12-
than Permitted Liens), except for any such conflict, breach or default which
would not have a material adverse effect on the Lessee or its ability to perform
its obligations under the Lessee Documents;
(h) except as disclosed in the Offering Memo, there are no
pending or, to the knowledge of the Lessee, threatened actions, suits,
investigations or proceedings against or affecting the Lessee or any of its
properties before or by any court, governmental agency, arbitration board,
tribunal or other administrative agency which, (A) may reasonably be expected to
have a materially adverse effect on the Lessee's consolidated financial
condition, business, or operations, or (B) would materially adversely affect the
ability of the Lessee to consummate the transactions contemplated by the
Operative Agreements or perform its obligations under the Lessee Documents;
(i) [Reserved].
(j) except for (A) the registration in the Owner Trustee's
name of the Aircraft pursuant to the Transportation Code, (B) the filing with
and, where appropriate, recordation by the FAA pursuant to the Transportation
Code of the Indenture (including Indenture Supplement No. 1), and the Lease
(including Lease Supplement No. 1), (C) the filing of the financing statements
referred to in Sections 3.01(m) and 3.01(n) and (D) the taking of possession by
the Indenture Trustee of the original counterpart of the Lease (including Lease
Supplement No. 1), no further action, including any filing or recording of any
document, is necessary or advisable in order (i) to establish the Owner
Trustee's title to and interest in the Aircraft and the Lessor's Estate as
against the Lessee and any third parties, or (ii) to perfect the first security
interest in and Lien on the Indenture Estate in favor of the Indenture Trustee;
(k) the Owner Trustee has received good and marketable title
to the Aircraft, free and clear of all Liens, except Permitted Liens;
(l) assuming the truth and accuracy of the representations and
warranties contained in Section 3.12 of the Pass-Through Trust Agreements and
the representations and warranties deemed to be made pursuant to Section 10.05
of the Indenture and in reliance upon such representations and warranties, the
execution and delivery of this Agreement and the other Operative Agreements and
the consummation of the transactions contemplated hereby and thereby will not
involve any prohibited transaction within the meaning of Section 406(a) of ERISA
or Section 4975(c)(1)(A) through (D) of the Code;
(m) all premiums which have become due with respect to the
insurance required to be provided by the Lessee on or prior to the Delivery Date
under Section 9 of the Lease have been paid by the Lessee;
(n) no Default or Event of Default exists and no Event of
Loss, or event which with the passage of time would constitute an Event of Loss,
exists;
-13-
(o) the Aircraft is in such condition so as to enable the
airworthiness certificate of such Aircraft to be in good standing under the
Transportation Code; the Aircraft has been duly certificated by the FAA as to
type and airworthiness; there is in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant to the
Transportation Code;
(p) the Lessee is not in default (after any applicable grace
periods) in the performance of any material term or condition of the Purchase
Agreement;
(q) neither the Lessee nor any subsidiary of the Lessee is an
"investment company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(r) there are no broker's or underwriter's fees payable on
behalf of the Lessee in connection with the transactions contemplated in the
Operative Agreements, other than those of the Placement Agents and the Lessee
Advisor (as defined in Section 8.01(a)) referred to in Article 8 hereof; and
(s) the Lessee represents and warrants that it has authorized
no one to act on its behalf in connection with the offer or sale of any interest
in the Equipment Notes or the Pass-Through Certificates other than the
Placement Agents.
Section 4.02. Certain Covenants of Lessee. The Lessee
---------------------------
covenants and agrees as follows:
(a) Filings and Recordings. The Lessee will cause to be done,
----------------------
executed, acknowledged and delivered, at the Lessee's cost and expense, all such
further acts, conveyances and assurances as the Owner Trustee, the Indenture
Trustee, the Pass-Through Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of the Operative Agreements. Without
limiting the generality of this Section 4.02(a), the Lessee will promptly take,
or cause to be taken, at the Lessee's cost and expense, such action with respect
to the recording, filing, re-recording and re-filing of the Indenture (including
each supplement thereto), the Lease (including each supplement thereto), and any
financing statements or other instruments as may be reasonably requested by the
Indenture Trustee and appropriate, to maintain the perfection of the first
security interest and the Lien created by the Indenture, and the Owner Trustee's
title to and interest in the Aircraft and the Lessor's Estate, as against the
Lessee and any third parties, or if the Lessee cannot itself take, or cause to
be taken, such action, will furnish to the Indenture Trustee and the Owner
Trustee timely notice of the necessity of such action, together with such
instruments, in execution form, and such other information as may be required to
enable either of them to take such action at the Lessee's cost and expense in a
timely manner.
(b) Registration. From and after the Delivery Date, the Lessee
------------
shall cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Owner
-14-
Trustee (provided, that the Owner Trustee and the Owner Participant shall be and
--------
remain Citizens of the United States), under the Transportation Code, and shall
furnish to the Owner Trustee such information as may be required to enable the
Owner Trustee to make application for such registration; provided, however, that
-------- -------
the Lessee may, at any time cause the Aircraft to be appropriately re-registered
under the laws of a country with which at the time of such registration the
United States maintains normal diplomatic relations and is listed on Exhibit E
to the Lease; provided that prior to any change in the country of registry of
--------
the Aircraft the following conditions are met:
(i) at the time of re-registration, no Specified Default
exists or would occur as a result of such re-registration;
(ii) the Lessee shall pay all fees and expenses (including
the reasonable fees and expenses of local counsel in such country)
relating to such re-registration;
(iii) the Lessee shall, at its cost, cause the interest of
the Owner Trustee as owner of the Aircraft and the Indenture Trustee as
mortgagee thereof to be duly registered or recorded under the laws of
such country and at all times thereafter to remain so duly registered
or recorded unless and until the registration of the Aircraft is
changed as provided herein, and shall, at its cost, cause to be done at
all times all other acts including the filing, recording and delivery
of any document or instrument and the payment of any sum necessary or,
by reference to prudent industry practice in such country, advisable in
order to create, preserve and protect such interest in the Aircraft
(including the first priority duly perfected Lien under the Indenture)
as against the Lessee or any third parties in such jurisdiction, and
the laws of such country would give effect to the Owner Trustee's title
to and ownership interest in the Aircraft and the Lien of the Indenture
Trustee thereon;
(iv) the obligations of the Lessee and each other party
under the Operative Agreements (and of the Permitted Sublessee, if any,
under a Sublease) shall remain or be, as the case may be, legal, valid,
binding and enforceable in such country;
(v) the Lessee shall ensure that all insurance required by
Section 9 of the Lease shall be in full force and effect prior to, at
the time of, and after such change in registration and the Owner
Participant, the Owner Trustee, and the Indenture Trustee shall receive
a certificate of Lessee's insurance broker to such effect;
(vi) the country of such re-registration imposes aircraft
maintenance standards approved by, or at least as stringent as those
approved by, the FAA or the central civil aviation authority of the
United Kingdom, France, Germany, Japan, the Netherlands or Canada;
-15-
(vii) it shall not be necessary by reason of such
re-registration or for purposes of enforcing remedies contained in the
Lease or the Indenture or the related Sublease for the Owner Trustee,
the Indenture Trustee or the Owner Participant to register or qualify
to do business in such country;
(viii) no Liens (except Permitted Liens) shall arise by
reason of such re-registration, and the Indenture shall continue as a
first priority Lien on the collateral thereunder (subject only to
Permitted Liens);
(ix) none of the Owner Trustee, the Indenture Trustee and
the Owner Participant shall be subjected to any adverse tax
consequences for which the Lessee is not required to and does not then
indemnify such Person in a manner reasonably satisfactory to such
Person as a result of such re-registration;
(x) any export licenses and certificate of deregistration
required in connection with any repossession or return of the Aircraft
will be readily obtainable in the normal course without material delay
or material burden on the Owner Trustee or the Indenture Trustee, it
being agreed that the Lessee shall be responsible for the cost thereof;
and
(xi) the Owner Participant, the Owner Trustee, and the
Indenture Trustee shall have received opinions in scope, form and
substance reasonably satisfactory to them, of counsel, expert in the
laws of such country, to the effect set forth in clauses (iii), (iv)
(with respect to the obligations of the Lessee under the Lease), (vii)
and (x).
Lessee agrees to pay on an After-Tax Basis all reasonable out-of-pocket costs
and expenses (including, without limitation, reasonable counsel fees and
disbursements) of the Owner Participant, the Owner Trustee, and the Indenture
Trustee in connection with any re-registration pursuant to this Section.
(c) Information. The Lessee shall promptly furnish to the
-----------
Owner Trustee and the Owner Participant such information as may be required to
enable the Owner Trustee and the Owner Participant timely to file any reports
required to be filed by the Owner Trustee as the Lessor and the Owner
Participant under the Lease with any governmental authority as a result of the
Owner Trustee's ownership interest in the Aircraft.
(d) Corporate Existence. The Lessee shall at all times
-------------------
maintain its corporate existence except as permitted by Section 4.02(e) hereof
and all of its rights, privileges and franchises necessary in the normal conduct
of its business, except for any corporate right, privilege or franchise that it
determines, is no longer necessary or desirable in the conduct of its business.
(e) Merger and Consolidation. The Lessee shall not,
------------------------
during the Term, enter into any merger with or into or consolidation with, or
sell, convey, transfer, lease or otherwise dispose
-16-
of in one or a series of transactions all or substantially all of its assets as
an entirety to any Person, unless (x) no Event of Default of the type described
in Section 16(a), (f), (g) or (h) of the Lease shall have occurred and be
continuing, (y) no Event of Default shall arise as a result of such merger,
consolidation, purchase, conveyance, transfer, lease or other disposition and
(z) the surviving corporation or Person which acquires by purchase, conveyance,
transfer or lease all or substantially all of the assets of the Lessee as an
entirety (i) is a domestic corporation organized and existing under the laws of
the United States or any State of the United States (ii) is a Citizen of the
United States, (iii) is a Section 1110 Person, so long as such status is a
condition to the availability of Section 1110, (iv) if not the Lessee, executes
a duly authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee and Owner Participant,
containing an effective assumption of all of the Lessee's, as applicable,
obligations hereunder and under the other Operative Agreements, and each other
document contemplated hereby or thereby and delivers such instrument to the
Indenture Trustee, the Owner Participant and the Owner Trustee, (v) provides an
opinion from counsel (which counsel may be the Lessee's General Counsel)
delivered to the Owner Trustee, the Indenture Trustee and the Owner Participant,
which opinion shall be reasonably satisfactory to the Owner Participant and the
Indenture Trustee, and an officer's certificate (which may rely, as to legal
matters, on such legal opinion), each stating that such merger, consolidation,
conveyance, transfer, lease or other disposition and the instrument noted in
clause (iv) above comply with this Section 4.02(e), that such instrument has
been duly authorized, executed and delivered and is a legal, valid and binding
obligation of, and is enforceable against, such survivor or Person, and that all
conditions precedent herein provided for relating to such transaction have been
complied with, and (vi) such survivor or Person makes such filings and
recordings with the FAA as may be required pursuant to part A of subtitle VII or
▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code to evidence such merger or consolidation and such
filings and recordings necessary in order to preserve and protect the rights of
the Owner Trustee and the Indenture Trustee under the Indenture.
Upon any consolidation or merger, or any conveyance, transfer
or lease of all or substantially all of the assets of the Lessee and the
satisfaction of the conditions specified in this Section 4.02(e), the successor
corporation formed by such consolidation or into which the Lessee is merged or
the Person to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Lessee
under this Agreement and the Lease and each other Operative Agreement and any
other document contemplated hereby and thereby to which the Lessee is a party
with the same effect as if such successor corporation had been named as the
Lessee herein and therein. No such consolidation or merger, or sale, conveyance,
transfer or lease of all or substantially all of the assets of the Lessee as an
entirety shall have the effect of releasing the Lessee or any successor
corporation which shall theretofore have become the Lessee hereunder in the
manner prescribed in this Section 4.02(e) from its liability hereunder or under
the other Operative Agreements. Nothing contained herein shall permit any lease,
sublease, or other arrangement for the use, operation or possession of the
Aircraft except in compliance with the applicable provisions of the Lease.
-17-
(f) Change of Location. The Lessee agrees to give prompt
------------------
written notice to the Owner Participant, the Owner Trustee and the Indenture
Trustee of any change in the address of its chief executive office (as such term
is used in Section 9-103(3) of the North Carolina Uniform Commercial Code) or of
any change in its corporate name;
(g) Financial Statements. The Lessee agrees to furnish
--------------------
to the Owner Participant during the Term:
(i) within 60 days after the end of each of the first
three fiscal quarters in each fiscal year of the Lessee, unaudited
consolidated balance sheets of the Lessee and its subsidiaries (if any)
as of the end of such quarter and related consolidated statements of
income, shareholder's equity and cash flows of the Lessee and its
subsidiaries (if any) for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, provided
--------
that so long as the Lessee is subject to the reporting provisions of
the Securities Exchange Act of 1934, a copy of the Lessee's quarterly
report on Form 10-Q will satisfy this requirement;
(ii) within 120 days after the end of each fiscal year of
the Lessee, a copy of the annual report for such year for the Lessee or
the affiliated group of which the Lessee is a member (on a consolidated
basis, if applicable) and a balance sheet of the Lessee and its
subsidiaries (if any) as of the end of such fiscal year and related
statements of income, shareholder's equity and cash flows of the Lessee
for such fiscal year, in comparative form with the preceding fiscal
year, in each case certified by independent certified public
accountants of national standing as having been prepared in accordance
with generally accepted accounting principles in the United States,
provided that so long as the Lessee is subject to the reporting
--------
provisions of the Securities Exchange Act of 1934, a copy of the
Lessee's annual report on Form 10-K will satisfy this requirement;
(iii) within 120 days after the end of each fiscal year of
the Lessee, an Officer's Certificate of the Lessee, to the effect that
the signer is familiar with or has reviewed the relevant terms of the
Lease and has made, or caused to be made under his supervision, a
review of the transactions and conditions of the Lessee during the
preceding fiscal year and that such review has not disclosed the
existence during such period, nor does the signer have knowledge of the
existence as of the date of such certificate, of any condition or event
which constituted or constitutes a Default or Event of Default, or, if
any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action the Lessee has taken or
is taking or proposes to take with respect thereof; and
(iv) from time to time, such other non-confidential
financial information as the Lessor the Owner Participant may
reasonably request.
-18-
(h) Notice of Sublease. In the event that the Lessee
------------------
subleases the Aircraft pursuant to Section 5(b)(x) of the Lease, it shall give
notice of such sublease to each of (i) ▇▇▇▇▇'▇ Investor Service, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Rating Division
(facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇) and (ii) Standard & Poor's Ratings Services, a
division of the ▇▇▇▇▇▇-▇▇▇▇ Companies Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇).
Section 4.03. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Lessee provided in Section 4.01 and in any
other Operative Agreement shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.
ARTICLE 5.
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. Representations, Warranties and Covenants of
--------------------------------------------
Owner Participant.
-----------------
(a) Representations and Warranties. The Owner Participant
------------------------------
represents and warrants that, as of the Delivery Date (unless any such
representation and warranty is specifically made as of an earlier date, in which
case the Owner Participant represents and warrants as of such earlier date):
(i) it is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
__________ and it has full corporate power, authority and legal right
to carry on its present business and operations, to own or lease its
properties and to enter into and to carry out the transactions
contemplated by this Agreement and the other Operative Agreements to
which it is party;
(ii) the execution, delivery and performance by it
of this Agreement and the other Operative Agreements to which it is
party have been duly authorized by all necessary corporate action on
its part;
(iii) neither the execution, delivery or performance
by the Owner Participant of the Operative Agreements to which it is
party, nor compliance with the terms and provisions hereof or thereof,
conflicts or will conflict with or results or will result in a breach
or violation of any of the terms, conditions or provisions of, any law,
governmental rule or regulation applicable to the Owner Participant or
the charter documents, as amended, or bylaws, as amended, of the Owner
Participant or any order, writ, injunction or decree of any court or
governmental authority against the Owner Participant or by which it or
any of its properties is bound or any indenture, mortgage or contract
or other agreement or instrument to which the Owner Participant is a
party or by which it or any of its properties
-19-
is bound, or constitutes or will constitute a default thereunder,
except for any such conflict, breach or default which would not have a
material adverse effect on the Owner Participant or its ability to
perform its obligations under the Operative Agreements;
(iv) the Operative Agreements to which it is party
have been duly executed and delivered by the Owner Participant and
constitute the legal, valid and binding obligations of the Owner
Participant enforceable against it in accordance with their terms
except as such enforceability may be limited by bankruptcy, insolvency,
or other similar laws or general equitable principles;
(v) there are no pending or, to the knowledge of the
Owner Participant, threatened actions, suits, investigations or
proceedings against the Owner Participant before any court,
administrative agency or tribunal which are expected to materially
adversely affect the ability of the Owner Participant to perform its
obligations under this Agreement and the other Operative Agreements to
which it is or is to be a party and the Owner Participant knows of no
pending or threatened actions or proceedings before any court,
administrative agency or tribunal involving it in connection with the
transactions contemplated by the Operative Agreements;
(vi) neither the execution and delivery by it of
this Agreement or the other Operative Agreements to which it is a party
nor the performance of obligations hereunder or thereunder requires the
consent or approval of or the giving of notice to, the registration
with, or the taking of any other action in respect of, any governmental
authority or agency that would be required to be obtained or taken by
the Owner Participant except for filings contemplated by this
Agreement; and
(vii) either (x) the funds to be used by the Owner
Participant to acquire its interests under this Agreement do not
constitute assets (within the meaning of ERISA and any applicable rules
and regulations) of an ERISA Plan; or (y) the purchase and holding of
such interests are exempt from the prohibited transaction restrictions
of ERISA and the Internal Revenue Code of 1986 pursuant to Prohibited
Transaction Class Exemption 95-60.
Notwithstanding the foregoing or anything else
contained in this Agreement, the Owner Participant makes no representation or
warranty in this Agreement with respect to laws, rules or regulations relating
to aviation or to the nature or use of the equipment owned by the Owner Trustee,
including, without limitation, the airworthiness, value, condition, workmanship,
design, patent or trademark infringement, operation, merchantability or fitness
for use of the Aircraft, other than such laws, rules or regulations relating to
the citizenship requirements of the Owner Participant under applicable aviation
law.
(b) Lessor's Liens. The Owner Participant represents,
--------------
warrants and covenants that on the Delivery Date there are no Lessor's Liens
attributable to it (or an Affiliate thereof). The
-20-
Owner Participant agrees with and for the benefit of the Lessee, the Owner
Trustee, the Indenture Trustee and the Pass-Through Trustee that the Owner
Participant will, at its own cost and expense, take such action as may be
necessary to duly discharge and satisfy in full, promptly after the same first
becomes known to the Owner Participant, any Lessor's Lien attributable to the
Owner Participant (or an Affiliate thereof), provided, however, that the Owner
-------- -------
Participant shall not be required to discharge or satisfy such Lessor's Lien
which is being contested by the Owner Participant in good faith and by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or
the Indenture Estate or any interest in any thereof or otherwise materially
adversely affect the validity or priority of the Lien of the Indenture.
(c) Assignment of Interests of Owner Participant. At any
--------------------------------------------
time after the Delivery Date and subject to satisfaction of the conditions set
forth in this Section 5.01(c), the Owner Participant may assign, convey or
otherwise transfer to a single institutional investor or an Affiliate of an
institutional investor all (but not less than all) of the Beneficial Interest,
provided that (i) the Owner Participant gives the Lessee and the Indenture
Trustee at least 10 days' days' notice of such assignment, conveyance or other
transfer, (ii) the Owner Participant and any Owner Participant Guarantor shall
remain liable for all obligations of the Owner Participant under the Trust
Agreement and the other Operative Agreements to which the Owner Participant is a
party to the extent (but only to the extent) relating to the period on or before
the date of such transfer, and (iii) the transferee agrees by a written
instrument substantially in the form attached hereto as Exhibit B to assume
liability for, and undertake performance of, all obligations of the Owner
Participant under the Trust Agreement and the other Operative Agreements to
which such Owner Participant is a party relating to the period after the date of
transfer. Any such transferee shall (a) be (i) a bank, savings institution,
finance company, leasing company or trust company, national banking association
acting for its own account or in a fiduciary capacity as trustee or agent under
any pension, retirement, profit sharing or similar trust or fund, insurance
company, fraternal benefit society or corporation acting for its own account
having a combined capital and surplus (or, if applicable, consolidated net worth
or its equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described in clause (i) where such Person provides (A) support for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee, the Owner Trustee and the Indenture Trustee or (B) an unconditional
guaranty of such transferee subsidiary's obligations, or (iii) an Affiliate of
the transferring Owner Participant, so long as such Affiliate has a combined
capital and surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $50,000,000 (unless the Owner Participant remains
liable for the obligations of such Affiliate under the Operative Agreements, in
which case there shall be such net worth requirement), (b) be legally capable of
binding itself to the obligations of the Owner Participant and shall expressly
agree to assume all obligations of the Owner Participant under the Trust
Agreement and this Agreement and (c) provide representations, warranties, and
covenants substantially similar to those contained in clauses (a) and (c) of
this Section 5.01; provided that, without the prior written consent of the
--------
Lessee, such transferee shall not be an airline or other aircraft operator or
competitor of the Lessee or an Affiliate of any thereof; and provided further
-------- -------
that neither such transferee nor any Affiliate thereof shall (x) be a party to
any
-21-
litigation or arbitration (whether as plaintiff or defendant) with the Lessee or
any Affiliate of the Lessee or (y) be attempting a hostile takeover of the
Lessee or any Affiliate of the Lessee. A transferee hereunder shall be a Citizen
of the United States or has established a voting trust, voting powers or other
arrangement reasonably satisfactory to the Indenture Trustee, the Owner Trustee,
and the Lessee to permit the Owner Trustee to be the registered owner of the
Aircraft under the Transportation Code, without in any way restricting the
Lessee's use and operation of the Aircraft. The Owner Trustee shall not be on
notice of or otherwise bound by any such assignment, conveyance or transfer
unless and until it shall have received an executed counterpart of the
instrument of such assignment, conveyance or transfer. Upon any such disposition
by the Owner Participant to a transferee as above provided, the transferee shall
be deemed the "Owner Participant" for all purposes of the Operative Agreements,
and shall be deemed to have acquired the same interest in the Lessor's Estate as
theretofore held by its transferor; and each reference therein to the "Owner
Participant" shall thereafter be deemed a reference to such transferee. No
assignment, conveyance or transfer by the Owner Participant of the Beneficial
Interest 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 Owner Participant shall pay all costs (including the Lessee's
costs) in connection with any such assignment, conveyance or transfer.
(d) Actions with Respect to Lessor's Estate, Etc. The
--------------------------------------------
Owner Participant agrees that it will not take any action to subject the
Lessor's Estate or the trust established by the Trust Agreement, as debtor, to
the reorganization or liquidation provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statute.
(e) Citizenship. The Owner Participant agrees, solely for
-----------
the benefit of the Lessee, the Pass-Through Trustee, the Indenture Trustee and
the Owner Trustee, that if at any time on or after the Delivery Date when the
Aircraft is registered or the Lessee proposes to register the Aircraft in the
United States (i) either the Owner Participant shall cease to be, or an event
which has been publicly disclosed has occurred of which the Owner Participant
has knowledge and which will cause the Owner Participant to cease to be, a
Citizen of the United States, and (ii) the Aircraft shall or would therefore
become ineligible for registration in the name of the Owner Trustee under the
Transportation Code and regulations then applicable thereunder (such eligibility
to be determined without regard to any provision of law that permits the U.S.
registration of the Aircraft by restricting where it is based or used), then the
Owner Participant shall give notice thereof to the Lessee, the Owner Trustee,
the Pass-Through Trustee and the Indenture Trustee and shall (at its own expense
and without any reimbursement or indemnification from the Lessee) immediately
(and in any event within a period of 20 days) promptly (x) effect a voting trust
or other similar arrangement, (y) transfer in accordance with the terms of this
Agreement and the Trust Agreement all its rights, title and interest in and to
such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any
other alternative action that would prevent any deregistration, or maintain or
permit the United States registration, of the Aircraft (determined without
regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used). Each party hereto
-22-
agrees, upon the request and at the sole expense of the Owner Participant, to
cooperate with the Owner Participant in complying with its obligations under the
provisions of the first sentence of this Section 5.01(e), but without any
obligation on the part of such other party to take any action believed by it in
good faith to be unreasonably burdensome to such party or materially adverse to
its business interests.
Section 5.02. Citizenship.
-----------
(a) Generally. The Owner Trustee, in its individual
---------
capacity, represents and warrants that it is and on the Delivery Date will be a
Citizen of the United States. If the Owner Trustee in its individual capacity
does not comply with the requirements of this Section 5.02, the Owner Trustee
and the Indenture Trustee hereby agree that no Default shall be deemed to exist
due to non-compliance by the Lessee with the registration requirements in the
Lease or in Section 4.02(b) hereof occasioned by such noncompliance of the Owner
Trustee.
(b) Owner Trustee. The Owner Trustee, in its individual
-------------
capacity, covenants that if at any time on or after the Delivery Date any of its
Responsible Officers shall have actual knowledge that it has ceased to be a
Citizen of the United States, it will resign immediately as the Owner Trustee if
such citizenship is necessary for registration of the Aircraft in the Owner
Trustee's name under the Transportation Code as in effect at such time (such
necessity to be determined without regard to any provision of law that permits
the U.S. registration of the Aircraft by restricting where it is based or used)
or, if it is not necessary for such registration, if the Owner Trustee is
informed in writing by the Lessee, the Indenture Trustee or any Owner
Participant that such lack of United States citizenship would have any adverse
effect on the Lessee, the Indenture Trustee, the Holders or any Owner
Participant. The Owner Trustee, in its individual capacity, further covenants
that if at any time it appears reasonably probable that it will cease to be a
Citizen of the United States based on information that is (i) known to a
Responsible Officer of the Owner Trustee or (ii) generally known to the public,
it will promptly so notify, to the extent permitted by law, all parties to this
Agreement.
Section 5.03. Representations, Warranties and Covenants of
--------------------------------------------
Trust Company and the Owner Trustee.
-----------------------------------
(a) Representations and Warranties. In addition to and
------------------------------
without limiting its other representations and warranties provided for in this
Article 5, Trust Company represents and warrants, in its individual capacity
with respect to items (i), (ii), (iii)(A), (iv), (v), (vi), (vii), (viii) and
(ix) below, and as the Owner Trustee with respect to items (iii)(B) and (iv), on
the Delivery Date that:
(i) it is a national banking association duly organized
and validly existing in good standing under the laws of the United
States with its principal place of business and chief executive office
(as such terms are used in Article 9 of the Uniform Commercial Code) in
Delaware at the address set forth in Section 12.01(b), and has full
corporate power and
-23-
authority, in its individual capacity or (assuming the Trust Agreement
has been duly authorized, executed and delivered by the Owner
Participant) as the Owner Trustee, as the case may be, to carry on its
business as now conducted, and to execute, deliver and perform this
Agreement and the Operative Agreements to which it is or is to be a
party;
(ii) the execution, delivery and performance by Trust
Company, either in its individual capacity or as the Owner Trustee, as
the case may be, of this Agreement and the Operative Agreements to
which it is or is to be party have been duly authorized by all
necessary corporate action on its part, and do not contravene its
articles of association or by- laws; each of this Agreement and the
other Operative Agreements to which it is or is to be a party has been
duly authorized, and has been duly executed and delivered by Trust
Company, either in its individual capacity or as the Owner Trustee, as
the case may be, and neither the execution and delivery thereof nor
Trust Company performance of or compliance with any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing Trust Company's banking or trust powers,
(iii) (A) assuming due authorization, execution and delivery
by each other party thereto, each of the Operative Agreements to which
it is or is to be party when duly executed and delivered will, to the
extent each such document is entered into by Trust Company in its
individual capacity, constitute the legal, valid and binding obligation
of Trust Company in its individual capacity enforceable against it in
such capacity in accordance with its respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws or equitable principles of general application to
or affecting the enforcement of creditors' rights (regardless of
whether enforceability is considered in a proceeding in equity or at
law), and the performance by Trust Company in its individual capacity
of any of its obligations thereunder does not contravene any lease,
regulation or contractual restriction binding on Trust Company in its
individual capacity;
(B) assuming due authorization, execution and
delivery by each other party thereto, each of the Operative Agreements
to which it is or is to be party when duly executed and delivered will,
to the extent each such document is entered into by the Owner Trustee
in its trust capacity, constitute the legal, valid and binding
obligation of the Owner Trustee enforceable against it in such capacity
in accordance with its respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or other
similar laws or general equitable principles, and the performance by
the Owner Trustee of any of its obligations thereunder does not
contravene any lease, regulation or contractual restriction binding on
the Owner Trustee;
(iv) there are no pending or, to its knowledge, threatened
actions or proceedings against Trust Company before any court or
administrative agency which would materially adversely affect the
ability of Trust Company, either in its individual capacity or as the
-24-
Owner Trustee, as the case may be, to perform its obligations under the
Operative Agreements to which it is or is to be party;
(v) its chief executive office (as such term is defined in
Article 9 of the Uniform Commercial Code) is One ▇▇▇▇▇▇ Square, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and it shall give
the Lessee, the Indenture Trustee and the Owner Participant at least 30
days' prior written notice in the event of any change in its chief
executive office or name;
(vi) neither the execution and delivery by it, either in
its individual capacity or as the Owner Trustee, as the case may be, of
any of the Operative Agreements to which it is or is to be a party,
requires on the part of Trust Company in its individual capacity or any
of its Affiliates the consent or approval of or the giving of notice
to, the registration with, or the taking of any other action in respect
of, any federal or Delaware governmental authority or agency governing
its banking or trust powers; and
(vii) the Owner Trustee holds whatever title to the Aircraft
as was conveyed to it by the Seller and the Aircraft is free of
Lessor's Liens attributable to Trust Company in its individual
capacity,
(viii) Trust Company is a Citizen of the United States; and
(ix) Trust Company has made a filing with the New York
State Banking Department under Section 131.3 of the New York State
Banking Law with respect to the trust formed by the Trust Agreement.
(b) Lessor's Liens. Trust Company, in its individual
--------------
capacity, further represents, warrants and covenants that there are no Lessor's
Liens attributable to it in its individual capacity on the Delivery Date. The
Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee,
covenants that it will in its trust capacity promptly, and in any event within
30 days after the same shall first become known to it, take such action as may
be necessary to discharge duly any Lessor's Liens attributable to it in its
trust capacity. Trust Company, in its individual capacity, covenants and agrees
that it will at its own expense take such action as may be necessary to duly
discharge and satisfy in full, promptly, and in any event within 30 days after
the same shall first become known to it, any Lessor's Liens attributable to it
in its individual capacity which may arise at any time after the date of this
Agreement.
(c) Indemnity for Lessor's Liens. Trust Company, in its
----------------------------
individual capacity, agrees to indemnify and hold harmless the Lessee, the
Indenture Trustee, the Owner Participant and the Pass-Through Trustee and the
Owner Trustee from and against any loss, cost, expense or damage which may be
suffered by the Lessee, the Indenture Trustee, the Owner Participant, the Pass-
-25-
Through Trustee or the Owner Trustee as a result of the failure of Trust Company
to discharge and satisfy any Lessor's Liens attributable to it in its individual
capacity, as described in Section 5.03(b).
(d) Securities Act. None of Trust Company, the Owner
--------------
Trustee or any Person authorized by either of them to act on its behalf has
directly or indirectly offered or sold or will directly or indirectly offer or
sell any interest in the Lessor's Estate, or in any similar security relating to
the Lessor's Estate, or in any security the offering of which for purposes of
the Securities Act of 1933, as amended, would be deemed to be part of the same
offering as the offering of the aforementioned securities to, or solicited any
offer to acquire any of the same from, any Person.
(e) Actions With Respect to Lessor's Estate, Etc. Neither
--------------------------------------------
Trust Company, in its individual capacity, nor the Owner Trustee will take any
action to subject the Lessor's Estate or the trust established by the Trust
Agreement, as debtor, to the reorganization or liquidation provisions of the
Bankruptcy Code or any other applicable bankruptcy or insolvency statute.
Section 5.04. Representations, Warranties and Covenants of
--------------------------------------------
the Indenture Trustee.
---------------------
(a) Representations and Warranties. The Indenture
------------------------------
Trustee in its individual capacity represents on the Delivery Date as follows:
(i) it is a state-chartered commercial bank duly organized
and validly existing in good standing under the laws of the State of
Maryland and has the corporate power and authority to enter into and
perform its obligations under the Indenture, this Agreement and the
other Operative Agreements to which it is a party and to authenticate
the Equipment Notes to be delivered on the Delivery Date;
(ii) the Indenture and this Agreement and the other
Operative Agreements to which it is or is to be a party, and the
authentication of the Equipment Notes, have been duly authorized by all
necessary corporate action on its part, and neither the execution and
delivery thereof nor its performance of any of the terms and provisions
thereof will violate any federal or Maryland law or regulation relating
to its banking or trust powers or contravene or result in any breach
of, or constitute any default under, its articles of incorporation or
by-laws;
(iii) each of the Indenture and this Agreement, and the
other Operative Agreements to which it is a party, has been duly
executed and delivered by it and, assuming that each such agreement is
the legal, valid and binding obligation of each other party thereto, is
(or will be, as the case may be), the legal, valid and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws or equitable principles of general application to or affecting the
-26-
enforcement of creditors' rights (regardless of whether enforceability
is considered in a proceeding in equity or at law);
(iv) neither the execution and delivery by it of the
Indenture and this Agreement and the other Operative Agreements to
which it is or is to be a party, nor the performance by it of any of
the transactions contemplated hereby or thereby, requires the consent
or approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any Federal or state
governmental authority or agency governing its banking and trust
powers; and
(v) it has made a filing with the New York State Banking
Department under Section 131.3 of the New York Banking Law in respect
of the performance of its duties relating to the Indenture Estate.
(b) Indenture Trustee's Liens. The Indenture Trustee, in
-------------------------
its individual capacity, represents, warrants and covenants that there are no
Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity,
covenants and agrees that it will at its own expense take such action as may be
necessary to duly discharge and satisfy in full, promptly, and in any event
within 30 days, after the same shall first become known to it, any Indenture
Trustee's Liens.
(c) Indemnity for Indenture Trustee's Liens. The
---------------------------------------
Indenture Trustee, in its individual capacity, agrees to indemnify and hold
harmless the Lessee, the Owner Participant, the Owner Trustee and the Pass-
Through Trustee from and against any actual out-of-pocket loss, cost, expense or
damage which may be suffered by the Lessee, the Indenture Trustee, the Owner
Participant, the Owner Trustee or the Pass-Through Trustee as a result of the
failure of the Indenture Trustee to discharge and satisfy any Indenture
Trustee's Liens attributable to it in its individual capacity, as described in
Section 5.04(b) hereof.
Section 5.05. Indenture Trustee's Notice of Default. The Indenture
-------------------------------------
Trustee agrees to give the Lessee and the Owner Participant notice of any
Default or Event of Default promptly upon a Responsible Officer of the Indenture
Trustee having actual knowledge thereof.
Section 5.06. Releases from Indenture. The Indenture Trustee covenants
-----------------------
and agrees, for the benefit of the Lessee and the Owner Participant, to execute
and deliver the instruments of release from the Lien of the Indenture which it
is required to execute and deliver in accordance with the provisions of Article
XIV of the Indenture, and the Owner Participant agrees, for the benefit of the
Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute
and deliver such instruments of release upon written notice from the Lessee to
make such request.
Section 5.07. The Lessee's Right of Quiet Enjoyment. Notwithstanding
-------------------------------------
any other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Event of Default shall have occurred and be
-27-
continuing, take or cause to be taken any action contrary to the Lessee's rights
under the Lease, including, without limitation, its rights to possession, use
and quiet enjoyment of the Aircraft during the Term.
Section 5.08. Pass-Through Trustee's Representations and Warranties.
-----------------------------------------------------
The Pass-Through Trustee, in its individual capacity (except with respect to
clause (iii) below), represents and warrants as of the Delivery Date that:
(i) it is a state-chartered commercial bank duly organized
and validly existing in good standing under the laws of the State of
Maryland and has full corporate power and authority to enter into and
perform its obligations under the Pass-Through Trust Agreements, the
Intercreditor Agreement and this Agreement and to execute and
authenticate the Pass- Through Certificates to be delivered on the
Pass-Through Closing Date;
(ii) the execution, delivery and performance of this
Agreement, and the Pass- Through Trust Agreement and the performance of
its obligations hereunder and thereunder have been fully authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Maryland law or
regulation relating to its banking or trust powers or contravene or
result in any breach of, or constitute any default under its articles
of incorporation, or bylaws or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it or its properties may be bound or affected; and
(iii) each of this Agreement and the Pass-Through Trust
Agreement has been duly executed and delivered by it (in its individual
and trust capacities) and, assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, is or
will be, as the case may be, the legal, valid and binding obligation of
the Pass-Through Trustee (in its individual and trust capacities),
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(iv) there are no Taxes payable by the Pass-Through Trustee
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Pass-Through Trustee of this Agreement, any of the
Pass-Through Trust Agreements (other than franchise or other taxes
based on or measured by any fees or compensation received by the
Pass-Through Trustee for services rendered in connection with the
transactions contemplated by the Pass-Through Trust Agreements), and
there are no Taxes payable by the Pass-Through Trustee imposed by the
State of Maryland or any political subdivision thereof in connection
with the acquisition, possession or ownership by the Pass-Through
Trustee of any of the Equipment Notes other
-28-
than franchise or other taxes based on or measured by any fees or
compensation received by the Pass-Through Trustee for services rendered
in connection with the transactions contemplated by the Pass-Through
Trust Agreements;
Section 5.09. Survival of Representations, Warranties and
-------------------------------------------
Covenants. Representations, warranties and covenants of the Owner Participant,
---------
the Owner Trustee (in its individual or trust capacity), the Pass-Through
Trustee (in its individual or trust capacity), the Indenture Trustee (in its
individual or trust capacity) and the Subordination Agent (in its individual or
trust capacity) provided for in this Article 5, and their respective obligations
under any and all of them, shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.
Section 5.10. Lessee's Assumption of the Equipment Notes.
------------------------------------------
(a) Subject to compliance by the Lessee with all of its
obligations under the Operative Agreements, each of the Owner Participant, the
Owner Trustee, the Indenture Trustee, the Pass-Through Trustee and the Lessee
covenants and agrees that if the Lessee elects to purchase the Aircraft pursuant
to the terms of the Operative Agreements, if no Event of Default shall exist,
then, upon compliance with the applicable provisions of the Operative
Agreements, the Owner Trustee will transfer to the Lessee, without recourse or
warranty (except as to the absence of Lessor's Liens attributable to the Owner
Trustee) but subject to the Lien of the Indenture, all of the Owner Trustee's
right, title and interest in and to the Aircraft, and if the Lessee, in
connection with such purchase, elects to assume the obligations of the Owner
Trustee to the Indenture Trustee and the Holders under the Indenture, the
Equipment Notes, and hereunder, the Lessee shall so notify the Indenture Trustee
(such notice to be given at least 30 and not more than 60 days prior to the
effective date of such assumption), and each of the parties shall execute and
deliver appropriate documentation permitting the Lessee to assume such
obligations on the basis of full recourse to the Lessee, maintaining for the
benefit of the Holders the security interest in the Aircraft created by the
Indenture, and upon compliance with the provisions of this Section 5.10
releasing the Owner Participant and the Owner Trustee from all obligations in
respect of the Equipment Notes, the Indenture, this Agreement, and the other
Operative Agreements, except any obligations relating to the period prior to
such assumption and take all such other actions, at the Lessee's expense, as are
reasonably necessary to permit such assumption by the Lessee.
(b) In connection with such assumption:
(i) the Lessee shall execute and deliver an instrument (A)
pursuant to which the Lessee irrevocably and unconditionally assumes
and undertakes, with full recourse to the Lessee, to pay, satisfy, and
discharge when and as due (at the stated maturity thereof, by
acceleration or otherwise) the principal of, Make-Whole Premium, if
any, interest, and all other sums owing on all Outstanding Equipment
Notes (or on the Lessee's substituted obligations) in accordance with
their terms, and punctually to perform and observe all of the
-29-
covenants and obligations hereunder and under the Indenture and the
Equipment Notes (as the same may be amended in connection with such
assumption) to be performed or observed by the Owner Trustee, and (B)
which contains amendments to the Indenture, in form and substance as
reasonably satisfactory to the Indenture Trustee, that incorporate
therein such provisions from the Lease (or, if the Lease has not been
entered into, the form of Lease attached hereto as Exhibit A) and this
Agreement as may be appropriate, including, without limitation, events
of default substantially identical in scope and effect to those set
forth in the Lease (or such form, as the case may be) and covenants
substantially identical to the covenants of the Lessee hereunder and
under the Lease (or such form, as the case may be);
(ii) the instrument referred to in paragraph (i) of this
Section 5.10(b), any Uniform Commercial Code financing statements
relating thereto, and any other documents which shall be necessary (or
reasonably requested by the Indenture Trustee) to establish the
Lessee's title to and interest in the Aircraft or to reflect the
substitution of the Lessee for the Owner Trustee under the Operative
Agreements or to continue the perfection of the security interests in
the Aircraft and the other rights, property, and interests included in
the Indenture Estate for the benefit of the Holders shall be filed in
such form, manner, and places as are necessary or, in the reasonable
opinion of the Indenture Trustee, advisable for such purpose;
(iii) the Indenture Trustee shall have received an insurance
report dated the effective date of such assumption of an independent
insurance broker and certificates of insurance, each in form and
substance satisfactory to the Indenture Trustee, as to the due
compliance as of the effective date of such assumption with the terms
of Section 9 of the Lease (as it relates to the Indenture Trustee)
relating to the insurance with respect to the Aircraft (provided that
--------
the required amount of all-risk hull insurance, subject to the self
insurance rights of the Lessee, shall be in an amount at least equal to
the aggregate outstanding amount of the Equipment Notes plus six months
interest);
(iv) the Indenture Trustee shall have received a
certificate from the Lessee that no Specified Default exists as of the
effective date of such assumption;
(v) the Indenture Trustee shall have received (A) from
counsel for the Lessee (who may be the Lessee's General Counsel) a
legal opinion, in form and substance as reasonably satisfactory to the
Indenture Trustee: (w) with respect to the compliance of the assumption
contemplated hereby with the terms hereof, (x) with respect to the due
authorization, execution, delivery, validity, and enforceability of the
instrument referred to in paragraph (i) of this Section 5.10(b), (y)
with respect to the continued perfection of the security interest in
the Aircraft for the benefit of the Holders, and (z) with respect to
the continued availability of the benefits of Section 1110 to the
Indenture Trustee for the benefit of the Holders with respect to the
Aircraft after giving effect to such assumption (but only to the extent
such benefits would have been available to the Holders prior to such
assumption assuming compliance with the Operative Agreements by the
parties thereto), (B) from
-30-
counsel to the Indenture Trustee and Lessee's special aviation counsel,
a legal opinion comparable to the respective opinions delivered on the
Delivery Date, as the case may be, with such changes therein as may be
appropriate in light of such assumption, and (C) in the case of each
opinion described in clause (A) or (B) above, covering such additional
matters as the Indenture Trustee shall reasonably request; and
(vi) the Lessee shall (i) obtain a written confirmation
from each Rating Agency that such assumption will not result in a
withdrawal, suspension or downgrading of the ratings of any class of
Pass-Through Certificates, (ii) provides the Indenture Trustee with an
opinion of counsel (both counsel and opinion reasonably satisfactory to
the Indenture Trustee) that the Pass-Through Trusts will not be subject
to U.S. federal income tax as a result of such assumption and (iii)
furnishes to the Indenture Trustee either (A) an opinion of counsel
(both counsel and opinion reasonably satisfactory to the Indenture
Trustee) that the holders of the Pass-Through Certificates will not
recognize gain or loss for U.S. federal income tax purposes and will be
subject to U.S. federal income tax on the same amount and in the same
manner and at the same time as would have been the case if such
assumption had not occurred or (B) both an opinion of counsel (both
counsel and opinion reasonably satisfactory to the Indenture Trustee)
that the holders of the Pass-Through Certificates should not recognize
gain or loss for U.S. federal income tax purposes in connection with
such assumption and should be subject to U.S. federal income tax on the
same amount and in the same manner and at the same time as would have
been the case if such assumption had not occurred and an indemnity in
favor of the holders of the Pass-Through Certificates in form and
substance reasonably satisfactory to the Indenture Trustee.
(c) The Lessee shall pay all reasonable expenses (including
reasonable fees and expenses of counsel) of the Indenture Trustee, the Owner
Trustee, the Pass-Through Trustee, each Liquidity Provider and the Owner
Participant in connection with such assumption.
Section 5.11. Compliance with Trust Agreement, Etc. Each of the
------------------------------------
Owner Participant, Trust Company, and the Owner Trustee agrees with the Lessee,
the Indenture Trustee, the Liquidity Providers and the Pass-Through Trustee that
so long as the Lien of the Indenture shall be in effect it will (i) comply with
all of the terms of the Trust Agreement applicable to it in its respective
capacity, the noncompliance with which would materially adversely affect any
such party and (ii) not take any action, or cause any action to be taken, to
amend, modify or supplement any other provision of the Trust Agreement in a
manner that would materially adversely affect any such party without the prior
written consent of such party. The Owner Trustee confirms for the benefit of the
Lessee, the Indenture Trustee, the Liquidity Providers and the Pass-Through
Trustee that it will comply with the provisions of Article 2 of the Trust
Agreement. Notwithstanding anything else to the contrary in the Trust Agreement,
so long as the Lease remains in effect, the Owner Participant agrees not to
terminate or revoke the trust created by the Trust Agreement without the consent
of the Lessee. If and so long as the Indenture shall not have been discharged
the consent of the Indenture Trustee shall also be required prior to any
termination or revocation of such trust and in addition, the Owner
-31-
Trustee will, at the Lessee's expense, promptly and duly execute and deliver to
the Indenture Trustee such documents and assurances including, without
limitation, conveyances, financing statements and continuation statements with
respect to financing statements and take such further action as the Indenture
Trustee may from time to time reasonably request in order to protect the rights
and remedies created or intended to be created in favor of the Indenture Trustee
under the Indenture and to create for the benefit of the Holders a valid first
priority Lien with respect to, and a first and prior perfected security interest
in, the Indenture Estate.
Section 5.12. Subordination Agent's Representations,
--------------------------------------
Warranties and Covenants.
------------------------
(a) Representations and Warranties. The Subordination
------------------------------
Agent represents and warrants as of the Delivery Date, that:
(i) it is a state-chartered commercial bank duly organized
and validly existing in good standing under the laws of the State of
Maryland and has the corporate power and authority to enter into and
perform its obligations under this Agreement, the Liquidity Facilities
and the Intercreditor Agreement;
(ii) the execution, delivery and performance of this
Agreement, each of the Liquidity Facilities and the Intercreditor
Agreement and the performance of its obligations hereunder and
thereunder have been fully authorized by all necessary, corporate
action on its part, and, neither the execution and delivery thereof nor
its performance of any of the terms and provisions thereof will violate
any federal or Maryland law or regulation relating to its banking or
trust powers or contravene or result in any breach of, or constitute
any default under its articles of incorporation, or bylaws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(iii) each of this Agreement, the Liquidity Facilities and
the Intercreditor Agreement has been duly executed and delivered by it
and, assuming that each such agreement is the legal, valid and binding
obligation of each other party thereto, is or will be, as the case may
be, the legal, valid and binding obligation of the Subordination Agent,
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(iv) there are no Taxes payable by the Subordination Agent
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Subordination Agent of this Agreement, any of the
Liquidity Facilities or the Intercreditor Agreement (other than
franchise or other taxes based on or measured by any fees or
compensation received by the Subordination Agent for
-32-
services rendered in connection with the transactions contemplated by
the Intercreditor Agreement or any of the Liquidity Facilities), and
there are no Taxes payable by the Subordination Agent imposed by the
State of Maryland or any political subdivision thereof in connection
with the acquisition, possession or ownership by the Subordination
Agent of any of the Equipment Notes other than franchise or other taxes
based on or measured by any fees or compensation received by the
Subordination Agent for services rendered in connection with the
transactions contemplated by the Intercreditor Agreement or any of the
Liquidity Facilities);
(v) to the best of the Subordination Agent's knowledge,
there are no pending or threatened actions or proceedings against the
Subordination Agent before any court or administrative agency which
individually or in the aggregate, if determined adversely to it, would
materially adversely affect the ability of the Subordination Agent to
perform its obligations under this Agreement, the Intercreditor
Agreement or any Liquidity Facility;
(vi) the Subordination Agent has not directly or indirectly
offered any Equipment Note for sale to any Person or solicited any
offer to acquire any Equipment Notes from any Person, nor has the
Subordination Agent authorized anyone to act on its behalf to offer
directly or indirectly any Equipment Note for sale to any Person, or to
solicit any offer to acquire any Equipment Note from any Person; and
the Subordination Agent is not in default under any Liquidity Facility;
and
(vii) the Subordination Agent is not directly or indirectly
controlling, controlled by or under common control with the Owner
Participant, the Owner Trustee, any Placement Agent or the Lessee.
(b) Covenants.
---------
(i) The Subordination Agent agrees not to amend any
Liquidity Facility or the Intercreditor Agreement without the consent
of the Lessee.
(ii) At any time when directed by the Lessee, the
Subordination Agent shall replace any Liquidity Provider pursuant to
Section 3.6(e) of the Intercreditor Agreement. Except as otherwise
expressly provided in the Intercreditor Agreement, the Subordination
Agent shall not in any other instance replace any Liquidity Provider in
respect of any Liquidity Facility.
(iii) [Reserved].
-33-
(iv) The Subordination Agent agrees, upon the request of
the Lessee, to replace the Liquidity Facility in accordance with
Section 3.6(e) of the Intercreditor Agreement
Section 5.13. Amendments to the Indenture.
---------------------------
Each of the Owner Trustee and the Indenture Trustee agrees that
it will not during the Term enter into any amendment or supplement to the
Indenture without the prior consent of the Lessee, if such amendment or
supplement would have the effect of limiting any right or of increasing any
obligation or liability of the Lessee under the terms of the Lease or any other
Operative Agreement.
ARTICLE 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 a net after-tax basis and hold each Tax Indemnitee
harmless from all license, recording, documentary, registration and other fees
and all taxes (including, without limitation, income, gross receipts, sales,
rental, use, value added, property (tangible and intangible), ad valorem, excise
-- -------
and stamp taxes), fees, levies, imposts, recording duties, duties, charges,
assessments or withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax or interest thereon
(individually, a "Tax," and collectively called "Taxes"), however imposed or
asserted (whether imposed upon any Tax Indemnitee, the Lessee, all or any part
of the Aircraft, Airframe, any Engine or any Part or the Lessor's Estate, the
Indenture Estate, Rent, the Equipment Notes or otherwise upon or with respect to
any Operative Agreement, any payments thereunder or otherwise in connection
therewith), by any Federal, state or local government or taxing authority in the
United States, or by any government or taxing authority of a foreign country or
of any political subdivision or taxing authority thereof or by a territory or
possession of the United States or an international taxing authority relating to
or measured by:
(i) the construction, mortgaging, financing, refinancing,
purchase, 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;
-34-
(ii) amounts payable under the Operative Agreements;
(iii) the Aircraft, or the income or other proceeds received
with respect to the Aircraft attributable to the transactions
contemplated by the Operative Agreements, held by the Owner Trustee
under the Trust Agreement or after an Event of Default under the Lease,
or by the Indenture Trustee under the Indenture;
(iv) otherwise with respect to any Operative Agreement, any
interest therein or by reason of the transactions described in or
contemplated by the Operative Agreements;
(v) the principal or interest or other amounts payable
with respect to the Equipment Notes;
(vi) the Pass-Through Certificates or the Equipment Notes
or the issuance, sale, acquisition, reoptimization, or refinancing
thereof or the beneficial interests in the Trust Estate or the
Indenture Estate or the creation thereof under the Trust Agreement or
the Indenture, or the security interest created or perfected thereby or
by any filing thereof;
(vii) any assumption by the Lessee pursuant to Section 5.10
of this Agreement;
(viii) the Aircraft, the Airframe, any Engine or any Part;
or
(ix) the rentals (including Basic Rent and Supplemental
Rent), receipts or earnings arising from 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, receipts, capital, franchise, net worth
(whether, denominated income, excise, capital stock, or doing business
taxes) or other similarly-based taxes (other than sales, use or
property taxes) ("Income Taxes"), provided, however, that this clause
-------- -------
(i) shall not exclude from the indemnity described in Section 6.01(a)
above any such Income Taxes to the extent such taxes are imposed on the
Owner Participant by any jurisdiction other than the United States or
any state or local taxing authority located therein in which the Owner
Participant would not be subject to taxes of such type but for, or
would be subject to such taxes of such type solely as a result of, (x)
the operation, registration, location, presence, or use of the
Aircraft, Airframe, any Engine or any Part thereof, in such
jurisdiction or (y) the place of incorporation or principal office or
the activities of the Lessee or any Affiliate thereof or any sublessee
in such jurisdiction (it being understood that (A) any such indemnity
payable only to the extent of the net harm incurred
-35-
by the Owner Participant from such Income Taxes, taking into account
any incremental Tax benefit in another tax jurisdiction resulting from
payment of such Income Taxes and (B) no indemnity is payable with
respect to Income Taxes imposed by any jurisdiction in which the Owner
Participant is already subject to Income Tax);
(ii) Taxes on items of tax preference or any minimum tax
or alternative minimum tax;
(iii) Taxes imposed with respect to any period after the
earlier of (A) the discharge in full of the Lessee's obligation, if
any, to pay Termination Value under and in accordance with the Lease,
(B) the expiration of the Term of the Lease or (C) the termination of
the Lease in accordance with the applicable provisions of the Lease
thereof;
(iv) As to the Owner Trustee, Taxes imposed against the
Owner Trustee upon or with respect to any fees for services rendered in
its capacity as Owner Trustee under the Trust Agreement or, as to the
Indenture Trustee, Taxes imposed against the Indenture Trustee upon or
with respect to any fees received by it for services rendered in its
capacity as Indenture Trustee under the Indenture;
(v) With respect to any Tax Indemnitee, Taxes resulting
from the willful misconduct or negligence of any Tax Indemnitee or the
breach by any Tax Indemnitee 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);
(vi) Taxes imposed on the Owner Trustee or the Owner
Participant or any successor, assign or Affiliate thereof which became
payable by reason of any voluntary or involuntary transfer or
disposition by such Tax Indemnitee subsequent to the Delivery Date,
including revocation of the Trust, of any interest in some or all of
the Aircraft, Airframe, Engines or Parts thereof or its interest in the
Lessor's Estate (not including any transfers of any Equipment Note
pursuant to Section 13.01 (a) hereof) or a disposition in connection
with a bankruptcy or similar proceedings involving either the Lessor or
the Owner Participant or a transfer or disposition of shares or other
interests in the Owner Trustee or the Owner Participant other than (A)
transfers resulting from a loss, substitution or modification of the
Aircraft, Engines or any Part, (B) transfers pursuant to the Lessor's
exercise of remedies in accordance with Section 17 of the Lease or (C)
a transfer pursuant to the Lessee's exercise of its rights under
Section 13(b) of the Lease; the parties agree to cooperate to minimize
any such Taxes covered by this provision;
(vii) Taxes subject to indemnification by the Lessee
pursuant to the Tax Indemnity Agreement;
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(viii) Taxes imposed on a successor, assign or other
transferee of any interest of any 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;
(ix) Taxes imposed by any jurisdiction that would not have
been imposed on the Owner Trustee or the Owner Participant but for the
activities or the status of the Owner Trustee or the Owner Participant
in such jurisdiction unrelated to the transactions contemplated by the
Operative Agreements;
(x) Any Taxes which have been included in the Purchase
Price;
(xi) any Taxes which would not have been imposed but for a
Lessor's Lien or an Indenture Trustee's Lien;
(xii) Any Taxes imposed on the Owner Participant arising
under or in connection with any prohibited transaction, within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code or
any similar provision of state law ("Prohibited Transaction");
(xiii) Taxes that would not have been imposed but for the
existence or status of any trust used to hold title to the Aircraft;
(xiv) Taxes in the nature of an intangible or similar Tax
imposed on or with respect to the Equipment Notes (or the indebtedness
evidenced thereby), the Pass-Through Certificates, the Trust Estate or
the Trust Agreement;
(xv) Taxes that are being contested in accordance with the
provisions hereof;
(xvi) Any value-added Taxes imposed by the federal
government of the United States;
(xvii) United States withholding Taxes imposed on payments
to a foreign person;
(xviii) interest, penalties, fines or additions to tax (x)
which result from the failure of a Tax Indemnitee to properly or timely
prepare or file any tax return, report or other statement required by
law to be filed by such Tax Indemnitee other than tangible property tax
returns, reports or statements relating to the Aircraft, or (y) to the
extent they relate to
-37-
taxes for which no indemnity would be payable by the Lessee pursuant to
this Section 6.01(b); or;
(xix) any Tax enacted as a substitute for or in lieu of any
Tax that would not have been indemnified against.
(c) Withholding. The Pass-Through Trustee shall withhold
-----------
any Taxes required by law to be withheld on payments to any holder of a Pass-
Through Certificate. The Indenture Trustee shall withhold any Taxes required to
be withheld on any payment to a Holder pursuant to Section 5.09 of the
Indenture. If the Indenture Trustee or the Pass-Through Trustee fails to
withhold a Tax required to be withheld with respect to any Holder of an
Equipment Note or any holder of a Pass-Through Certificate or any claim is
otherwise asserted by a taxing authority against the Owner Trustee or Owner
Participant for any withholding tax, the Lessee will indemnify the Owner Trustee
and the Owner Participant (without regard to the exclusions set forth in Section
6.01(b) hereof) on an After-Tax Basis against any such Taxes required to be
withheld and any interest and penalties with respect thereto, along with any
other costs (including reasonable attorney's fees) incurred in connection with
any such claim. The Indenture Trustee or the Pass-Through Trustee, as the case
may be, in its individual capacity (and without recourse to the Indenture
Estate), shall indemnify the Lessee (without regard to the exclusions set forth
in Section 6.01(b) hereof) on an After-Tax Basis for any payment the Lessee
shall have made pursuant to the preceding sentence.
Section 6.02. All Tax Obligations; After-Tax Basis.
------------------------------------
Notwithstanding any other provisions anywhere contained in the Operative
Agreements, it is understood that all of the Lessee's obligations with respect
to taxes are set forth in this Article 6 (and Section 7.01 to the extent that
payments by the Lessee thereunder are required to be made on an "After-Tax
Basis") and in the Tax Indemnity Agreement, and if the Lessee shall be required
under any provision of the Operative Agreements to pay any tax imposed upon a
Tax Indemnitee or with respect to a payment made by the Lessee under the
Operative Agreements for which the Lessee is not responsible under this Article
or the Tax Indemnity Agreement, it shall be entitled to prompt reimbursement of
such amount from the party whose tax liability was paid. The amount which the
Lessee shall be required to pay with respect to any Tax indemnified against
under Section 6.01 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 realized or,
except in the case of foreign tax credits, expected to be realized by such Tax
Indemnitee as a result of the Indemnifiable Tax. If any Tax Indemnitee realizes
a Tax benefit (whether by credit, deduction or otherwise), or would have
realized such a benefit if properly claimed, by reason of the payment of any Tax
paid or indemnified against by the Lessee, 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, 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 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
-38-
and not already paid to the Lessee. All computations for the purposes hereof
shall be based on tax rates in effect on the date payment pursuant to this
Section 6.02 is made. Computations involving the loss of use of money or
calculations of present value shall be based on ___% per annum, as adjusted for
applicable income tax effects and compounded semiannually.
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;
provided, that such other foreign taxes which are carried back to the taxable
--------
year for which a determination is being made shall be deemed utilized after
foreign taxes described in clause (ii) below, and (ii) then, on a pro rata
basis, all foreign taxes with respect to which such Tax Indemnitee is entitled
to obtain indemnification pursuant to an indemnification provision contained in
any lease, loan agreement, or other financing document (including this
Participation Agreement) that is similar to the indemnification provision in
this Article 6.
Notwithstanding the preceding paragraph, if foreign taxes of a
Tax Indemnitee have been indemnified hereunder and all such indemnified foreign
taxes have not been used to produce a credit against such Tax Indemnitee's
United States income taxes resulting in the realization of a tax benefit paid to
the Lessee in accordance with the first paragraph of this Section 6.02, a tax
benefit will be deemed to be attributable to such indemnified foreign taxes to
the extent that an item of income derived from the transactions contemplated in
the Operative Agreements is allocable to sources outside the United States and
such allocation results in an increase in the amount of foreign tax credit such
Tax Indemnitee is entitled to use in any taxable year over the amount of foreign
tax credit such Tax Indemnitee would have been entitled to use if such foreign
source allocation had not occurred.
Section 6.03. Time of Payment. Any amount payable to a Tax
---------------
Indemnitee pursuant to this Article 6 shall be paid 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 the due date for Tax in issue.
Section 6.04. Contests. If a written claim is made against any
--------
Tax Indemnitee for Taxes with respect to which the Lessee is liable for a
payment or indemnity hereunder, such Tax Indemnitee shall promptly (but in any
event within 30 days of receipt thereof) give the Lessee notice in writing of
such claim and shall furnish the Lessee with copies of any written requests for
information sent to such Tax Indemnitee from any taxing authority to the extent
relating to such Taxes with respect to which the Lessee may be required to
indemnify hereunder; provided, however,
-------- -------
-39-
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. The Lessee may, at
its option, contest in its own name (if permissible as a matter of law) or
require the Tax Indemnitee to contest in good faith, with due diligence and at
the Lessee's expense, if timely requested in writing by the Lessee, the
validity, applicability or amount of such Taxes by:
(a) resisting payment thereof if lawful and practicable or not
paying the same except under protest if protest is necessary and proper in each
case so long as non-payment will not result in a material risk of the sale,
forfeiture or loss of, or the creation of a Lien other than a Permitted Lien on
the Aircraft, Airframe or any Engine or any risk of criminal liability; or
(b) if the payment be made, using reasonable efforts to obtain
a refund thereof in appropriate administrative and judicial proceedings.
If requested by the Lessee, the Tax Indemnitee shall appeal any
adverse administrative or judicial decision. Notwithstanding the foregoing, the
Lessee shall not be permitted or entitled to contest any such Tax in its own
name unless the Lessee is allowed to contest such Tax under applicable law of
the taxing jurisdiction.
If the Tax Indemnitee, after reasonable discussion with the
Lessee and consideration in good faith of any suggestion made by the Lessee as
to the method of pursuing such contest, elects to conduct the contest, such Tax
Indemnitee shall control the contest and shall determine the manner in which to
contest such Taxes and shall periodically or upon the Lessee's request advise
the Lessee of the progress of such contest; provided, however, that the Lessee
-------- -------
shall have the right to be consulted in good faith with respect to any contest
of claims subject to indemnification hereunder and to participate in any contest
proceeding, including governmental and judicial conferences, and the right to be
consulted in good faith regarding the relevant portions of all related
submissions to any governmental or other authority. If the Lessee satisfies the
conditions imposed on it in this Section 6.04 and a Tax Indemnitee nevertheless
fails to contest and refuses to permit the Lessee to contest under and as and to
the extent required by this Section 6.04, then the Lessee shall not be obligated
to indemnify such Tax Indemnitee for such claim or for any other claim for which
a successful contest is adversely affected because of such failure to contest or
to permit a contest. The Tax Indemnitee will not settle a contest that results
in a final determination without consent of the Lessee, unless the Tax
Indemnitee waives its right to indemnification with respect to such contest and
any related contest. Any such settlement, concession, or compromise without the
prior written consent of the Lessee shall constitute a waiver of such Tax
Indemnitee's rights to indemnification hereunder with respect to such claim and
any other claim for which a successful contest is adversely affected because of
such settlement, concession, or compromise. Notwithstanding the preceding
-40-
sentences of this Section 6.04, such Tax Indemnitee shall not be required to
take or continue any action unless the Lessee shall have agreed to pay the Tax
Indemnitee on a current basis all reasonable fees and expenses (including
reasonable attorneys' fees and accountants' fees) which such Tax Indemnitee may
incur as a result of contesting such Taxes. In no event shall such Tax
Indemnitee be required or the Lessee be permitted to contest pursuant to this
Section 6.04 the imposition of any Tax for which the Lessee is obligated to
indemnify any Tax Indemnitee hereunder unless (i) such contest will not result
in any material risk of loss, sale or forfeiture of, or the creation of a Lien
(other than Permitted Liens) on, the Aircraft or any part thereof or interest
thereon or in a risk of criminal liability, and (ii) if such contest shall be
conducted in a manner requiring payment of the claim in advance, the Lessee
shall have advanced sufficient funds, on an interest free basis, to make the
payment required, and agreed to indemnify the Tax Indemnitee against any
additional net adverse tax consequences on an After-Tax Basis to such Tax
Indemnitee of such advance; provided, that in the event that such Tax Indemnitee
--------
is not required under this paragraph to contest any Tax liability for which the
Lessee is obligated to indemnify any Tax Indemnitee, the Lessee may contest such
Tax liability in the name of the Lessee, if permitted by law.
Nothing contained in this Section 6.04 shall require any Tax
Indemnitee to contest or continue to contest, or permit Lessee to contest, a
claim which such Tax Indemnitee would otherwise be required to contest pursuant
to this Section 6.04, if such Tax Indemnitee shall waive payment by Lessee of
any amount that might otherwise be payable by Lessee under this Article 6 in
connection with 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 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.
Section 6.06. [Reserved].
----------
Section 6.07. Reports; 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
-41-
to the relevant Taxing authority and file any returns or reports required with
respect thereto to the extent legally entitled to do so in its own name;
provided, however, that the Lessee shall not make any statements or take any
-------- -------
action which would indicate that the Lessee or any Person other than the Owner
Trustee or Owner Participant is the owner of the Aircraft, the Airframe, any
Engine or any Part or which would otherwise be inconsistent with the terms of
the Lease or the Tax Indemnity Agreement and the position thereunder of the
Owner Trustee and the Owner Participant.
Section 6.09. Reimbursements by Indemnitees Generally. To the
---------------------------------------
extent the Lessee is required to pay or withhold any Tax imposed on or with
respect to a Tax Indemnitee in respect of the transactions contemplated by the
Operative Agreements, which Tax is not otherwise the responsibility of the
Lessee under the Operative Agreements, or any other written agreements between
the Lessee and such Tax Indemnitee, then such Tax Indemnitee shall pay to the
Lessee within 30 days of the Lessee's demand therefor an amount which equals the
amount actually paid by the Lessee with respect to such Taxes.
Section 6.10. Forms. Each Tax Indemnitee agrees to furnish from
-----
time to time to Lessee or to such other person as Lessee may designate, at
Lessee's request, such duly executed and properly completed forms as may be
necessary or appropriate in order to claim any reduction of or exemption from
any withholding or other Tax imposed by any taxing authority, if (x) such
reduction or exemption is available to such Tax Indemnitee 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 jointly by the
applicable Tax Indemnitee and 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.
-42-
ARTICLE 7.
GENERAL INDEMNITY
Section 7.01. Generally.
---------
(a) Indemnity. The Lessee agrees to indemnify each
---------
Indemnitee against and agrees to protect, defend, save and keep harmless each
Indemnitee against and in respect of, and will pay on an After-Tax Basis, from
any and all liabilities, obligations, losses, damages, 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
(individually, an "Expense," collectively, "Expenses"), which may be imposed on,
incurred or suffered by or asserted against any Indemnitee, in any way relating
to, arising out of or in connection with, any one or more of the following:
(i) any Operative Agreement or Pass-Through Document or
any transaction contemplated thereby;
(ii) the operation, possession, use, non-use, maintenance,
storage, overhaul, delivery, non-delivery, control, 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, 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, and claims or penalty
relating to any laws, rules or regulations, including, without
limitation, environmental control, noise and pollution laws, rules or
regulation;
(iii) the manufacture, design, sale, return, purchase,
acceptance, rejection, delivery, non-delivery, condition, repair,
modification, servicing, rebuilding, airworthiness, registration,
reregistration, deregistration, ownership, financing, import, export,
performance, non-performance, lease, sublease, transfer,
merchantability, fitness for use, alteration, substitution or
replacement of any Airframe, Engine, or Part or other transfer of use
or possession, or other disposition of the Aircraft, the Airframe, any
Engine or any Part including, without limitation, latent and other
defects, whether or not discoverable, strict tort liability, and any
claims for patent, trademark or copyright infringement;
(iv) any breach of or failure to perform or observe, or any
other non-compliance with, any condition, covenant or agreement to be
performed, or other obligations of the Lessee under any of the
Operative Agreements or any Pass-Through Trust Agreement, or the
falsity or inaccuracy of any representation or warranty of the Lessee
in any of the Operative
-43-
Agreements or any Pass-Through Trust Agreement (other than
representations and warranties in the Tax Indemnity Agreement);
(v) the enforcement of the terms of the Operative
Agreements; and
(vi) the offer, issuance, sale or delivery of any Equipment
Note, any Pass-Through Certificate or interest in the Lessor's Estate
or the Trust Agreement or any similar interest.
(b) Exceptions. The indemnity provided for in Section
----------
7.01(a) shall not extend to any Expense of any Indemnitee to the extent it:
(i) is attributable to the willful misconduct or gross
negligence of such Indemnitee (other than gross negligence or willful
misconduct imputed to such person by reason of its interest in the
Aircraft or any transaction documents);
(ii) is attributable to acts or events (other than the
performance by Lessee of its obligations pursuant to the terms of the
Operative Agreements) which occur after the Aircraft is no longer part
of the Lessor's Estate or, if the Aircraft remains a part of the
Lessor's Estate, after the expiration of the Term (unless the Aircraft
is being returned at such time, in which case after return of physical
possession; provided that if the Lease has been terminated pursuant to
--------
Section 17 thereof, the indemnity provided in Section 7.01(a) hereof
shall survive for so long as Lessor or the Indenture Trustee shall be
exercising remedies under such Section 17), or to acts or events which
occur after return of possession of the Aircraft by the Lessee in
accordance with the provisions of the Lease (subject to the foregoing
proviso if the Lessor has terminated the Lease pursuant to Section 17
of the Lease);
(iii) is a Tax or loss of a Tax benefit, whether or not the
Lessee is required to indemnify therefor pursuant to Article 6 hereof
or pursuant to the Tax Indemnity Agreement;
(iv) is a cost or expense 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 such
Indemnitee, directly or indirectly pursuant to the terms of this
Agreement or such other Operative Agreement;
(v) is attributable to the incorrectness or breach by
such Indemnitee of its representations or warranties, under any of the
Operative Agreements;
(vi) is attributable to the failure by such Indemnitee to
perform any of its obligations under any of the Operative Agreements;
-44-
(vii) is, in the case of the Owner Participant, Lessor's
Liens attributable to the Owner Participant; in the case of the Owner
Trustee, Lessor's Liens to the extent attributable to the Owner
Trustee; in the case of Trust Company, Lessor's Liens to the extent
attributable to Trust Company; and in the case of the Indenture
Trustee, Indenture Trustee's Liens;
(viii) is, in the case of the Owner Participant or the Owner
Trustee, attributable to the offer or sale by such Indemnitee of any
interest in the Aircraft, the Lessor's Estate or the Trust Agreement or
any similar interest (including an offer or sale resulting from
bankruptcy or other proceedings for the relief of debtors in which such
Indemnitee is the debtor), unless in each case such offer or sale shall
occur pursuant to the exercise of remedies under Section 17 of the
Lease;
(ix) is an Expense arising under or in connection with any
"prohibited transaction", within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code or any similar provision of state law;
(x) except during the continuation of an Event of Default,
is attributable to any amendment to any of the Operative Agreements
which is not requested by the Lessee or is not required or made
pursuant to the terms of any of the Operative Agreements;
(xi) is attributable to the exercise by any Indemnitee of
any right to inspect the Aircraft except with respect to any such
inspection conducted while an Event of Default is continuing; and
(xii) constitutes the loss of future profits or losses
attributable to such Indemnitee's overhead.
Section 7.02. Notice and Payment. Each Indemnitee shall give
------------------
prompt written notice to the Lessee of any liability 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, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Lessee
would have been liable for in the absence of such failure to provide such notice
or adversely affects the ability of Lessee's insurers to defend such claim.
Section 7.03. Defense of Claims. The Lessee or its insurers
-----------------
shall have the right (in each such case at the Lessee's sole expense) to
investigate, defend (and control the defense of) any such claim for which
indemnification is sought pursuant to this Article 7 and each Indemnitee shall
cooperate with the Lessee or its insurers with respect thereto, provided that,
-------- ----
without limiting the right of the Lessee's insurers to assume and control the
defense of, or to compromise, any such claim, the Lessee shall not be entitled
to assume and control the defense of or compromise any such claim (A) during the
continuance of any Event of Default arising under Section 14(a) of the Lease,
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(B) if an actual or potential material conflict of interest exists making it
advisable (on the basis of prevailing standards of professional responsibility)
for such Indemnitee to be represented by separate counsel or on the grounds that
such proceeding involves the potential imposition of criminal liability on such
Indemnitee or (C) such proceeding will involve any material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than Permitted Liens)
on the Aircraft or the Trust Estate (unless the Lessee posts a bond or other
security reasonably acceptable in form and substance to such Indemnitee) or
involve any material risk of criminal liability to such Indemnitee for which it
is not indemnified hereunder and, in any such case, the relevant Indemnitee
will, in good faith, undertake the defense of such claim at the expense of the
Lessee. Subject to the immediately foregoing sentence, where the Lessee or the
insurers under a policy of insurance maintained by the Lessee undertake the
defense of an Indemnitee with respect to such a claim, no additional legal fees
or expenses of such Indemnitee in connection with the defense of such claim
shall be indemnified hereunder unless the fees or expenses were incurred at the
written request of the Lessee or such insurers. Subject to the requirement of
any policy of insurance applicable to a claim, an Indemnitee may participate at
its own expense at any judicial proceeding controlled by the Lessee or its
insurers pursuant to the preceding provisions, to the extent that such party's
participation does not, in the opinion of the independent counsel appointed by
the Lessee or its insurers to conduct such proceedings, interfere with such
control; 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, unless such
Indemnitee waives its right to be indemnified under this Article 7 with respect
to such claim. The Lessee shall not enter into any settlement or compromise with
respect to which the Lessee has not agreed to indemnify such Indemnitee to such
Indemnitee's satisfaction or which admits any criminal violation, gross
negligence or willful misconduct on the part of any Indemnitee without the prior
written consent of such Indemnitee.
Section 7.04. 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 Permitted Sublessee) pursuant to Section 9 of the
Lease or otherwise, it shall be a condition of such indemnity with respect to
any particular Indemnitee that such Indemnitee shall cooperate with the insurers
in the exercise of their rights to investigate, defend or compromise such claim
as may be required to retain the benefits of such insurance with respect to such
claim.
Section 7.05. Subrogation. To the extent that an Expense
-----------
indemnified by the Lessee under this Article 7 is in fact paid by the Lessee
and/or an insurer under a policy of insurance maintained by the Lessee, the
Lessee and/or such insurer as the case may be shall be subrogated to the extent
of such payment to the rights and remedies of the Indemnitee on whose behalf
such Expense was paid with respect to the transaction or event giving rise to
such Expense. Should an Indemnitee receive any refund, in whole or in part, with
respect to any Expense paid by the Lessee hereunder, it shall promptly pay over
the amount refunded, together with any interest received with
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respect to such amount for the period between the indemnification payment and
the receipt of such refund, to the Lessee.
Section 7.06. Survival of Obligations. The indemnities and
-----------------------
agreements of the Lessee provided for in this Article 7 shall survive the
expiration or other termination of this Agreement.
Section 7.07. Effect of Other Indemnities. The Lessee's
---------------------------
obligations under this Article 7 shall be those of a primary obligor whether or
not the Person indemnified shall also be indemnified with respect to the same
matter under the terms of this Agreement, or any other document or instrument,
and the Person seeking indemnification from the Lessee pursuant to any provision
of this Agreement may proceed directly against the Lessee without first seeking
to enforce any other right of indemnification.
Section 7.08. 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 7.09. Certain Limitations. The Lessee does not
-------------------
guarantee and nothing in the general indemnification provisions of this Article
7 shall be construed as a guarantee (or an indemnification) by the Lessee (i)
that the principal of, premium, if any, or interest on any Equipment Note will
be paid or (ii) with respect to the residual value of the Aircraft or any part
thereof.
ARTICLE 8.
TRANSACTION COSTS
Section 8.01. Transaction Costs and Other Costs.
---------------------------------
(a) Transaction Costs. The Owner Participant shall pay
-----------------
(or reimburse the Lessee if the Lessee shall have previously made such payment)
all fees and expenses of the following persons relating to the offering of the
Pass-Through Certificates contemplated by the Placement Agreement and related to
the transactions contemplated hereby: (i) the reasonable fees and expenses of
counsel for Owner Participant; (ii) the reasonable fees and expenses of the
respective counsel for the Lessee, the Owner Trustee, the Indenture Trustee, the
Manufacturer, the Engine Manufacturer, the Subordination Agent, the Pass-Through
Trustee, the Paying Agent, each Liquidity Provider and the Placement Agents
(other than those fees, expenses and disbursements payable by the Placement
Agent pursuant to the Placement Agreement); (iii) the reasonable fees and
expenses of special aviation counsel; (iv) any initial fees and expenses of the
Pass-Through Trustee and the initial fees
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and expenses of the Owner Trustee, the Subordination Agent, the Paying Agent,
the Indenture Trustee; (v) any compensation, commissions and discounts payable
to the Placement Agents pursuant to the Placement Agreement; (vi) the fees and
expenses incurred in connection with printing any offering memorandum for the
offering of the Pass-Through Certificates; (vii) the fees and expenses of
▇▇▇▇▇'▇ and S&P; (viii) the fees and expenses of The Seabury Group LLC (the
"Lessee Advisor"); (ix) any amounts paid in connection with any appraisal report
prepared for the Owner Participant; and (x) any other amounts approved by the
Lessee and the Owner Participant. The fees and expenses described in clauses
(ii) through (viii) of this paragraph shall be allocable to the Owner
Participant under this Agreement (1) to the extent incurred specifically with
respect to the Owner Participant, and (2) to the extent such fees and expenses
are incurred but are not specifically attributable to the Owner Participant, in
the proportion that the principal amount of the Equipment Notes bears to the
total amount of the Pass-Through Certificates.
(b) Continuing Expenses. The Lessee agrees to pay, as
-------------------
Supplemental Rent, (i) the continuing fees, expenses and disbursements
(including reasonable counsel fees and expenses) of the Trust Company and Owner
Trustee, with respect to the administration of the Lease and the Lessor's
Estate; (ii) the continuing fees, expenses and disbursements (including
reasonable counsel fees and expenses) of the Indenture Trustee, with respect to
the administration of the Indenture Estate; (iii) the continuing fees, expenses
and disbursements (including reasonable counsel fees and expenses) of the
Pass-Through Trustee, the Paying Agent and the Subordination Agent (including,
(x) in the case of the Pass-Through Trustee, (1) any reasonable fees, costs and
expenses incurred in connection with the preparation and filing of tax returns
or reports, including any schedule, if any, required to be filed on any
Pass-Through Trust (other than any such fees, costs or expenses which are
incurred in the normal course of the performance of the Pass-Through Trustee's
duties and for which the Pass-Through Trustee would not otherwise seek
reimbursement from the Pass-Through Trust) and (2) any reasonable fees, costs
and expenses incurred and any penalties incurred by the Pass-Through Trustee or
imposed upon a Pass-Through Trust relating to the failure to file any such tax
return unless such failure is the result of the gross negligence or willful
misconduct of the Pass-Through Trustee and (y) in the case of the Subordination
Agent, any reasonable fees and expenses incurred in connection with the
replacement of any Liquidity Provider as provided in the Intercreditor
Agreement); and (iv) the continuing fees, expenses and disbursements (including
reasonable counsel fees and expenses) of the Liquidity Providers as expressly
provided in each Liquidity Facility.
(c) Amendments and Supplements. Without limitation of the
--------------------------
foregoing, the Lessee agrees to pay, as Supplemental Rent, to the Owner Trustee,
the Owner Participant, the Indenture Trustee, the Subordination Agent, the
Liquidity Providers and the Pass-Through Trustee all costs and expenses
(including reasonable legal fees and expenses) incurred by any of them in
connection with any amendment, supplement, waiver or consent (whether or not
entered into) under this Agreement or any other Operative Agreement or document
or instrument delivered pursuant to any of them, which amendment, supplement,
waiver or consent is required by any provision of any Operative Agreement
(including any adjustment pursuant to Section 3(d) of the Lease) or is
-48-
requested by the Lessee or necessitated by the action or inaction of the Lessee;
provided, however, that the Lessee shall not be responsible for fees or expenses
-------- -------
incurred in connection with the offer, sale or other transfer (whether pursuant
to Section 5.01(c) hereof or otherwise) by the Owner Participant, the Owner
Trustee, the Indenture Trustee, or any Holder of any interest in the Aircraft,
the Lessor's Estate, the Beneficial Interest or the Trust Agreement or any
similar interest (and the offeror, seller, or transferor shall be responsible
for all such fees and expenses), unless such offer, sale or transfer shall occur
(A) pursuant to the exercise of remedies under Section 17 of the Lease, or (B)
in connection with the termination of the Lease or action or direction of the
Lessee pursuant to Section 8, 13 or 14 of the Lease.
ARTICLE 9.
SUCCESSOR OWNER TRUSTEE
Section 9.01. Appointment of Successor Owner Trustee.
--------------------------------------
(a) Resignation and Removal. The Owner Trustee or any
-----------------------
successor Owner Trustee may resign or may be removed (with the consent of the
Lessee) by the Owner Participant, and a successor Owner Trustee may be appointed
and a Person may become Owner Trustee under the Trust Agreement only in
accordance with the provisions of Section 9.01 of the Trust Agreement and the
provisions of paragraphs (b) and (c) of this Section 9.01.
(b) Conditions to Appointment. The appointment in any
-------------------------
manner of a successor Owner Trustee pursuant to Section 9.01 of the Trust
Agreement shall be subject to the following conditions:
(i) such successor Owner Trustee shall be a Citizen of
the United States;
(ii) such successor Owner Trustee shall be a bank or a
trust company having combined capital, surplus and undivided profits of
at least $100,000,000 or a bank or trust company fully guaranteed by a
direct or indirect parent thereof having a combined capital, surplus
and undivided profits of at least $100,000,000;
(iii) such appointment shall not violate any provisions of
the Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered or create a relationship which
would be in violation of the Transportation Code or any applicable rule
or regulation of the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered;
(iv) such successor Owner Trustee shall enter into an
agreement or agreements, in form and substance reasonably satisfactory
to the Lessee, the Owner Participant, the Pass-
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Through Trustee and the Indenture Trustee whereby such successor Owner
Trustee confirms that it shall be deemed a party to this Agreement and
each other Operative Agreement to which the Owner Trustee is a party
and agrees to be bound by all the terms of such documents applicable to
the Owner Trustee and makes the representations and warranties
contained in Section 5.03 hereof (except that it may be duly
incorporated, validly existing and in good standing under the laws of
the United States of America or any State thereof); and
(v) all filings of Uniform Commercial Code financing and
continuation statements, filings in accordance with the Transportation
Code and amendments thereto shall be made and all further actions taken
in connection with such appointment as may be necessary in connection
with maintaining the validity, perfection and priority of the Lien of
the Indenture and the valid and continued registration of the Aircraft
in accordance with the Transportation Code.
ARTICLE 10.
LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS
Section 10.01. Liabilities of the Owner Participant. The Owner
------------------------------------
Participant shall not have any obligation or duty to the Lessee or to any Holder
with respect to the transactions contemplated by this Agreement, except those
obligations or duties expressly set forth in this Agreement, the Indenture, the
Trust Agreement, the Tax Indemnity Agreement, the Lease or any other Operative
Agreement to which the Owner Participant is a party and the Owner Participant
shall not be liable for the performance by any other party hereto of such other
party's obligations or duties hereunder.
Section 10.02. Interest of Holders of Equipment Notes. Each
--------------------------------------
Holder of an Equipment Note shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal and interest on
all Equipment Notes held by such Holder and all other sums payable to such
Holder under this Agreement, under the Indenture and under such Equipment Notes
shall have been paid in full.
ARTICLE 11.
OTHER DOCUMENTS
Section 11.01. Consent of Lessee to Other Documents. The Lessee
------------------------------------
hereby consents in all respects to the execution and delivery of the Indenture,
the Trust Agreement, the Intercreditor Agreement and the Liquidity Facilities.
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Section 11.02. Pass-Through Trustee's and Subordination Agent's
------------------------------------------------
Acknowledgment. The Pass-Through Trustee and the Subordination Agent hereby
--------------
acknowledge and agree to be bound by all of the terms and conditions of the
Indenture, including without limitation, Section 8.02 thereof regarding the
rights of the Owner Participant to purchase the Equipment Notes under the
circumstances specified therein.
ARTICLE 12.
NOTICES
Section 12.01. Notices. All notices, demands, declarations and
-------
other communications required by this Agreement shall be in writing and shall be
deemed received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, or (b) if given by certified mail, return receipt
requested, by courier service, or by any other commercially customary means,
when received or personally delivered, addressed:
(a) if to the Lessee, to its office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel,
telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other
address as the Lessee shall from time to time designate in writing to
the Owner Trustee, the Indenture Trustee and any Owner Participant;
(b) if to the Lessor or the Owner Trustee, to its office at One
▇▇▇▇▇▇ Square North, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Corporate Trust Administration, telephone (302)
▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such other address as the
Lessor shall from time to time designate in writing to the Lessee and
the Indenture Trustee, with a copy to the Owner Participant;
(c) if to the Owner Participant to its office at _____________,
Attention: __________________, telephone __________________ facsimile
_______________; or to such other address as the Owner Participant
shall from time to time designate in writing to the Lessee, and the
Owner Trustee and the Indenture Trustee;
(d) if to the Indenture Trustee, the Subordination Agent or the
Pass-Through Trustee, to its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Mail
Code 101-591, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Corporate Trust
Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇ facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to
such other address as the Indenture Trustee or the Pass-Through
Trustee, as the case may be, shall from time to time designate in
writing to the Owner Trustee, the Lessee and the Owner Participant; and
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(e) if to the Liquidity Provider, to its office at ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ________________,
telephone (212) __________ and facsimile (▇▇▇) ▇▇▇-▇▇▇▇, or to such
other address as a Liquidity Provider shall from time to time designate
in writing to the Owner Trustee, the Lessee and the Indenture Trustee.
ARTICLE 13.
REFINANCING
Section 13.01. Refinancing
-----------
(a) Subject to the terms and conditions of this Section 13.01,
the Lessee may request the Owner Participant to participate in two refinancings
in whole but not in part, of the Equipment Notes prior to the end of the Basic
Term (a "Refinancing"). Such Refinancing may be placed in either the private or
public markets and shall be denominated in Dollars and shall be on terms
reasonably satisfactory to the Owner Participant. The Owner Participant will
agree to negotiate promptly in good faith to conclude an agreement with the
Lessee as to the terms of any such Refinancing transaction (including the terms
of any debt to be issued in connection with such refinancing and the
documentation to be executed in connection therewith). Without the prior written
consent of the Owner Participant, the prospectus and other offering materials
relating to any Refinancing in the form of a public offering shall not identify
the Owner Participant and shall not include any financial statements of the
Owner Participant or any Affiliate thereof. In connection with any such
Refinancing in the form of a public offering, the Lessee shall indemnify the
Owner Participant in a manner satisfactory to it for any liabilities under
federal, state or foreign securities laws resulting from such offering. The
aggregate principal amount of the new Equipment Notes issued in connection with
any Refinancing shall be the same as the aggregate principal amount outstanding
on the Equipment Notes being refinanced.
(b) Notwithstanding anything herein to the contrary, no
Refinancing will be permitted unless the Owner Participant and the Indenture
Trustee shall have received at least 15 days' prior written notice of the
scheduled closing date of such Refinancing and the Owner Participant shall have
been provided such longer period as it shall have required for a reasonable
opportunity to review the relevant documentation and the Owner Participant shall
have determined in good faith that neither it nor the Owner Trustee shall suffer
any loss or expense or bear any increased risk as a result of such Refinancing
(including, without limitation, any risk with respect to taxes or other adverse
consequences to the Owner Participant including the application of Revenue
Procedures 75-21 and 75-28 and Section 467 of the Code) for which it has not
been or will not have been indemnified by the Lessee in a manner reasonably
satisfactory to the Owner Participant.
Prior to the consummation of any Refinancing pursuant to this
Section 13.01, the Owner Participant and the Lessee shall agree upon a schedule
setting forth each installment of Basic
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Rent and setting forth Termination Values payable pursuant to the Lease as a
result of the Refinancing in accordance with Section 3(d) of the Lease, and
thereafter the amounts set forth in such schedule shall become the amounts
payable under the Lease. Upon the consummation of the Refinancing, the evidence
of indebtedness issued pursuant to the Refinancing shall be considered
"Equipment Notes" for purposes of this Agreement and the Lease.
(c) Notwithstanding the foregoing, the Owner Participant shall
have no obligation to proceed with any Refinancing transaction as contemplated
by this Section 13.01 unless the Lessee indemnifies the Owner Trustee and the
Owner Participant by agreement in form and substance reasonably satisfactory to
each of them, for any liability, obligation (other than the obligation to pay
principal and interest in respect of the refinanced indebtedness), cost or
expense (including, without limitation, reasonable attorneys' fees and
Make-Whole Premium or other amounts due under the Indenture), including any
adverse tax consequences or impact, related to or arising out of any such
Refinancing transaction.
(d) Without the prior written consent of the Owner Participant,
no such refinancing shall (1) cause the aggregate principal amount of the
indebtedness to be substituted for the Equipment Notes to exceed the aggregate
principal amount of the then outstanding Equipment Notes, (2) cause the weighted
average life of such indebtedness to be different by more than six months than
the remaining weighted average life of the then outstanding Equipment Notes, or
(3) cause the date of maturity of such indebtedness to be later than the date of
maturity of the Equipment Notes being refinanced.
(e) Each party agrees to take or cause to be taken all
requested action, including, without limitation, the execution and delivery of
any documents and instruments, including, without limitation, amendments or
supplements to the Lease, which may be reasonably necessary or desirable to
effect such Refinancing, including, in the case of the Owner Participant,
direction to the Owner Trustee by the Owner Participant to prepay the Equipment
Notes then outstanding; provided, however, that such Refinancing shall be
-------- -------
subject to the satisfaction of each of the following conditions:
(i) Payment shall have been made with respect to
principal, accrued interest, Make-Whole Premium, if any, and all other
sums due and owing on the Equipment Notes payable under the Indenture;
(ii) Payment in full of all other amounts then due and
owing by the Lessee under this Agreement, the Indenture, the Lease, the
Trust Agreement, and the Equipment Notes then outstanding shall have
been made by the Lessee;
(iii) Such party shall have received such opinions of
counsel (including, without limitation, an opinion received by the
Owner Participant from independent tax counsel reasonably satisfactory
to the Lessee that such Refinancing shall not result in any adverse tax
-53-
consequences to such Owner Participant, unless the Lessee shall have
agreed to provide an indemnity in respect thereof reasonably
satisfactory in form and substance to the Owner Participant),
certificates and other documents as it may reasonably request, each in
form and substance reasonably satisfactory to such party;
(iv) All authorizations, approvals and consents which in
the reasonable judgment of the Owner Participant are necessary for such
Refinancing shall have been obtained;
(v) No Specified Default shall exist or would occur
immediately after giving effect to such Refinancing;
(vi) In the event the Lessee shall not prohibit the
purchase of the Refinancing loan certificates by, or with the assets
of, an ERISA Plan, the Lessee will permit the placement of the
Refinancing loan certificates with an ERISA Plan only if either (A) if
such placement is in the form of pass-through certificates, the sole
underwriter or the manager or co-manager of the underwriting syndicate
or the selling or placement agent of such pass-through certificates
represents to the Lessee that it has a prohibited transaction exemption
from the U.S. Department of Labor with respect to pass-through
certificates (such as Prohibited Transaction Exemption 89-88 or any
other comparable exemption) or (B) purchasers of the Refinancing loan
certificates (or if the Refinancing involves the issuance and sale of
pass-through certificates, purchasers of such pass-through
certificates) provide a representation (which may be in the form of a
deemed representation) regarding their source of funds used in
acquiring the Refinancing loan certificates (or such pass-through
certificates, as the case may be) and, if such purchasers represent
that they are using funds of an ERISA Plan in acquiring the Refinancing
loan certificates (or such pass-through certificates, as the case may
be), such purchasers further represent that (1) either they are relying
on a prohibited transaction exemption from the U.S. Department of Labor
with respect to their purchase and holding of the Refinancing loan
certificates (or such pass-through certificates, as the case may be) or
(2) their purchase and holding of the Refinancing loan certificates (or
such pass- through certificates, as the case may be) will not
constitute a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code. The reliance on any such exemption
will not be conditional on the Owner Participant's representation
concerning its party in interest or other status with respect to ERISA
Plans; and
(vii) The Lessee shall pay all costs and expenses (including
legal fees) incurred in connection with any proposed or actually
consummated Refinancing.
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ARTICLE 14.
[RESERVED]
ARTICLE 15.
MISCELLANEOUS
Section 15.01. Counterparts. This Agreement may be executed by
------------
the parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 15.02. No Oral Modifications. Neither this Agreement
---------------------
nor any of its terms may be terminated, amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought. No such written termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy shall have been
delivered to and executed by the Owner Trustee and the Indenture Trustee. A copy
of each such termination, amendment, supplement, waiver or modification shall
also be delivered to each other party to this Agreement.
The consent of each of the Pass-Through Trustee and the
Subordination Agent, in its capacity as a party to this Agreement and not as a
Holder, shall not be required to modify, amend or supplement this Agreement or
to give any consent, waiver, authorization or approval with respect to this
Agreement under the circumstances in which the consent of the Indenture Trustee
would not be required for such modification, amendment, supplement, consent,
waiver or approval in accordance with Section 8.01(b) of the Indenture, provided
--------
that the Pass-Through Trustee and the Subordination Agent shall be entitled to
receive an Opinion of Counsel (as defined in the Pass- Through Trust Agreement)
necessary, in its sole discretion, to establish that the Indenture Trustee's
consent would not be required under such circumstances.
Section 15.03. Captions. The table of contents preceding this
--------
Agreement and the headings of the various Articles and Sections of this
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions of this Agreement.
Section 15.04. Successors and Assigns. The terms of this
----------------------
Agreement shall be binding upon, and shall inure to the benefit of, the Lessee
and its successors and permitted assigns, the Subordination Agent and its
successors and permitted assigns, including without limitation each Holder of an
Equipment Note, the Owner Participant and its successors and permitted assigns,
the Owner Trustee and its successors as Owner Trustee (and any additional owner
trustee appointed) under the Trust Agreement, the Indenture Trustee and its
successors as Indenture Trustee (and any additional indenture trustee appointed)
under the Indenture and the Pass-Through Trustee and its successors as
Pass-Through Trustee (and any additional Pass-Through trustee appointed).
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Section 15.05. Concerning the Owner Trustee, Indenture Trustee
-----------------------------------------------
and the Pass-Through Trustee. Each of Trust Company and Allfirst is entering
----------------------------
into this Agreement solely in its capacities (except to the extent otherwise
expressly indicated), in the case of Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, in the case of
Allfirst, not in its individual capacity but solely as Indenture Trustee under
the Indenture and as Pass-Through Trustee under the Pass-Through Trust Agreement
and as Subordination Agent under the Subordination Agreement, and except as
otherwise expressly provided in this Agreement or in the Lease, the Indenture,
the Pass-Through Trust Agreement or the Trust Agreement, neither Trust Company
nor Allfirst shall be personally liable for or on account of its statements,
representations, warranties, covenants or obligations under this Agreement;
provided, however, that each of Trust Company and Allfirst accepts the benefits
-------- -------
running to it under this Agreement, and each agrees that (except as otherwise
expressly provided in this Agreement or any other Operative Agreement to which
it is a party) it shall be liable in its individual capacity for (a) its own
gross negligence or willful misconduct (whether in its capacity as trustee or in
its individual capacity), (b) any breach of representations and warranties or
any breach of covenants made in its individual capacity pursuant to or in
connection with this Agreement or the other Operative Agreements to which it is
a party, (c) any breach, in the case of the Owner Trustee, of its covenants
contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure to use
ordinary care in receiving, handling and disbursing funds, (e) in the case of
the Owner Trustee, Lessor's Liens attributable to it in its individual capacity,
(f) in the case of the Indenture Trustee, Indenture Trustee's Liens, and (g)
taxes, fees or other charges on, or based on, or measured by, any fees,
commissions or compensation received by it in connection with the transactions
contemplated by the Operative Agreements.
Section 15.06. Severability. Any provision of this Agreement
------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 15.07. Certain Limitations on Reorganization. The
-------------------------------------
Indenture Trustee and each Holder agree that, if (i) the Owner Trustee becomes
or all or any part of the Lessor's Estate or the trust created by the Trust
Agreement becomes the property of, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any other applicable bankruptcy or
insolvency statutes, (ii) pursuant to any such reorganization provisions, the
Owner Participant is held to have recourse liability to the Indenture Trustee,
any Holder, the debtor, the Owner Trustee or the trustee of the debtor directly
or indirectly on account of any amount payable as Make-Whole Premium, principal
or interest on the Equipment Notes, or any other amount payable on any Equipment
Note that is provided in the Operative Agreements to be nonrecourse to the Owner
Participant and (iii) any Holder or the Indenture Trustee actually receives any
Recourse Amount which reflects any payment by the Owner Participant on account
of (ii) above, then such Holder or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Participant such Recourse Amount. For
purposes of this Section 15.07, "Recourse Amount" means the amount by which the
portion of
-56-
such payment by the Owner Participant on account of clause (ii) above received
by such Holder or the Indenture Trustee exceeds the amount which would have been
received by such Holder or the Indenture Trustee if the Owner Participant had
not become subject to the recourse liability referred to in (ii) above. Nothing
contained in this Section shall prevent the Indenture Trustee from enforcing any
individual obligation (and retaining the proceeds thereof) of the Owner
Participant under this Agreement or, any other Operative Agreement to the extent
herein or therein provided, for which the Owner Participant has expressly agreed
by the terms of this Agreement to accept individual responsibility.
Section 15.08. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE
-------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE NON- EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY AND COUNTY OF
NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN
CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER
RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET
FORTH PURSUANT TO SECTION 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT,
OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 15.08(c),
SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH
PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY
NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY
THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY
ACTION OR PROCEEDING BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT
-57-
OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
Section 15.09. Section 1110 Compliance. The parties hereto
-----------------------
agree that the transactions contemplated by the Operative Agreements are
expressly intended to be, shall be, and should be construed so as to be entitled
to the benefits and protection of Section 1110.
Section 15.10. Reliance of Liquidity Providers. Each of the
-------------------------------
parties hereto agrees and acknowledges that each Liquidity Provider shall be a
third party beneficiary of each of the representations and warranties made
herein by such party (and of each covenant herein made by such party to each
Liquidity Provider), and that each Liquidity Provider may rely on such
representations, warranties and covenants to the same extent as if such
representations, warranties and covenants were made to such Liquidity Provider
directly. The terms of this Agreement shall inure to the benefit of each
Liquidity Provider, their respective successors and permitted assigns.
Section 15.11. Agreement Regarding Engine. The Indenture
--------------------------
Trustee hereby agrees for the benefit of the lessor or secured party of any
engine (other than the Engines) or of any airframe (other than the Airframe)
leased to the Lessee or purchased by the Lessee and subject to a conditional
sale or other security agreement, which lease or conditional sale or other
security agreement (in the case of any such airframe) also covers an engine or
engines (other than the Engines) owned by the lessor under such lease or subject
to a security interest in favor of the secured party under such conditional sale
or other security agreement, that the Indenture Trustee will not seek to
acquire, claim, or exercise as against such lessor or secured party, any rights,
title or interest in any such engine as a result of such engine being installed
on the Airframe at any time while such engine is owned by such lessor or is
subject to such conditional sale or other security agreement or security
interest in favor of such secured party.
* * *
-58-
IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers as of the
day and year first written above.
MIDWAY AIRLINES CORPORATION
By:
-------------------------------------
Name:
Title:
[OWNER PARTICIPANT]
By:
-------------------------------------
Name:
Title:
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, except as otherwise expressly
provided herein but solely as Owner
Trustee
By:
-------------------------------------
Name:
Title:
ALLFIRST BANK, as Indenture Trustee,
Pass-Through Trustee and Subordination
Agent
By:
-------------------------------------
Name:
Title:
-59-
Schedule I
Commitments
Participants Amount of Commitment
------------ --------------------
[Owner Participant] ____% of Lessor's Cost
2000-1A Pass-Through Trust ____% of Lessor's Cost
2000-1B Pass-Through Trust ____% of Lessor's Cost
2000-1C Pass-Through Trust ____% of Lessor's Cost
Schedule II
Wire Instructions
[_________________] ("Owner Participant")
Wire Transfer Instructions:
wire transfer of immediately available funds to (or as otherwise specified by
the Owner Participant):
Bank Name:
ABA No.:
Account No.:
Account Name:
Reference: Midway N3__ML
[Leased Aircraft Definitions]
APPENDIX A
DEFINITIONS [N3__ML]
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 (including, without limitation, in the case of the
Liquidity Facility, any Replacement Liquidity Facility (as defined in the
Intercreditor Agreement)), and (ii) references to parties to agreements shall be
deemed to include the successors and permitted assigns of such parties.
"Additional Insureds" means the Owner Trustee (in its individual and trust
-------------------
capacities), the Owner Participant, the Indenture Trustee (in its individual and
trust capacities) and each Liquidity Provider.
"Aeronautical Authority" means as of any time of determination, the FAA or
----------------------
other governmental airworthiness authority having jurisdiction over the Aircraft
or the Airframe and Engines or engines attached thereto under the laws of the
country in which the Airframe is then registered.
"Affiliate" means, with respect to any Person, any other Person directly or
---------
indirectly controlling 50% or more of any class of voting securities of such
Person or otherwise controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" (including "controlled
by" and "under common control with") shall mean the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or by contract or
otherwise.
"After Tax Basis" means a basis such that any payment to be received or
---------------
deemed to be received by a Person shall be supplemented by a payment to such
Person so that the sum of such payments, after deduction of all Taxes (taking
into account any related credits or deductions) resulting from the actual or
constructive receipt or accrual of such payments, shall be equal to the payment
to be received.
"Aircraft" means the Airframe together with the Engines, whether or not any
--------
of the Engines may at the time of determination be installed on the Airframe or
installed on any other airframe or on any other aircraft.
"Airframe" means (i) the Boeing model 737-700 aircraft (excluding the
--------
Engines and any other engines which may from time to time be installed thereon,
but including any and all Parts which may from time to time be incorporated in,
installed on or attached to such aircraft, and including any and all such Parts
removed therefrom so long as title to such removed Parts remains vested in the
Lessor under the terms of Section 7 of the Lease) originally delivered and
leased under the Lease, identified by national registration number and
manufacturer's serial number in the Lease Supplement executed and delivered on
the Delivery Date, so long as a Replacement Airframe shall not have been
substituted therefor pursuant to Section 8 of the Lease, and (ii) a Replacement
Airframe, so long as another Replacement Airframe shall not have been
substituted therefor pursuant to Section 8 of the Lease.
"Allfirst" means Allfirst Bank, a Maryland state-chartered commercial bank.
--------
"Applicable Law" means all applicable laws, statutes, treaties, rules,
--------------
codes, ordinances, regulations, certificates, orders, interpretations, licenses
and permits of any Governmental Authority of competent jurisdiction and
judgments, decrees, injunctions, writs, orders or like action of any court,
arbitrator or other administrative, judicial or quasi-judicial tribunal or
agency of competent jurisdiction.
"Average Life Date" means, for any Equipment Note, the date which follows
-----------------
the prepayment date by a period equal to the Remaining Weighted Average Life of
such Equipment Note.
"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.
-▇-
"▇▇▇▇▇ ▇▇▇▇" means the period commencing at the beginning of the day on the
----------
Delivery Date and ending at end of the day on the Expiration Date, or such
earlier date on which the Lease shall be terminated as provided therein.
"Beneficial Interest" means the interest of the Owner Participant under the
-------------------
Trust Agreement.
"Bills of Sale" means the FAA ▇▇▇▇ of Sale and the Warranty ▇▇▇▇ of Sale.
-------------
"Business Day" means any day other than a Saturday or Sunday or other day
------------
on which commercial banks are authorized or required by law to close in New York
City, Charlotte, North Carolina and the city in the United States in which the
office or agency is maintained by the Pass-Through Trustee for the payment of
the Pass-Through Certificates, and after the Lien of the Indenture is
discharged, Wilmington, Delaware.
"CFM Warranty" means certain General Terms Agreement No. 6-13593 dated as
------------
of June 11, 1999 by and between the Engine Manufacturer and the Lessee, to the
extent relating to the Engines.
"Change in Tax Law" means any change or proposed change in the Code or the
-----------------
Regulations or any change in the interpretation of the Code or Regulations or
any change in the interpretation of the Code or Regulations in a decision by the
United States Supreme Court, the United States Tax Court, the United States
Court of Claims or any one of the United States Courts of Appeals, or any
issuance of a revenue ruling, revenue procedure or any pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"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.
"Class A Liquidity Provider" has the meaning given to such term in Section
--------------------------
1.1 of the Intercreditor Agreement.
"Class B Liquidity Provider" has the meaning given to such term in Section
--------------------------
1.1 of the Intercreditor Agreement.
"Class C Liquidity Provider" has the meaning given to such term in Section
--------------------------
1.1 of the Intercreditor Agreement.
"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).
-3-
"Commitment" of a Loan Participant shall have the meaning given such term
----------
in Section 2.01(d) of the Participation Agreement; "Commitment" of the Owner
----------
Participant shall have the meaning given such term in Section 2.01(c) of the
Participation Agreement.
"CRAF Program" has the meaning specified in Section 5(b)(vii) of the Lease.
-------------
"Debt Rate" means the weighted average (based on Outstanding principal
---------
amount) rate of interest on the Equipment Notes.
"Default" means any event or condition which, with the lapse of time or the
-------
giving of notice, or both, would constitute an Event of Default.
"Delivery Date" means the date on which the Aircraft is delivered and sold
-------------
to the Lessor and leased by the Lessor to the Lessee under the Lease, which date
shall be the date of the initial Lease Supplement.
"Deposit Agreement" means each of the three Deposit Agreements between the
-----------------
Depositary and the Escrow Agent, dated as of the Issuance Date, each of which
relates to one of the Pass-Through Trusts.
"Depositary" means Allfirst Bank, a Maryland state-chartered commercial
----------
bank, as Depositary under each Deposit Agreement.
"Dollars", "Dollar" and "$" means the lawful currency of the United States
------- ------ -
of America.
"DOT" means the United States Department of Transportation and any agency
---
or instrumentality of the United States Government succeeding to its functions.
"Downgrade Drawing" has the meaning given to such term in Section 1.1 of
-----------------
the Intercreditor Agreement.
"EBO Amount" has the meaning given to such term in Exhibit B to the Lease.
----------
"EBO Date" has the meaning given to such term in Exhibit B to the Lease.
--------
"Engine" means (A) each of the two CFM-56-7B20 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
-4-
or installed in or attached thereto and any and all Parts removed therefrom so
long as title to such Parts remains vested in the Lessor under the terms of
Section 7 of the Lease. The term "Engines" means, as of any date of
-------
determination, the two engines each of which is an Engine on that date.
"Engine Manufacturer" means CFM International, Inc., a Delaware
-------------------
corporation, and its successors and assigns.
"Engine Manufacturer's Consent" means the consent to the Engine Warranty
-----------------------------
Assignment delivered by the Engine Manufacturer on the Delivery Date and
pertaining to the Aircraft.
"Engine Warranty Assignment" means the engine warranty assignment
--------------------------
agreement, in form and substance reasonably acceptable to the Owner Participant,
entered into by the Lessor and the Lessee on the Delivery Date and pertaining to
the Aircraft.
"Equipment Notes" means the Equipment Notes issued by the Owner Trustee
---------------
pursuant to the Indenture and any equipment note issued in exchange therefor or
replacement thereof pursuant to the Indenture.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"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;
"Escrow Agent" means First Union Trust Company, National Association, a
------------
national banking association, as Escrow Agent under each of the Escrow
Agreements.
"Escrow Agreement" means each of the three Escrow and Paying Agent
----------------
Agreements, among the Escrow Agent, the Paying Agent, certain initial purchasers
of the Pass-Through Certificates named therein and one of the Pass-Through
Trustees, dated as of the Issuance Date, each of which relates to one of the
Pass Through Trusts.
"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 30 consecutive days (provided that, so long as Lessee shall be
diligently pursuing recovery of such property, such period shall be
extended to 60 consecutive days) or more or, if earlier for a period that
extends until the end of the Term;
-5-
(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) with respect to the Airframe only, requisition of use of such
property by any foreign government or purported government or any agency or
instrumentality thereof (other than the Government), for a period in excess
of 180 consecutive days (for countries listed in Exhibit E to the Lease) or
30 consecutive days (for any other country) or such shorter period ending
on the expiration of the Term;
(v) with respect to the Airframe only, requisition of use of such
property by the Government for a period extending beyond the Term;
(vi) condemnation, confiscation or seizure of, or requisition of title
to, such property by any foreign government or purported government or any
agency or instrumentality thereof or by the Government, for a period in
excess of 10 consecutive days or such shorter period ending on the
expiration of the Term;
(vii) 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 of passengers shall have been
prohibited by virtue of a condition affecting all Boeing model 737-700
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 Boeing model 737-700 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
(viii) with respect to an Engine only, the requisition or taking of
use thereof by any government, or instrumentality or agency thereof and any
divestiture of title or ownership deemed to be an Event of Loss with
respect to an Engine under Section 5(b)(iii) or 5(b)(vi) of the Lease.
The date of such Event of Loss shall be (aa) the 31st day following loss of such
property or its use due to theft or disappearance or the 61st 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
-6-
economic repair or rendition of such property permanently unfit for normal use;
(cc) the date of any insurance settlement on the basis of an actual,
constructive or compromised total loss; (dd) the 181st day (for countries listed
in Exhibit E to the Lease) or 31st day (for any other country) following
requisition of use of such property by a foreign government or other
Governmental Authority referred to in clause (iv) above, or the end of the Term
if earlier than such 181st or 31st day; (ee) the 11th day following
condemnation, confiscation or seizure of, or requisition of title to, such
property by a foreign government or other Governmental Authority referred to in
clause (vi) above or the Government or the end of the Term if earlier than such
11th day; (ff) the last day of the Term in the case of requisition of use of
such property by the Government; and (gg) the last day of the applicable period
referred to in clause (vii) above (or if earlier, the end of the Term). 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.
"Excepted Payments" means collectively, (i) indemnity, expense,
-----------------
reimbursement or other payments (including without limitation, Transaction
Costs) paid or payable by the Lessee in respect of the Owner Participant, the
Owner Trustee in its individual capacity or any of their respective successors,
permitted assigns, directors, officers, employees, servants and agents or
Affiliates, pursuant to the Participation Agreement or any other Operative
Agreement or any indemnity hereafter granted to the Owner Participant or the
Owner Trustee in its individual capacity pursuant to the Lease or the
Participation Agreement, (ii) proceeds of public liability insurance (or
government indemnities in lieu thereof) in respect of the Aircraft payable as a
result of insurance claims paid for the benefit of, or losses suffered by, the
Owner Trustee or the Indenture Trustee in their respective individual capacities
or by the Owner Participant, or their respective successors, permitted assigns
or Affiliates, (iii) proceeds of insurance maintained with respect to the
Aircraft by the Owner Participant or any Affiliate thereof (whether directly or
through the Owner Trustee) in accordance with Section 9(f) of the Lease, (iv)
payments by the Lessee in respect of any amounts payable under the Tax Indemnity
Agreement, (v) any purchase price paid to the Owner Participant for its interest
in the Trust Estate, (vi) subject to Section 3(f) of the Lease, payments
constituting increases in Basic Rent attributable to payments arising pursuant
to the Tax Indemnity Agreement, (vii) any payments in respect of interest to the
extent attributable to payments referred to in clauses (i) through (vi) above,
(viii) any right to demand, collect or otherwise receive and enforce the payment
of any amount described in clauses (i) through (v) and (vii) above (except with
respect to interest attributable to payments referred to in clause (vi) above).
"Expenses" has the meaning given to such term in Section 7.01(a) of the
--------
Participation Agreement.
"Expiration Date" means the date specified as such in the Lease Supplement
---------------
executed and delivered on the Delivery Date.
"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
-7-
Owner Trustee and to be dated the Delivery Date, and (B) a ▇▇▇▇ of sale for a
Replacement Airframe on AC Form 8050-2, or such other form as may be approved by
the Aeronautical Authority, executed by the seller thereof in favor of the Owner
Trustee.
"Fair Market Rental Value" or "Fair Market Sales Value" of the Airframe or
------------------------ -----------------------
any Engine shall mean the value that would be obtained in an arms'-length
transaction between an informed and willing lessee-user or buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to lease or buy, as the case may be, and an informed and willing
lessor or seller, as the case may be, under no compulsion to lease or sell, as
the same shall be specified by agreement between the Lessor and the Lessee or,
if not agreed to by the Lessor and the Lessee within a period of 15 days after
either party requests a determination, then as specified in an appraisal
prepared and delivered in New York City mutually agreed to by two recognized
independent aircraft appraisers, one of which shall be appointed by the Lessor
and the other of which shall be appointed by the Lessee, or, if such appraisers
cannot agree on such appraisal, an appraisal arrived at by a third independent
recognized appraiser chosen by the mutual consent of the two aircraft
appraisers. If either party should fail to appoint an appraiser within 15 days
of receiving notice of the appointment of an appraiser by the other party, then
such appraisal shall be made by the appraiser appointed by the first party. If
the two appraisers cannot agree on such appraisal and fail to appoint a third
independent recognized aircraft appraiser within 15 days after the appointment
of the second appraiser, then either party may apply to the American Arbitration
Association to make such appointment. The appraisal shall be completed within
30 days of the appointment of the last appraiser appointed. In determining Fair
Market Rental Value or Fair Market Sales Value by appraisal or otherwise, it
will be assumed that the Aircraft, Airframe or Engine is in the condition,
location and overhaul status in which it is required to be returned to the
Lessor pursuant to Section 12 of the Lease (except that a determination of Fair
Market Sales Value pursuant to Section 17 of the Lease shall be based on "as is,
where is" condition), 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 encumbered
by the Lease. For purposes of the preceding sentence and with respect to a
purchase of the Aircraft pursuant to Section 13(b) of the Lease, "encumbered by
the Lease" shall mean, with respect to Fair Market Sales Value, the Fair Market
Sales Value increased or decreased to reflect the benefits and burdens of the
Lease and other Operative Agreements. Except as otherwise expressly provided in
the Lease, all appraisal costs will be shared equally by the Lessor and the
Lessee.
"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, the Administrator thereof and any agency or
instrumentality of the United States government succeeding to their functions.
"Final Drawing" has the meaning given to such term in Section 1.1 of the
-------------
Intercreditor Agreement.
-8-
"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.
"Governmental Authority" means (a) any federal, state, county, provincial,
----------------------
municipal, foreign, international, regional or other governmental or regulatory
authority, agency, department, board, body, instrumentality, commission, court
or any political subdivision of any of the foregoing, and (b) each person who
shall, from time to time, be vested with the control and supervision of, or have
jurisdiction over, the registration, airworthiness, operation or other matters
relating to aviation including any competent airport authority, air traffic
control or navigation authority (including European Organization for the Safety
of Air Navigation (Eurocontrol) and the Federal Aviation Administration of the
United States of America or any person acting on its behalf).
"Holder" means, as of any particular time, the Person in whose name an
------
Equipment Note shall be registered, provided that as long as an Equipment Note
is registered in the name of the Subordination Agent, the Holder of such
Equipment Note will include the Pass-Through Trustee for the Pass-Through Trust,
the property of which includes such Equipment Note.
"Indemnitee" means each of Trust Company, in its individual capacity and as
----------
Owner Trustee, the Subordination Agent, in its individual capacity and in its
capacity as Subordination Agent, each Liquidity Provider, the Owner Participant,
the Indenture Trustee, in its individual capacity and as trustee, the Escrow
Agent, the Paying Agent, the Pass Through Trustees and each Affiliate, officer,
director, employee, agent and servant of any of the foregoing Persons. No
holder of a Pass-Through Certificate shall be deemed to be an Indemnitee.
"Indenture" means the Trust Indenture and Security Agreement [N3__ML],
---------
dated as of ______________, 200_, between the Owner Trustee and the Indenture
Trustee.
"Indenture Default" means any event or condition which, with the lapse of
-----------------
time or the giving of notice, or both, would constitute an Indenture Event of
Default.
"Indenture Documents" has the meaning specified in the Granting Clause of
-------------------
the Indenture.
"Indenture Estate" means all estate, right, title and interest of the
----------------
Indenture Trustee in and to any of the property, rights, interest, and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of the
Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee
or the Owner Participant pursuant to the Indenture.
"Indenture Event of Default" means each of the events specified in Section
--------------------------
7.01 of the Indenture.
-9-
"Indenture Indemnitee" means (i) the Indenture Trustee and each separate or
--------------------
additional trustee appointed pursuant to the Indenture, (ii) the Escrow Agent,
(iii) the Subordination Agent, (iv) each Liquidity Provider, (v) the Paying
Agent, (vi) each Pass-Through Trustee and (vii) each of the respective
directors, officers, employees, agents and servants of each of the persons
described in clauses (i) through (vi).
"Indenture Supplement" means (a) the Trust Indenture and Security Agreement
--------------------
Supplement No. 1, substantially in the form of Exhibit A to the Indenture, which
shall describe with particularity the Aircraft included in the property of the
Owner Trustee covered by the Indenture by reference to the Lease Supplement, and
which creates a first priority security interest in the Aircraft and (b) any
other supplement to the Indenture from time to time executed and delivered in
accordance with the Indenture.
"Indenture Trustee" means Allfirst Bank, a Maryland state-chartered
-----------------
commercial bank, as indenture trustee under the Operative Agreements.
"Indenture Trustee's Liens" means any Lien against, on or with respect to
-------------------------
the Aircraft, any Engine, the Lessor's Estate or the Indenture Estate or any
part thereof resulting from (i) claims against the Indenture Trustee not related
to the administration of the Indenture Estate or any transactions pursuant to
the Indenture or any document included in the Indenture Estate, (ii) any act or
omission of the Indenture Trustee which is not related to the transactions
contemplated by the Operative Agreements or is in violation of any of the terms
of the Operative Agreements, or (iii) Taxes imposed against the Indenture
Trustee in its individual capacity in respect of which the Lessee has not
indemnified (and is not obligated to indemnify) the Indenture Trustee in such
capacity.
"Independent Investment Banker" means an independent investment banking
-----------------------------
institution of national standing appointed by the Lessee that is independent in
fact, does not have any direct financial interests, or any material indirect
financial interest, in the Lessee or any Affiliate of the Lessee, and is not
connected with the Lessee or any Affiliate of the Lessee, as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, that if the Indenture Trustee shall not have
--------
received written notice of such an appointment at least 10 days prior to the
Prepayment Date, "Independent Investment Banker" shall mean such an institution
appointed by the Indenture Trustee.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
-----------------------
September 27, 2000, among the Pass Through Trustees, the Class A Liquidity
Provider, the Class B Liquidity Provider, the Class C Liquidity Provider and the
Subordination Agent.
"Interest Drawing" has the meaning given to such term in Section 1.1 of the
----------------
Intercreditor Agreement.
-10-
"Investment Earnings" has the meaning given to such term in Section 1.1 of
-------------------
the Intercreditor Agreement.
"Issuance Date" means September 27, 2000.
-------------
"Lease" means the Lease Agreement [N3__ML], dated as of ______________,
-----
200_ between the Owner Trustee and the Lessee.
"Lease Supplement" means any Lease Supplement, substantially in the form of
----------------
Exhibit A to the Lease, entered into between the Lessor and the Lessee for the
purpose of leasing the Aircraft under and pursuant to the terms of the Lease,
including any amendment thereto entered into subsequent to the Delivery Date.
"Lessee" means Midway Airlines Corporation, a Delaware corporation.
------
"Lessee Documents" means (x) the Operative Agreements to which the Lessee
----------------
is a party and (y) the Pass-Through Trust Agreements.
"Lessor" means First Union Trust Company, National Association, a national
------
banking association, not in its individual capacity but solely as Owner Trustee
under the Trust Agreement.
"Lessor's Cost" has the meaning given to such term in Exhibit B of the
-------------
Lease.
"Lessor's Estate" means all estate, right, title and interest of the Owner
---------------
Trustee in and to the Aircraft, and Engines and the Operative Agreements (other
than the Tax Indemnity Agreement) including, without limitation, all amounts of
Rent, insurance proceeds and requisition, indemnity or other payments of any
kind, but specifically excluding any Excepted Payments.
"Lessor's Liens" means Liens against, on or with respect to the Aircraft,
--------------
any Engine, the Lessor's Estate or the Indenture Estate or any part thereof,
title thereto or any interest therein arising as a result of (i) claims against
or affecting the Lessor, in its individual capacity or as Owner Trustee, or the
Owner Participant, in each case not related to the Operative Agreements or the
transactions contemplated thereby, (ii) acts or omissions of the Lessor in its
individual capacity or as Owner Trustee, or of the Owner Participant not
contemplated or permitted under the terms of the Operative Agreements, (iii)
Taxes or Expenses imposed against the Lessor, in its individual capacity or as
Owner Trustee, Owner Participant, Lessor's Estate or the trust created by the
Trust Agreement which are not required to be indemnified against by the Lessee
pursuant to Articles 6 or 7 of the Participation Agreement and which are not
required to be indemnified against by the Lessee pursuant to the Tax Indemnity
Agreement, or (iv) claims against the Lessor, in its individual capacity or as
Owner Trustee, or the Owner Participant arising from the transfer by the Lessor
or the Owner Participant of its interests in the Aircraft or any Engine other
than a transfer of the Aircraft pursuant
-11-
to Section 5(b), 7(e), 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.
"Liquidity Facility" means each of the three Revolving Credit Agreements
------------------
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass-Through Trust) between the Subordination Agent, as
borrower, and the Liquidity Provider, each dated as of the Issuance Date.
"Liquidity Provider" has the meaning given to such term in Section 1.1 of
------------------
the Intercreditor Agreement.
"Loan Participant" means and includes each registered holder from time to
----------------
time of an Equipment Note issued under the Indenture including, so long as it
holds any Equipment Notes issued under the Indenture, the Pass-Through Trustee
under each Pass-Through Trust Agreement.
"Majority in Interest of Holders" means, as of a particular date of
-------------------------------
determination, the Holders of more than 50% of the aggregate unpaid principal
amount of all Equipment Notes Outstanding as of such date (excluding any
Equipment Notes held by Owner Trustee, Lessee or the Owner Participant or any
Affiliate of any such party or any interests of Owner Trustee or the Owner
Participant therein by reason of subrogation pursuant to Section 8.02 of the
Indenture (unless all Equipment Notes Outstanding shall be held by Owner
Trustee, Lessee, the Owner Participant or any Affiliate thereof)).
"Make-Whole Premium" means with respect to any Equipment Note, an amount
------------------
determined on the 3rd Business Day prior to the applicable Prepayment Date (or
date of purchase, as the case may be) which an Independent Investment Banker
determines to be equal to the excess, if any, of (i) the present value, as of
the applicable Prepayment Date (or date of purchase, as the case may be) of the
remaining scheduled payments of such principal amount or portion thereof and
interest thereon to the maturity date of such Equipment Note assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the Treasury
Yield (in the case of the Series A Equipment Notes and Series B Equipment Notes)
and the Treasury Yield plus .50% (in the case of the Series C Equipment Notes)
over (ii) the outstanding principal amount of such Equipment Note plus accrued
interest to the applicable Prepayment Date (or date of purchase, as the case may
be) (other than any overdue portion thereof).
"Manufacturer" means The Boeing Company, and its successors and assigns.
------------
"Minimum Liability Amount" has the meaning given to such term in Exhibit B
------------------------
to the Lease.
-12-
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
-------
"Net Economic Return" means the Owner Participant's nominal after-tax book
-------------------
yield (utilizing the multiple investment sinking fund method of analysis),
aggregate net after-tax cash and periodic FASB 13 earnings (plus or minus 5%),
computed on the basis of the same methodology, constraints and assumptions as
were utilized by the initial Owner Participant in determining Basic Rent
percentages and Termination Value percentages as of the Delivery Date; provided,
--------
that, if the initial Owner Participant shall have transferred its interest, Net
Economic Return shall be calculated as if the initial Owner Participant had
retained its interest; provided, further, that, notwithstanding the preceding
-------- -------
proviso, solely for purposes of Article 13 of the Participation Agreement and
calculating any adjustments to Basic Rent percentages and Termination Values
percentages in connection with a refinancing pursuant to such Article 13 at a
time when the Owner Participant is a transferee (other than an Affiliate of the
initial Owner Participant), the after-tax yield (but not the after-tax cash)
component of Net Economic Return shall be calculated on the basis of the
methodology and assumptions utilized by the transferee Owner Participant as of
the date on which it acquired its interest.
"Non-U.S. Person" means any Person other than a U.S. Person.
---------------
"Note Purchase Agreement" means the Note Purchase Agreement, dated as of
-----------------------
the Issuance Date, among the Lessee, the Subordination Agent, the Escrow Agent,
the Paying Agent and the Pass-Through Trustee under each Pass-Through Trust
Agreement providing for, among other things, the issuance and sale of certain
equipment notes, including the Equipment Notes.
"Offering Memo" means the Lessee's September 22, 2000 Offering Memorandum
-------------
concerning the Pass-Through Certificates.
"Officer's Certificate" means a certificate signed by a Responsible Officer
---------------------
of the Lessee or the Owner Trustee, as the case may be. When delivered pursuant
to the Indenture, each such certificate shall include the statements provided
for in Section 15.07 of the Indenture.
"Operative Agreements" means the Participation Agreement, the Trust
--------------------
Agreement, the FAA ▇▇▇▇ of Sale, the Warranty ▇▇▇▇ of Sale, the Purchase
Agreement, the Purchase Agreement Assignment, the PAA Consent, the Engine
Warranty Assignment, the Engine Manufacturer's Consent, the Lease, each Lease
Supplement, any Owner Participant Guaranty, the Equipment Notes outstanding at
the time of reference, the Indenture, each Indenture Supplement and the Tax
Indemnity Agreement.
"Opinion of Counsel" means when delivered pursuant to the Indenture, a
------------------
written opinion of legal counsel, who in the case of counsel (a) for the Lessee
may be (i) an attorney employed by the Lessee who is generally empowered to
deliver such written opinions, (ii) Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., or (iii) other
counsel designated by the Lessee and reasonably satisfactory to the Indenture
-13-
Trustee, and (b) for the Owner Trustee or the Indenture Trustee, an attorney
selected by such Person and reasonably satisfactory to the Lessee and, in the
case of the Owner Trustee, reasonably satisfactory to the Indenture Trustee.
"Outstanding" means, when used with respect to Equipment Notes, as of the
-----------
date of determination and subject to the provisions of Section 10.04 of the
Indenture, all Equipment Notes theretofore executed and delivered under the
Indenture, with the exception of the following:
(i) Equipment Notes theretofore canceled by the Indenture Trustee or delivered
to the Indenture Trustee for cancellation pursuant to Section 2.08 of the
Indenture or otherwise;
(ii) Equipment Notes for which prepayment money in the necessary
amount has been theretofore deposited with the Indenture Trustee in
trust for the Holders of such Equipment Notes pursuant to Section
14.01 of the Indenture; provided that if such Equipment Notes are to
-------- ----
be prepaid, notice of such prepayment has been duly given pursuant to
the Indenture or provision therefor satisfactory to the Indenture
Trustee has been made; and
(iii) Equipment Notes in exchange for or in lieu of which other
Equipment Notes have been executed and delivered pursuant to Article
II of the Indenture.
"Owner Participant" means _______________, a __________ and its successors
-----------------
and permitted transferees and assigns.
"Owner Participant Guarantor" means the provider of an Owner Participant
---------------------------
Guaranty.
"Owner Participant Guaranty" means any guaranty delivered or to be
--------------------------
delivered to support the obligations of the Owner Participant under the
Operative Agreements in connection with the transfer by the Owner Participant of
the Beneficial Interest.
"Owner Trustee" means Trust Company, not in its individual capacity except
-------------
as otherwise expressly stated, but solely as trustee under the Trust Agreement.
"PAA Consent" means the Aircraft Manufacturer's Consent and Agreement
-----------
[N3__ML], dated as of ______________, 200_, from the Manufacturer.
"Participants" means, collectively, the Owner Participant and the Pass-
------------
Through Trustee with respect to each of the Pass-Through Trust Agreements;
"Participant" means, individually, one of the Participants.
------------
-14-
"Participation Agreement" the Participation Agreement [N3__ML], dated as of
-----------------------
______________, 200_, among the Lessee, the Owner Trustee not in its individual
capacity except as otherwise expressly provided therein, but solely as owner
trustee, the Owner Participant, the Indenture Trustee, the Pass-Through Trustees
and the Subordination Agent.
"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.
"Pass-Through Certificates" means any of the Pass-Through Certificates,
-------------------------
2000-1A, the Pass-Through Certificates, 2000-1B or the Pass-Through
Certificates, 2000-1C, in each case as issued by the related Pass-Through Trust;
and "Pass-Through Certificates" means all of such Pass-Through Certificates.
"Pass-Through Documents" means the Pass-Through Trust Agreements, the
----------------------
Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement and
the Liquidity Facilities.
"Pass-Through Trust" means the Midway Airlines 2000-1 Pass-Through Trust
------------------
Class A, Midway Airlines 2000-1 Pass-Through Trust Class B and Midway Airlines
2000-1 Pass-Through Trust Class C, in each case formed pursuant to the related
Series Supplement in accordance with the Pass-Through Trust Agreement; and
"Pass-Through Trusts" means all of such Pass-Through Trusts.
"Pass-Through Trust Agreement" means each of the three Pass-Through Trust
----------------------------
Agreements dated as of September 27, 2000 between the Lessee and the Pass-
Through Trustee (which shall include each Successor Pass-Through Trust Agreement
entered into pursuant to Section 11.01 of each thereof).
"Pass-Through Trustee" means Allfirst Bank, a Maryland state-chartered
--------------------
commercial bank, in its capacity as Pass-Through Trustee under each Pass-Through
Trust Agreement.
"Past Due Rate" means (i) in respect of any payment of Rent relating to
-------------
principal of or interest on or any other amounts payable in respect of any
Equipment Note that is not paid when due to any Holder, a rate per annum during
the period from and including the due date to but excluding the date on which
such amount is paid in full equal to 1% plus the interest rate applicable to
such Equipment Note and (ii) in respect of any other payment or amount, a rate
per annum equal to __% plus the Debt Rate or, if the Equipment Notes have been
paid in full, a rate per annum equal to the TV Rate identified in Exhibit B to
the Lease.
-15-
"Payment Date" means each April 1 and October 1, commencing on the first
------------
such date occurring after the Delivery Date.
"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), including any proprietary mutual fund
of Allfirst Bank for which such bank or an affiliate is investment advisor or to
which such bank provides other services and receives reasonable compensation for
such services, (d) certificates of deposit issued by, or bankers' acceptances
of, or time deposits or a deposit account with, any bank, trust company, or
national banking association incorporated or doing business under the laws of
the United States of America or one of the states thereof, having a combined
capital and surplus of at least $100,000,000 and having a rating of "A" or
better from the ▇▇▇▇▇ Bank Watch Service, (e) commercial paper issued by
companies in the United States which directly issue their own commercial paper
and which are doing business under the laws of the United States of America or
one of the states thereof and in each case having a rating assigned to such
commercial paper by a nationally recognized rating organization in the United
States of America equal to the highest rating assigned by such organization, or
(f) obligations of the type described in clause (a), (b), (d), or (e) above,
purchased from any bank, trust company, or banking association referred to in
clause (d) above pursuant to repurchase agreements obligating such bank, trust
company, or banking association to repurchase any such obligation not later than
30 days after the purchase of any such obligation. Unless otherwise specified
in writing by the Owner Trustee, all such Permitted Investments shall mature not
later than 30 days from the date of purchase.
"Permitted Lien" has the meaning given to such term in Section 10 of the
--------------
Lease.
"Permitted Sublessee" means (a) any Permitted Air Carrier or (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, entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof) or other entity of
whatever nature.
"Placement Agents" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and Seabury
----------------
Securities LLC.
-16-
"Placement Agreement" means the Purchase Agreement dated September 22, 2000
-------------------
among the Lessee and the Placement Agents.
"Prepayment Date" has the meaning given to such term in Section 6.02(b) of
---------------
the Indenture.
"Prepayment Price" has the meaning given to such term in Section 6.02(b) of
----------------
the Indenture.
"Purchase Agreement" means Aircraft Purchase Agreement No. 2235 dated as of
------------------
June 11, 1999, 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 any such Purchase Agreement).
"Purchase Agreement Assignment" means the Purchase Agreement Assignment
-----------------------------
[N3__ML], dated as of ______________, 200_, between Lessee and Owner Trustee.
"Purchase Price" means an amount equal to Lessor's Cost.
--------------
"Rating Agency" means Moody's or S&P, as the context requires.
-------------
"Record Date" means, with respect to Payment Dates under the Indenture
-----------
(except a date for payment of defaulted interest), [March 15] for April 1
Payment Dates and [September 15] for October 1 Payment Dates, whether or not
such date is a Business Day.
"Recourse Amount" has the meaning given to such term in Section 15.07 of
---------------
the Participation Agreement (in the case of the Participation Agreement) or
Section 2.05 of the Indenture (in the case of the Indenture), as the case may
be.
"Recovery Period" means "Tax Attribute Period" as defined in the Tax
---------------
Indemnity Agreement.
"Refinancing" has the meaning given to such term in Section 13.01 of the
-----------
Participation Agreement.
"Register" has the meaning given to such term in Section 3.02 of the
--------
Indenture.
"Registrar" has the meaning given to such term in Section 3.02 of the
---------
Indenture.
"Registration Rights Agreement" means the Exchange and Registration Rights
-----------------------------
Agreement, dated as of September 27, 2000, among the Placement Agents, Allfirst
Bank, a Maryland state-chartered commercial bank, as Pass-Through Trustee, and
the Lessee.
-17-
"Registration Rights Event" has the meaning given to such term in the
-------------------------
Registration Rights Agreement.
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System (or any successor), as the same may be modified and supplemented
and in effect from time to time.
"Related Indentures" means the "Indentures" (other than the Indenture), as
------------------
defined in the Pass-Through Trust Agreements.
"Related Tax Indemnitee" means any Affiliate of any Tax Indemnitee.
----------------------
"Remaining Weighted Average Life" means on a given date with respect to any
-------------------------------
Equipment Note the number of days equal to the quotient obtained by dividing (i)
the sum of each of the products obtained by multiplying (a) the amount of each
then remaining scheduled payment of principal of such Equipment Note by (b) the
number of days from and including such prepayment date to but excluding the
dates on which each such payment of principal is scheduled to be made; by (ii)
the then outstanding principal amount of such Equipment Note.
"Renewal Term" has the meaning given to such term in Section 13(a) of the
------------
Lease.
"Rent" means Basic Rent and Supplemental Rent, collectively.
----
"Rent Payment Date" means each Payment Date during the Term.
-----------------
"Replacement Aircraft" means any Aircraft of which a Replacement Airframe
--------------------
is part.
"Replacement Airframe" means a Boeing model 737-700 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 CFM-56-7B20 engine (or engine of the same or
------------------
another manufacturer of a comparable or an improved model and suitable for
installation and use on the Airframe), and which shall have become subject to
the Lease pursuant to Section 7(e) thereof.
"Responsible Officer" means, with respect to the Owner Trustee or the
-------------------
Indenture Trustee, any officer in its Corporate Trust Administration, as the
case may be, designated by such Person to perform obligations under the
Operative Agreements, and with respect to any other party, any corporate officer
of a party who, in the normal performance of his or her operational
responsibilities, with respect to the subject matter of any covenant, agreement
or obligation of such party pursuant
-18-
to any Operative Agreement, would have responsibility for and knowledge of such
matter and the requirements of any Operative Agreement with respect thereto.
"S&P" means Standard & Poor's Ratings Services, a division of the McGraw-
---
Hill Companies Inc.
"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.
"Secured Obligations" has the meaning specified in the Granting Clause of
-------------------
the Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller" has the meaning given to such term in Exhibit B to the Lease.
------
"Series "A" or "Series A Equipment Notes" means the Equipment Notes issued
---------------------------------------
and designated as "Series A" under the Indenture, in the principal amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series A".
"Series "B" or "Series B Equipment Notes" means the Equipment Notes issued
---------------------------------------
and designated as "Series B" under the Indenture, in the principal amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series B".
"Series "C" or "Series C Equipment Notes" means the Equipment Notes issued
---------------------------------------
and designated as "Series C" under the Indenture, in the principal amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series C".
"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 mature into an Event of Default, or (b) any Event of
Default.
"Specified Investments" means (a) direct obligations of the United States
---------------------
of America or obligations fully guaranteed by the United States of America; (b)
any mutual fund the portfolio of which is limited to obligations of the type
described in clause (a), including any proprietary mutual fund of Allfirst Bank
for which such bank or an affiliate is investment advisor or to which such bank
-19-
provides other services and receives reasonable compensation for such services;
(c) commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such
ratings are unavailable, rated by any nationally recognized rating organization
in the United States equal to the highest rating assigned by such rating
organization; (d) investments in negotiable certificates of deposit, time
deposits, banker's acceptances, commercial paper or other direct obligations of,
or obligations guaranteed by, commercial banks organized under the laws of the
United States or of any political subdivision thereof (or any U.S. branch of a
foreign bank) with issuer ratings of at least B/C by Thomson Bankwatch, having
maturities no later than 90 days following the date of such investment; (e)
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers; or (f) overnight repurchase agreements with
respect to the securities described in clause (a) above entered into with an
office of a bank or trust company which is located in the United States of
America or any bank or trust company which is organized under the laws of the
United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $500 million.
"Sublease" means any sublease agreement between the Lessee and a Permitted
--------
Sublessee as permitted by Section 5(b) of the Lease.
"Subordination Agent" means Allfirst Bank, a Maryland state-chartered
-------------------
commercial bank, in its capacity as Subordination Agent.
"Subsequent Renewal Term" has the meaning given to such term in Section
-----------------------
13(a) of the Lease.
"Supplemental Rent" means (a) all amounts, liabilities, indemnities and
-----------------
obligations which the Lessee assumes or agrees to perform or pay under the Lease
or under the Participation Agreement or Tax Indemnity Agreement or any other
Operative Agreement to the Lessor, the Owner Participant, the Indenture Trustee,
the Subordination Agent, any Liquidity Provider or others, including payments of
Termination Value, EBO Amount, and amounts calculated by reference to
Termination Value, any amounts of Make-Whole Premium payable under the Indenture
to the extent provided in Section 3(c) or Section 14 of the Lease, all other
amounts payable under Section 3(c) of the Lease, and all amounts required to be
paid by Lessee under the agreements, covenants, and indemnities contained in the
Lease or in the Participation Agreement or the Tax Indemnity Agreement or any
other Operative Agreement, but excluding Basic Rent, and (b) all amounts that
the Owner Trustee is obligated to pay in accordance with clause (b) of the last
paragraph of Section 2.04 of the Indenture.
"Tax" or "Taxes" has the meaning set forth in Section 6.01(a) of the
--- -----
Participation Agreement.
"Tax Indemnitee" means each of Trust Company, individually and as Owner
--------------
Trustee, the Owner Participant and the Indenture Trustee.
-20-
"Tax Indemnity Agreement" means the Tax Indemnity Agreement [N3__ML], dated
-----------------------
as of ______________, 200_ between the Lessee and the Owner Participant.
"Term" has the meaning given to such term in Section 3(a) of the Lease.
----
"Termination Date" means each date listed in the column entitled
----------------
"Termination Date" in Exhibit D to the Lease or, during a Renewal Term or
otherwise during any period following the last day of the Term, the second day
of each month.
"Termination Value" means (a) as of any Termination Date during the Basic
-----------------
Term, the amount determined as set forth in Exhibit D to the Lease for that
Termination Date, and (b) during any Renewal Term, the amount for the date
involved, determined in accordance with Section 13(a) of the Lease, in either
case adjusted as required by Section 3(d) of the Lease.
"Transaction Costs" means those costs and expenses set forth in Section
-----------------
8.01(a) of the Participation Agreement.
"Transportation Code" means Title 49 of the United States Code, subtitle
-------------------
VII, as amended and in effect on the date of the Lease or as subsequently
amended, or any successor or substituted legislation at the time in effect and
applicable, and the regulations promulgated pursuant thereto.
"Treasury Yield" means, at the time of determination with respect to any
--------------
Equipment Note, the interest rate (expressed as a semi-annual equivalent and as
a decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield) determined to be the per annum rate equal to the semi-annual
yield to maturity for United States Treasury securities maturing on the Average
Life Date on such Equipment Note and trading in the public securities markets
either as determined by interpolation between the most recent weekly average
yield to maturity for two series of United States Treasury securities, trading
in public securities markets, (i) one maturing as close as possible to, but
earlier than, the Average Life Date of such Equipment Note and (ii) the other
maturing as close as possible to, but later than, the Average Life Date of such
Equipment Note, in each case as published in the most recent H.15(519) or, if a
weekly average yield to maturity for United States Treasury securities maturing
on the Average Life Date of such Equipment Note is reported on the most recent
H.15(519), such weekly average yield to maturity as published in such H.15(519).
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. The date of determination of a Make-Whole Premium will be the
third Business Day prior to the applicable prepayment date and the "most recent
H.15(519)" means the H.15(519) published prior to the close of business on the
third Business Day prior to the applicable prepayment date.
"Trust Agreement" means the Trust Agreement [N3__ML] dated as of
---------------
______________, 200_, between the Owner Participant and Trust Company.
-21-
"Trust Company" means First Union Trust Company, National Association, a
-------------
national banking association.
"Trust Estate" means the Lessor's Estate.
------------
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
-------------------
"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 Owner Trustee and to be dated the Delivery Date, and (B) a full
warranty ▇▇▇▇ of sale covering a Replacement Aircraft (and specifically
referring to each Engine) executed by the seller thereof in favor of the Owner
Trustee.
-22-
[Exhibit A-2 to Note Purchase Agreement
Form of Lease]
--------------------------------------------------------------------------------
LEASE AGREEMENT [N3__ML]
dated as of ___________, 200_
between
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
Owner Trustee,
Lessor,
and
MIDWAY AIRLINES CORPORATION
Lessee.
Covering One Boeing Model 737-700 Aircraft
Bearing U.S. Registration Number N3__ML
and Manufacturer's Serial Number _____
--------------------------------------------------------------------------------
This Lease Agreement is subject to a security interest in favor of Allfirst
Bank, as Indenture Trustee, under the Trust Indenture and Security Agreement
[N3__ML] dated as of _________ __, 200_, for the benefit of the holders of the
Equipment Notes referred to in such Trust Indenture and Security Agreement.
This Lease Agreement has been executed in counterparts. To the extent, if any,
that this Lease Agreement constitutes chattel paper (as such term is defined in
the Uniform Commercial Code as in effect in any jurisdiction), no security
interest in this Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart containing the receipt
therefor executed by Allfirst Bank, as Indenture Trustee, on the signature page
thereof.
TABLE OF CONTENTS
-----------------
Page
Section 1. Interpretation.................................................................................. 1
(a) Definitions..................................................................................... 1
(b) References...................................................................................... 1
(c) Headings........................................................................................ 1
(d) Appendices, Schedules and Exhibits.............................................................. 2
Section 2. Delivery and Leasing of the Aircraft............................................................ 2
(a) Leasing of the Aircraft......................................................................... 2
(b) Delivery and Acceptance of the Aircraft Under the Lease......................................... 2
Section 3. Term and Rent................................................................................... 2
(a) Term............................................................................................ 2
(b) Basic Rent...................................................................................... 2
(c) Supplemental Rent............................................................................... 3
(d) Adjustments to Basic Rent and Termination Values................................................ 3
(e) Manner of Payment............................................................................... 5
(f) Minimum Rent.................................................................................... 5
(g) Rent Obligations Unconditional.................................................................. 6
Section 4. The Lessor's Representations and Warranties..................................................... 7
Section 5. Possession, Operation and Use, Maintenance Registration......................................... 7
(a) General......................................................................................... 7
(b) Possession...................................................................................... 8
(c) Operation and Use............................................................................... 11
(d) Maintenance..................................................................................... 11
(e) Registration.................................................................................... 12
Section 6. Inspection...................................................................................... 12
Section 7. Replacement and Pooling of Parts; Alterations, Modifications and
Additions; Substitution of Engines.............................................................. 13
(a) Replacement of Parts............................................................................ 13
(b) Title to Parts.................................................................................. 13
(c) Pooling or Parts Leasing........................................................................ 14
(d) Alterations, Modifications and Additions........................................................ 14
(e) Substitution of Engines......................................................................... 15
Section 8. Loss, Destruction or Requisition................................................................ 17
(a) Event of Loss with Respect to the Airframe...................................................... 17
(b) Effect of Replacement........................................................................... 18
(c) Effect of Termination Value Payment............................................................. 18
(d) Conditions to Airframe Replacement.............................................................. 19
(e) Non-Insurance Payments Received on Account of an Event of Loss.................................. 21
(f) Requisition for Use............................................................................. 22
(g) Certain Payments to be Held As Security......................................................... 23
Section 9. Insurance....................................................................................... 23
(a) Public Liability and Property Damage Insurance.................................................. 23
(b) Insurance Against Loss or Damage to the Aircraft and Engines.................................... 23
(c) Additional Insureds; Loss Payment............................................................... 24
(d) Deductibles and Self-Insurance.................................................................. 25
(e) Application of Hull Insurance Proceeds.......................................................... 26
(f) Insurance for Own Account....................................................................... 26
(g) Reports, etc.................................................................................... 27
Section 10. Liens........................................................................................... 27
Section 11. Recordation and Further Assurances.............................................................. 28
(a) Recordation of Lease............................................................................ 28
(b) Further Assurances.............................................................................. 28
Section 12. Return of Aircraft and Records.................................................................. 28
(a) Return of Aircraft.............................................................................. 28
(b) Return of Other Engines......................................................................... 28
(c) Fuel; Records................................................................................... 29
(d) Condition of Aircraft........................................................................... 29
(e) Delayed Return.................................................................................. 29
Section 13. Renewal Option and Purchase Options............................................................. 29
(a) Renewal Terms................................................................................... 29
(b) Lessee's Purchase Options....................................................................... 30
(i) Rights to Purchase....................................................................... 30
(ii) Option to Assume Equipment Notes......................................................... 31
(iii) Notice of Exercise of Option............................................................. 31
Section 14. Voluntary Termination for Obsolescence.......................................................... 31
(a) Termination by Sale of Aircraft................................................................. 31
(b) Payments Due Upon Sale of Aircraft.............................................................. 32
(c) Preemptive Election by Lessor................................................................... 32
(d) Termination of Lease........................................................................... 33
(e) Effect of No Sale or Preemptive Delivery to Lessor............................................. 33
Section 15. Investment of Security Funds................................................................... 33
Section 16. Events of Default.............................................................................. 34
Section 17. Remedies....................................................................................... 36
Section 18. Lessor's Right to Perform for the Lessee....................................................... 38
Section 19. Bankruptcy..................................................................................... 39
Section 20. Assignment: Benefit and Binding Effect......................................................... 39
(a) Assignment by the Lessee..................................................................... 39
(b) Assignment by the Lessor..................................................................... 39
(c) Benefit and Binding Effect................................................................... 39
(d) Sublessee's Performance and Rights........................................................... 40
Section 21. Owner Trustee's Limitation on Liability........................................................ 40
Section 22. Certain Agreements of Lessee................................................................... 40
Section 23. Miscellaneous.................................................................................. 41
(a) Notices........................................................................................ 41
(b) Counterparts................................................................................... 41
(c) Amendments..................................................................................... 41
(d) Agreement to Lease............................................................................. 42
(e) Governing Law.................................................................................. 42
(f) Severability................................................................................... 43
(g) Survival....................................................................................... 43
(h) Article 2A..................................................................................... 43
Exhibit A to Lease ........................................................................................ 45
SCHEDULE I TO EXHIBIT A.................................................................................... 48
Exhibit A Form of Lease Supplement
Exhibit B Certain Economic Information
Exhibit C Basic Rent
Exhibit D Termination Values
Exhibit E List of Countries
Exhibit F Return Conditions
THIS LEASE AGREEMENT [N3__ML], dated as of ____________, 200_, between
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity but solely as Owner Trustee, the Lessor, and
MIDWAY AIRLINES CORPORATION, a Delaware corporation, the Lessee.
W I T N E S S E T H:
-------------------
WHEREAS, the Lessor intends to purchase the Aircraft pursuant to the
terms of the Participation Agreement;
WHEREAS, the Lessee desires to lease from the Lessor and the Lessor is
willing to lease to the Lessee the Aircraft upon and subject to the terms and
conditions of this Lease; and
WHEREAS, the parties intend this Lease to constitute a true lease and
not a security agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:
Section 1. Interpretation.
--------------
(a) Definitions.
-----------
Capitalized terms used herein and defined in Appendix A shall, except
as such definitions may be specifically modified in the body of this Lease for
the purposes of a particular section, paragraph or clause, have the meanings
given such terms in Appendix A and, unless otherwise specified, such meanings
shall be equally applicable to both the singular and the plural forms of such
terms.
(b) References.
----------
References in this Lease to sections, paragraphs, clauses, appendices,
schedules and exhibits are to sections, paragraphs, clauses, appendices,
schedules and exhibits in and to this Lease unless otherwise specified.
Paragraphs identified with a letter and clauses identified with a number or
letter within a section may be referred to either by section reference (for
example, this is Section l(b)) or by paragraph and clause reference (for
example, this is also paragraph (b) of Section 1) with the same meaning.
(c) Headings.
--------
The headings of the various sections, paragraphs and clauses of this
Lease 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.
(d) Appendices, Schedules and Exhibits.
----------------------------------
The appendices, schedules and exhibits hereto are part of this Lease.
Section 2. Delivery and Leasing of the Aircraft.
------------------------------------
(a) Leasing of the Aircraft.
-----------------------
Subject to the satisfaction or waiver of the conditions precedent
stated in the Participation Agreement, the Lessor agrees to lease to the Lessee,
and the Lessee agrees to lease from the Lessor, the Aircraft on the terms and
conditions set forth herein, such leasing to be evidenced by the execution and
delivery by the Lessor and the Lessee on the Delivery Date of a Lease
Supplement.
(b) Delivery and Acceptance of the Aircraft Under the Lease.
-------------------------------------------------------
The Lessor hereby authorizes one or more persons designated by the
Lessee as the authorized representative or representatives of the Lessor to
accept delivery of the Aircraft from the Seller. By executing and delivering
Lease Supplement No. 1, the Lessee confirms to the Lessor that the Lessee has
duly and irrevocably accepted delivery of the Aircraft for all purposes of this
Lease.
Section 3. Term and Rent.
-------------
(a) Term.
----
The Aircraft is leased for a Term which shall comprise the Basic Term
and, at the option of the Lessee exercised in accordance with Section 13(a), one
or more Renewal Terms. The Basic Term shall commence on the Delivery Date and
continue through the Expiration Date; and each Renewal Term, if any, shall be
for the applicable period provided in Section 13(a), except that the Term
(including the Basic Term or any Renewal Term, as the case may be) shall end
upon any earlier termination of this Lease according to its terms.
(b) Basic Rent.
----------
The Lessee shall pay Basic Rent in consecutive semi-annual
installments on each Basic Rent Payment Date during the Basic Term, each such
installment to be in an amount determined by multiplying Lessor's Cost by the
percentage set forth in Exhibit C for the applicable
-2-
Basic Rent Payment Date. The Lessee shall pay Basic Rent during a Renewal Term
in the amounts and at the times provided in Section 13(a) for such Renewal Term.
(c) Supplemental Rent.
-----------------
The Lessee shall pay to the Lessor, or to whoever shall be entitled
thereto, any and all Supplemental Rent when the same shall become due and owing.
Without limiting the foregoing, the Lessee shall pay as Supplemental Rent:
(i) to the Lessor, on demand, interest at the Past Due
Rate on any part of any installment of Basic Rent not paid when
due for the period for which the same shall be overdue;
(ii) to whoever shall have been entitled to receive the
relevant payment of Supplemental Rent, on demand, interest at the
Past Due Rate on any payment of Supplemental Rent (other than
interest payable under this clause (ii)) not paid when due for
the period for which the same shall be overdue; and
(iii) to the Lessor, an amount equal to any Make-Whole
Premium as and when such amount is due and payable by the Lessor
under the terms of the Indenture (except in the case of any
prepayment pursuant to Section 6.02(a)(iii) of the Indenture),
except as otherwise provided in Section 14(b); and
(iv) to the Lessor, an amount equal to any amount that the
Lessor is obligated to pay pursuant to clause (b) of the last
paragraph of Section 2.04 of the Indenture.
The obligations of the Lessee to pay Supplemental Rent provided for in
this Section 3(c) shall survive the expiration or other termination of this
Lease.
(d) Adjustments to Basic Rent and Termination Values.
------------------------------------------------
All installments of Basic Rent remaining to be paid during the Basic
Term shall be recalculated and adjusted, upwards or downwards as the case may be
(and corresponding adjustments shall be made to the EBO Amount and the
Termination Values applicable during the remaining Basic Term) to maintain the
Net Economic Return and, to the greatest extent consistent with such maintenance
of such Net Economic Return, to minimize the net present value (calculated at a
discount rate equal to the Debt Rate or such other rate as may be specified by
the Lessee to the Owner Participant) of the remaining Basic Rent payments (or,
if the Lessee shall have so specified
-3-
to the Owner Participant, the remaining Basic Rent Payments to the EBO Date
together with the EBO Amount), if:
(i) the Delivery Date shall not be __________, 200_;
(ii) there shall be a refinancing or refunding of the debt evidenced
by the Equipment Notes pursuant to Section 13 of the Participation
Agreement;
(iii) the Transaction Costs payable by the Owner Participant pursuant
to Section 8.01(a) of the Participation Agreement shall be greater or less
than the percentage of Lessor's Cost set forth on Exhibit B;
(iv) there shall be an adjustment of Termination Values as provided
in Section 16 of the Tax Indemnity Agreement; or
(v) there shall be any increase in the amount of interest due on
the Equipment Notes pursuant to the Registration Rights Agreement.
Adjustments to the installments of Basic Rent (expressed as percentages of
Lessor's Cost) set forth in Exhibit C and conforming adjustments to the EBO
Amount and the amounts of Termination Values (expressed as percentages of
Lessor's Cost) set forth in Exhibit D shall be calculated by the Owner
Participant in accordance with the terms of this Section 3(d), and the Owner
Participant shall deliver to the Lessee, the Lessor and the Indenture Trustee
schedules setting forth the revised EBO Amount and the revised percentages that
the Owner Participant proposes to include in Exhibits C and D, subject to review
by the Lessee and verification as provided herein. In the event of a dispute
regarding any such adjustment which is not resolved by agreement of the Lessee
and the Owner Participant, the adjustments, at the request of the Lessee
delivered to the Owner Participant within 30 days after receipt of the Owner
Participant's proposed adjustments, shall be subjected to verification by a
lease advisory firm or a nationally recognized firm of accountants to be
selected by the Owner Participant and reasonably acceptable to the Lessee. The
Owner Participant shall provide to such firm, but not, in any circumstances, to
Lessee or any representatives of Lessee, on a confidential basis such
information as such firm may reasonably require, including, without limitation,
a true copy of this Lease and a full description of the methodology and
assumptions employed by the Owner Participant in calculating the EBO Amount or
Basic Rent or Termination Value set forth in Exhibits C and D as in effect on
the Delivery Date and a true copy of the calculations of the same performed by
the Owner Participant at the time, to enable such firm to determine whether the
adjustments proposed by the Owner Participant are mathematically accurate, apply
the same methodology and assumptions (except to the extent changed by the events
giving rise to such recalculation) as were employed in the calculations of the
Basic Rent, EBO Amount and Termination Values in effect on the Delivery Date,
and are otherwise in conformity with the provisions of this Lease. The Lessee
and its financial advisors shall be entitled to submit such data and views as
the Lessee may elect to such firm concerning the proposed adjustments. The firm
shall
-4-
be requested to deliver to each of the Owner Participant, the Lessee, the
Lessor and the Indenture Trustee within 30 days after its appointment its
determination as to the changes, if any, that are appropriate with respect to
the adjustments proposed by the Owner Participant. The adjustments proposed by
the Owner Participant, if not disputed by the Lessee as provided above, or the
determination of the firm as provided above, as the case may be, shall be
conclusive, final and binding upon the Lessor, the Lessee and the Owner
Participant, and the EBO Amount and Exhibits C and D shall be amended to reflect
them. No dispute concerning any adjustment shall release the Lessee from its
obligation to pay the EBO Amount or Basic Rent or Termination Value as then set
forth in Exhibits C and D. All reasonable fees and expenses payable to a firm
pursuant to this paragraph shall be paid by the Lessee except that such fees and
expenses shall be paid entirely by the Owner Participant if, as a result of
changes determined by the firm, the net present value, discounted at the Debt
Rate or such other rate as the Lessee may have specified as provided above in
this paragraph, of Basic Rent remaining to be paid is five basis points (0.05%)
or more lower than it would have been under the adjustments proposed by the
Owner Participant.
(e) Manner of Payment.
-----------------
All Rent payable by the Lessee to the Lessor hereunder shall be paid
to the Lessor at its principal office at One ▇▇▇▇▇▇ Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Corporate Trust
Administration, or to such other address as the Lessor shall specify in a notice
to the Lessee, in Dollars in immediately available funds, so that the Lessor
receives the full amount of each payment not later than 12:00 noon Eastern Time
on the due date thereof, except that so long as the Indenture shall not have
terminated pursuant to its terms, all Rent payable to the Lessor (other than
Excepted Payments) shall be paid to the Indenture Trustee, in the manner
provided above, at its principal office as specified in Section 12.01 of the
Participation Agreement, or as the Indenture Trustee may otherwise direct by a
notice delivered to the Lessee prior to the date of payment. If any Rent is due
on a day that is not a Business Day, such Rent shall be paid on the next
succeeding Business Day with the same force and effect as if paid on the
scheduled date of payment and (if paid on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date to the time of payment on such next succeeding Business Day.
Whether or not the Indenture remains in effect, Rent constituting Excepted
Payments shall be paid directly to the Person entitled thereto in the manner and
at or before the time specified above.
(f) Minimum Rent.
------------
Anything herein to the contrary notwithstanding,
(i) each installment of Basic Rent, whether or not such
installment has been adjusted pursuant to Section 3(d), shall be
in an amount which is at least equal to the amount of any
principal of and interest on the Equipment Notes that falls due
and is payable by the Lessor pursuant to the
-5-
terms of the Indenture (other than by reason of acceleration of
the Equipment Notes) on the date when such installment of Basic
Rent is due,
(ii) Termination Value, whether or not Termination Value
has been adjusted pursuant to Section 3(d), shall be in an amount
which (when taken together with any Basic Rent due and payable in
connection therewith) is at least equal to, as of the applicable
date of payment, the aggregate unpaid principal of and accrued
interest on the Equipment Notes (other than overdue amounts
attributable to an Indenture Event of Default not caused solely
by an Event of Default), and
(iii) EBO Amount, whether or not EBO Amount has been
adjusted pursuant to Section 3(d), shall be in an amount which
(when taken together with any Basic Rent due and payable in
connection therewith) is at least equal to, as of the applicable
date of payment, the aggregate unpaid principal of and accrued
interest on the Equipment Notes.
The preceding sentence is intended solely to provide for, and to allocate as
between the Lessor and the Lessee the risk of, the possibility of miscalculation
by the Lessor and the Lessee of amounts of Rent which it is contemplated will be
available to the Indenture Trustee, as the Lessor's security assignee under the
Indenture, for application to the payment of amounts payable by the Lessor on
the Equipment Notes. The Lessee does not guarantee, and nothing in this
paragraph (f) shall be construed to be a guarantee by the Lessee, that the
Lessor will repay any principal of or pay any premium or interest on any
Equipment Notes or that the Indenture Trustee will, or will be able to, apply
for such purposes any amount of Rent paid by the Lessee.
(g) Rent Obligations Unconditional.
------------------------------
The Lessee's obligations to pay all Rent due and owing under the terms
hereof shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever including, without limitation, (i) any setoff,
counterclaim, recoupment or other right which the Lessee may have against the
Lessor, the Owner Participant, the Indenture Trustee, the holders of the
Equipment Notes or anyone else for any reason whatsoever, (ii) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, or any interference,
interruption or cessation in or prohibition of the use or possession thereof by
the Lessee for any reason whatsoever, including, without limitation, any such
interference, interruption, cessation or prohibition resulting from the act of
any governmental authority or any violation by the Lessor of Section 4 hereof,
(iii) any Liens, encumbrances or rights of others with respect to the Aircraft,
(iv) the invalidity or unenforceability or lack of due authorization or other
infirmity or disaffirmance of this Lease or any provision hereof or any other
Operative Agreement or any lack of right, power or authority of the Lessor or
the Lessee to enter into this Lease or any other Operative Agreement, (v) any
insolvency, bankruptcy, reorganization or similar proceedings by or against the
-6-
Lessee, or any other Person, or (vi) any other cause whether similar or
dissimilar to the foregoing, any present or future law notwithstanding, it being
the intention of the parties that all Rent payable by the Lessee hereunder shall
continue to be payable in all events in the manner and at the times provided
herein. Such Rent shall not be subject to any abatement and the payments
thereof shall not be subject to any setoff or any reduction for any reason other
than manifest error in the calculation thereof or the documentation of this
Lease. To the extent permitted by Applicable Law, the Lessee waives any rights
which it may now have or which may be conferred upon it by statute or otherwise
to terminate, cancel, quit or surrender this Lease except in accordance with the
terms hereof. Nothing herein shall be construed as a waiver by the Lessee of any
claim it may have against any Person arising under any of the Operative
Agreements or otherwise, including, without limitation, any claim that Rent
payments demanded from or paid by the Lessee are or were not due, are or were
erroneous or were paid under mistake or protest, or be construed as a limitation
on any rights of the Lessee to assert any claim in any proceeding at law, in
equity or otherwise against the Lessor or any other Person and to pursue and
obtain relief on such claim in such manner as the Lessee shall deem appropriate
other than by setoff against Rent payments due under the terms hereof.
Section 4. The Lessor's Representations and Warranties.
-------------------------------------------
(a) THE LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS", "WHERE IS" AND
NEITHER THE LESSOR, TRUST COMPANY INDIVIDUALLY NOR THE OWNER PARTICIPANT SHALL
BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION, VALUE, DESIGN,
OPERATION, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION,
PERFORMANCE OR FITNESS FOR USE OR FOR ANY PURPOSE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON LIABILITY IN TORT, STRICT
OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT OR ANY PART THEREOF OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except
that the Lessor warrants that on the Delivery Date the Lessor shall have
received whatever title was conveyed to it by the Seller and the Lessor warrants
that the Aircraft shall be free of Lessor's Liens during the Term.
(b) The Lessor covenants that during the Term, as long as no Event of
Default has occurred and is continuing, the Lessee's possession, use and quiet
enjoyment of the Aircraft leased hereunder shall not be interrupted by the
Lessor (or any Person lawfully claiming through the Lessor).
-7-
Section 5. Possession, Operation and Use,
Maintenance Registration.
------------------------
(a) General.
-------
Except as otherwise expressly provided herein, the Lessee (and any
Permitted Sublessee) shall be entitled during the Term to operate, use, locate,
employ or otherwise utilize or not utilize the Airframe, Engines and Parts
leased hereunder in any lawful manner or place in accordance with the Lessee's
(or such Permitted Sublessee's) business judgment.
(b) Possession.
----------
The Lessee shall not sublease, or otherwise in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine leased hereunder
to any Person or install any Engine, or permit any Engine to be installed, on
any airframe other than the Airframe, during the Term, without the prior consent
of the Lessor, which consent shall not be unreasonably withheld, except that the
Lessee may without the prior consent of the Lessor:
(i) enter into a charter or wet lease or other similar
arrangement under which the Lessee (or such Permitted Sublessee)
has operational control of the Airframe and any Engines installed
thereon in the course of the Lessee's business (which shall not
be considered a transfer of possession hereunder), provided that
the Lessee's obligations under this Lease shall continue in full
force and effect notwithstanding any such charter or wet lease or
other similar arrangement;
(ii) deliver possession of the Airframe or any Engine or
any Part to the manufacturer thereof or to any organization for
testing, service, repair, maintenance, overhaul work or other
similar purposes or for alterations or modifications or additions
required or permitted by the terms of this Lease;
(iii) subject the Airframe and any Engines installed thereon
to interchange agreements or any Engine to interchange or pooling
agreements or arrangements which are applicable to other similar
property owned by or leased to the Lessee (or such Permitted
Sublessee) and are entered into by the Lessee (or such Permitted
Sublessee) in the course of its airline business with any air
carrier, provided, that (A) no such agreement or arrangement
--------
shall under any circumstances result in, contemplate or require
the transfer of title to the Aircraft, Airframe or any Engine and
(B) if the Lessor's title to any Engine shall nevertheless be
divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with
-8-
respect to such Engine and the Lessee shall comply with Section
7(e) hereof in respect thereof;
(iv) install an Engine on an airframe owned by the Lessee
(or such Permitted Sublessee) free and clear of all Liens except
(A) Permitted Liens, (B) those which apply only to the engines
(other than the Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment
(other than Parts) installed on such airframe, and (C) those
created by the rights of other air carriers under interchange or
pooling agreements or other arrangements customary in the airline
industry which do not contemplate, permit or require the transfer
of title to such airframe or engines installed thereon;
(v) install an Engine on an airframe, leased to the Lessee
(or such Permitted Sublessee) or purchased by the Lessee (or such
Permitted Sublessee) subject to a conditional sale or other
security agreement, provided that such Engine shall not thereby
--------
become subject to the lien of such lease, conditional sale or
other security agreement;
(vi) install an Engine on an airframe, owned by the Lessee
(or such Permitted Sublessee), leased by the Lessee (or such
Permitted Sublessee) or purchased by the Lessee (or such
Permitted Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither clause (iv)
nor clause (v) above is applicable, provided that any
--------
divestiture or non-curable impairment of title to such Engine
resulting from such installation shall be deemed an Event of Loss
with respect to such Engine and the Lessee shall comply with
Section 7(e) hereof;
(vii) transfer possession of the Airframe or Engine to the
United States of America or any instrumentality thereof pursuant
to the Civil Reserve Air Fleet Program (as established and
administered pursuant to Executive Order 11490, as amended, as
superseded by United States Executive Order No. 12656) or any
similar or substitute program ("CRAF Program"), in which event
Lessee (or such Permitted Sublessee) shall promptly notify Lessor
and Indenture Trustee in writing of any such transfer of
possession and, in the case of any transfer pursuant to the CRAF
Program, in such notification shall identify by name, address and
telephone numbers the Contracting Office Representatives of the
Military Airlift Command of the United States Air Force to whom
notices must be given and to whom requests or claims must be made
to the extent applicable under the CRAF Program;
-9-
(viii) transfer possession of the Airframe or any Engine to
the United States of America, or to a foreign government, when
required by Applicable Law (it being understood that nothing in
this clause (viii) shall relieve the Lessee from its obligations
under Section 8(a) if such transfer becomes an Event of Loss), in
which event Lessee shall promptly notify Lessor and Indenture
Trustee in writing of any such transfer of possession;
(ix) transfer possession of the Airframe or any Engine to
the United States of America or any instrumentality or agency
thereof pursuant to a sublease, contract or other instrument;
(x) so long as no Specified Default shall have occurred
and be continuing, and subject to the provisions of this Section
5(b), enter into a sublease with respect to any Engine or the
Airframe and Engines or engines then installed on the Airframe to
a Permitted Sublessee which is not the subject of a petition
filed under any bankruptcy laws or other insolvency laws in
effect at the time such sublease is entered into, or any other
foreign air carrier; provided that in the case only of a sublease
--------
to a foreign air carrier that is not a Permitted Sublessee, the
Lessor receives at the time of such sublease an opinion of
counsel to the Lessee (which counsel shall be reasonably
satisfactory to the Lessor) to the effect that there exist no
possessory rights in favor of the sublessee under the laws of
such sublessee's country which would, upon bankruptcy or
insolvency of or other default by the Lessee and assuming that at
such time such sublessee is not insolvent or bankrupt, prevent
the return of such Engine or the Airframe and such Engine or
engine to the Lessor in accordance with and when permitted by the
terms of Section 17(a) upon the exercise by the Lessor of its
remedies under Section 17(a);
provided that (1) the rights of any transferee who receives possession by reason
--------
of a transfer permitted by this Section 5(b) (other than by a transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to all
the terms of this Lease, (2) the Lessee shall remain primarily liable hereunder
for the performance of all the terms of this Lease and all the terms and
conditions of this Lease and the other applicable Operative Agreements shall
remain in effect and (3) no sublease or transfer of possession otherwise in
compliance with this Section 5(b) shall (x) result in any registration or
reregistration of the Aircraft except to the extent permitted by Section S(e) or
the maintenance, operation or use thereof except in compliance with Sections
5(c) and 5(d), (y) permit any action not permitted to the Lessee hereunder or
(z) extend beyond the end of the Term (except to the extent that the Lessee
shall have irrevocably committed to exercise a purchase option in accordance
with the terms hereof).
In the case of any sublease permitted under this Section 5(b), the
Lessee will include in such sublease appropriate provisions which (a) make such
sublease expressly subject and
-10-
subordinate to all of the terms of this Lease and the Indenture, including the
rights of the Lessor and the Indenture Trustee to avoid such sublease in the
exercise of their rights to repossession of the Airframe and Engines hereunder
and thereunder; (b) expressly prohibit any further subleasing of the Airframe
and Engines; (c) require that the Airframe and Engines be maintained in
accordance with a maintenance program approved by the Aeronautical Authority
applicable thereto; (d) require the sublessee to comply with the terms of
Section 9 hereof; (e) limit the term of such sublease (including renewal rights)
to a period not beyond the end of the Term unless the Lessee shall then have
irrevocably committed to exercise a purchase option in accordance with the terms
hereof; and (f) require that the Airframe and Engines be used in accordance with
the limitations applicable to the Lessee's possession and use provided in this
Lease.
The Lessor hereby agrees for the benefit of the lessor or secured
party of any engine or of any airframe (other than the Airframe) leased to the
Lessee or purchased by the Lessee subject to a conditional sale or other
security agreement, which lease or conditional sale or other security agreement
(in the case of any such airframe) also covers an engine or engines owned by the
lessor under such lease or subject to a security interest in favor of the
secured party under such conditional sale or other security agreement, that the
Lessor will not seek to acquire, claim or exercise as against such lessor or
secured party, any right, title or interest with respect to any such engine as a
result of such engine being installed on the Airframe at any time while such
engine is owned by such lessor or is subject to such conditional sale or other
security agreement or security interest in favor of such secured party.
(c) Operation and Use.
-----------------
The Lessee shall not operate, use or locate the Airframe or any
Engine, or suffer such Airframe or any Engine to be operated, used or located
(i) in any area excluded from coverage by any insurance required by the terms of
Section 9 hereof, except in the case of a requisition by the United States of
America where the Lessee obtains indemnity from the Government for the benefit
of the Additional Insureds against substantially the same risks and for at least
the amounts of the insurance required by Section 9 hereof covering such area, or
(ii) outside the United States or Canada in any recognized or, in the Lessee's
reasonable judgment, threatened area of hostilities unless covered by war risk
insurance, or in either case unless the Airframe or such Engine is operated or
used under contract with the Government under which contract the Government
assumes liability for substantially the same risks in at least the same amounts
as would be covered by such insurance. The Lessee shall not permit the Airframe
or any Engine to be used or operated during the Term in violation of any
Applicable Law or in violation of any airworthiness certificate, license or
registration relating to the Aircraft or such Engines issued by any competent
governmental authority, unless (i) the validity thereof is being contested in
good faith and by appropriate proceedings which do not involve a material danger
of the sale, forfeiture or loss of the Airframe or such Engine, or (ii) it is
not possible for the Lessee (or a Permitted Sublessee) to comply with the laws
of a jurisdiction other than the United States (or other than any jurisdiction
in which the Aircraft is then registered)
-11-
because of a conflict with the applicable laws of the United States (or such
jurisdiction in which the Aircraft is then registered).
(d) Maintenance.
-----------
The Lessee, at its own cost and expense, shall during the Term
service, repair, maintain, overhaul and test the Airframe and each Engine or
cause the same to be done in accordance with a maintenance program approved by
the Aeronautical Authority, and shall keep or cause to be kept the Airframe and
each Engine in such operating condition as may be necessary to enable the
airworthiness certification of the Aircraft to be maintained in good standing at
all times under the applicable rules and regulations of the Aeronautical
Authority, except when aircraft of the same type, model or series as the
Airframe (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of grounding) registered in the same country have
been grounded by the Aeronautical Authority, provided, however, that if the
-------- -------
airworthiness certificate of the Aircraft shall be withdrawn, then, subject to
Section 8 hereof, so long as the Lessee (or a Permitted Sublessee) is taking or
causing to be taken all necessary action to promptly correct the condition which
caused such withdrawal, no Event of Default shall arise from such withdrawal.
Nothing herein shall be deemed to prevent the Lessee (or a Permitted Sublessee)
from taking the Aircraft out of service for maintenance or modifications
permitted hereunder or storage in accordance with applicable Aeronautical
Authority requirements and sound practice for such storage. The Lessee shall
maintain or cause to be maintained all records, logs and other documents
required by the Aeronautical Authority to be maintained in respect of the
Aircraft.
(e) Registration
------------
Except as otherwise permitted by Section 4.02(b) of the Participation
Agreement, or as otherwise required by the Transportation Code or rules,
regulations, or orders promulgated thereunder, or to the extent that such
registration cannot be effected or continued due to the Lessor's or the Owner
Participant's failure to comply with the citizenship or other eligibility
requirements for registration of commercial aircraft under the Transportation
Code or any rule, regulation or order promulgated thereunder, the Aircraft shall
be duly registered in the name of the Lessor under the Transportation Code at
all times during the Term; provided that the Lessor shall execute and deliver
--------
all such documents as the Lessee may reasonably request for the purpose of
effecting, continuing or (as provided in this Section 5(e) hereof and Section
4.02(b) of the Participation Agreement) changing such registration.
Section 6. Inspection.
----------
At all reasonable times during the Term, but upon at least 15 days'
prior notice to the Lessee and at a time and place reasonably acceptable to the
Lessee, the Lessor and the Indenture Trustee or their authorized representatives
may at their own expense and risk conduct a visual walk-around inspection of the
Aircraft and any Engine (including a visual walk-around inspection
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of the Aircraft during any "C" check or other heavy maintenance) and may inspect
the books and records of the Lessee relating to the operation and maintenance
thereof; provided that (a) such representatives shall be fully insured to the
--------
reasonable satisfaction of the Lessee by the Lessor or the Indenture Trustee
with respect to any risks incurred in connection with any such inspection, (b)
any such inspection shall be subject to the safety, security and workplace rules
applicable at the location where such inspection is conducted and any applicable
governmental rules or regulations, (c) in the case of an inspection during a
maintenance visit, such inspection shall not in any respect interfere with the
normal conduct of such maintenance visit or extend the time required for such
maintenance visit or, in any event, at any time interfere with the use or
operation of the Airframe or any Engine or with the normal conduct of the
Lessee's or a Permitted Sublessee's business, and (d) the Lessee shall not be
required to undertake or incur any additional liabilities in connection with any
such inspection. All information obtained in connection with any such
inspection shall be held confidential by the Lessor, the Indenture Trustee and
the Owner Participant and shall not be furnished or disclosed by them to anyone
other than each other, their bank examiners, auditors, accountants, agents and
legal counsel and any Person with whom the Owner Participant is in good faith
conducting negotiations relating to the possible transfer and sale of the Owner
Participant's interest in the Trust Estate or the Aircraft, if such Person shall
have entered into an agreement similar to that contained in this Section 6
whereby such Person agrees to hold such information confidential, and except as
may be required by an order of any court or administrative agency or by any
statute, rule, regulation or order of any governmental authority or as may be
necessary to enforce the terms of this Lease, provided, however, that the Lessor
-------- -------
or the Owner Participant may during any time it is offering the Aircraft for
sale make customary disclosures to prospective purchasers of the Aircraft as to
the then current flight and maintenance status of the Aircraft. The Lessor and
the Indenture Trustee shall have no duty to make any such inspection and shall
not incur any liability or obligation by reason of not making any such
inspection.
Section 7. Replacement and Pooling of Parts; Alterations, Modifications and
Additions; Substitution of Engines.
----------------------------------
(a) Replacement of Parts.
--------------------
Except as otherwise provided in the proviso to the third sentence of
Section 7(d) or if the Airframe or an Engine to which a Part relates has
suffered an Event of Loss, the Lessee, at its own cost and expense, will during
the Term promptly replace all Parts that may from time to time become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever. In addition, in
the ordinary course of maintenance, service, repair, overhaul or testing, the
Lessee (or a Permitted Sublessee), at its own cost and expense, may remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided that the
--------
Lessee (or such Permitted Sublessee), at its own cost and expense, shall, except
as otherwise provided in the proviso to the third sentence of Section 7(d),
replace such Parts as promptly as practicable with replacement Parts or
temporary replacement parts as provided in Section 7(c) hereof. All replacement
Parts shall
-13-
be free and clear of all Liens except for pooling arrangements to the extent
permitted by Section 7(c) and Permitted Liens and shall be in as good operating
condition as, and shall have a value and utility at least equal to, the Parts
replaced assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
(b) Title to Parts.
--------------
Except as otherwise provided in the proviso to the third sentence of
Section 7(d), all Parts at any time removed from the Airframe or any Engine
shall remain the property of the Lessor and subject to this Lease, no matter
where located, until such time as such Parts shall be replaced by Parts that
have been incorporated or installed in or attached to such Airframe or Engine
and that meet the requirements for replacement Parts specified in Section 7(a).
Immediately upon any replacement Part becoming incorporated or installed in or
attached to an Airframe or Engine as provided in Section 7(a), without further
act, (i) title to the replaced Part shall thereupon vest in the Lessee (or the
relevant Permitted Sublessee), in "as-is, where-is" condition, free and clear of
all rights of the Lessor and the Indenture Trustee and any Lessor's Liens and
shall no longer be deemed a Part hereunder; (ii) title to such replacement Part
shall thereupon vest in the Lessor (subject only to Permitted Liens); and (iii)
such replacement Part shall become subject to this Lease and be deemed part of
such Airframe or Engine, as the case may be, for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or attached to such
Airframe or Engine.
(c) Pooling or Parts Leasing.
------------------------
Any Part removed from the Airframe or from any Engine as provided in
Section 7(a) may be subjected by the Lessee (or a Permitted Sublessee) to a
pooling or parts leasing agreement or arrangement of a type customary in the
airline industry entered into in the ordinary course of the Lessee's (or such
Permitted Sublessee's) business, provided the part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Sections 7(a) and 7(b) as promptly as practicable after the
removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to the Airframe or any Engine in
accordance with Section 7(a) may be owned by another airline or vendor as
customary in the airline industry, subject to a pooling or parts leasing
arrangement, provided that the Lessee (or a Permitted Sublessee), at its expense
--------
within a commercially reasonable time, either (i) causes title to such temporary
replacement part to vest in the Lessor in accordance with Section 7(b) by the
Lessee (or such Permitted Sublessee) acquiring title thereto for the benefit of
the Lessor free and clear of all Liens except Permitted Liens, at which time
such temporary replacement part shall become a Part and become subject to this
Lease or (ii) replaces such temporary replacement part by incorporating or
installing in or attaching to such Airframe or Engine a further replacement Part
owned by the Lessee (or such Permitted Sublessee) free and clear of all Liens
except Permitted Liens and by causing title to such further replacement Part to
vest in the Lessor in accordance with Section 7(b).
-14-
(d) Alterations, Modifications and Additions.
----------------------------------------
The Lessee, at its own expense, shall make (or cause to be made)
alterations and modifications in and additions to the Airframe and any Engine as
may be required to be made from time to time during the Term by Applicable Law
regardless of upon whom such requirements are, by their terms, nominally
imposed; provided, that the Lessee may, in good faith, contest the validity or
--------
application of any such standard in any reasonable manner which does not
materially adversely affect the Lessor or the lien of the Indenture. In
addition, the Lessee (or a Permitted Lessee), at its own expense, may from time
to time make or cause to be made such alterations and modifications in and
additions to the Airframe and any Engine as the Lessee (or such Permitted
Lessee) may deem desirable in the proper conduct of its business (including,
without limitation, removal of Parts), provided further that no such alteration,
--------
modification or addition diminishes, in the Lessee's reasonable judgment, the
value, utility, condition or airworthiness of such Airframe or Engine below the
value, utility, condition or airworthiness thereof immediately prior to such
alteration, modification or addition, assuming such Airframe or Engine was then
in the condition required to be maintained by the terms of this Lease, except
that the value (but not the utility, condition or airworthiness) of the Aircraft
may be reduced by the value of Parts which the Lessee deems obsolete or no
longer suitable or appropriate for use in the Airframe or any Engine which shall
have been removed and not replaced, if the aggregate value of all such obsolete
or unsuitable Parts removed from the Aircraft and not replaced shall not exceed
$300,000. Title to all Parts incorporated or installed in or attached or added
to the Airframe or any Engine as the result of any alteration, modification or
addition effected by the Lessee (or a Permitted Lessee) shall, without further
act, vest in the Lessor free and clear of any Liens except Permitted Liens and
become subject to this Lease; provided that the Lessee (or a Permitted Lessee)
--------
may, at any time during the Term, remove any such Part from the Airframe or an
Engine if (i) such Part is in addition to, and not in replacement of or in
substitution for, any Part originally incorporated or installed in or attached
to such Airframe or Engine at the time of delivery thereof hereunder or any Part
in replacement of, or in substitution for, any such original Part, (ii) such
Part is not required to be incorporated or installed in or attached or added to
such Airframe or Engine pursuant to the terms of Section 5(d) or the first
sentence of this Section 7(d) and (iii) such Part can be removed from such
Airframe or Engine without diminishing or impairing the value, condition,
utility or airworthiness which such Airframe or Engine would have had at the
time of removal had such alteration, modification or addition not been effected
by the Lessee (or such Permitted Sublessee) assuming the Aircraft was otherwise
maintained in the condition required by this Lease. Upon the removal by the
Lessee (or such Permitted Sublessee) of any such Part as above provided, title
thereto shall, without further act, vest in the Lessee (or such Permitted
Sublessee), in "as-is, where-is" condition, free and clear of all rights of the
Lessor and the Indenture Trustee and any Lessor's Liens and such Part shall no
longer be deemed a Part hereunder. Any Part not removed by the Lessee (or a
Permitted Sublessee) as above provided prior to the return of the Airframe or
respective Engine to the Lessor hereunder shall remain the property of the
Lessor.
-15-
(e) Substitution of Engines.
-----------------------
The Lessee (or a Permitted Sublessee) shall have the right at its
option at any time, on at least 30 days' prior notice to the Lessor and the
Indenture Trustee, to substitute, and if an Event of Loss shall have occurred
with respect to an Engine, shall within 90 days of the occurrence of such Event
of Loss and on at least five days' prior notice to the Lessor substitute, a
Replacement Engine for any Engine not then installed or held for use on the
Airframe. In such event, immediately upon the effectiveness of such substitution
on the date set forth in such notice and without further act, (i) title to the
Replacement Engine shall thereupon vest in the Lessor free and clear of all
Liens (other than Permitted Liens), (ii) title to the replaced Engine shall
thereupon vest in the Lessee (or its designee), in "as-is, where-is" condition,
free and clear of all rights of the Lessor and the Indenture Trustee and any
Lessor's Liens and shall no longer be deemed an Engine hereunder, and (iii) such
Replacement Engine shall become subject to this Lease and be deemed part of the
Aircraft for all purposes hereof to the same extent as the Engine originally
installed on or attached to the Airframe. Upon the substitution of a Replacement
Engine, the following conditions shall be satisfied at the Lessee's sole cost
and expense and the parties agree to cooperate with the Lessee to the extent
necessary to enable it to timely satisfy such conditions:
(i) the following documents shall be duly authorized, executed
and delivered by the respective party or parties thereto, and an executed
counterpart of each shall be delivered to the Lessor, the Owner Participant
and, if the Indenture is in effect, the Indenture Trustee:
(A) a Lease Supplement covering the Replacement Engine,
which shall have been duly filed for recordation with the FAA;
(B) so long as the Indenture shall not have been satisfied
and discharged, an Indenture Supplement covering the Replacement
Engine, which shall have been duly filed for recordation with the FAA;
(C) a full warranty ▇▇▇▇ of sale (as to title), in form and
substance satisfactory to the Lessor, covering the Replacement Engine,
executed by the owner thereof in favor of the Lessor;
(D) as long as the Indenture is in effect, such documents as
may be required under Section 9.08 of the Indenture relating to the
Replacement Engine;
(E) (i) so long as the Indenture shall not have been
satisfied and discharged, such Uniform Commercial Code financing
statements covering the security interests created by the Indenture
(or
-16-
any similar statements or other documents required to
be filed or delivered pursuant to the laws of the
jurisdiction in which the Replacement Engine may be
registered in accordance with Section 5(e)), and (ii)
"precautionary" Uniform Commercial Code financing
statements as are deemed necessary or desirable by
counsel for the Owner Participant or the Indenture
Trustee to protect the ownership interests of the Owner
Trustee and the security interests of the Indenture
Trustee in the Replacement Engine; and
(F) an Officer's Certificate of the Lessee
certifying that the Replacement Engine is of at least
equal value and utility, and in as good operating
condition, as the Engine it replaces assuming such
Engine had been maintained in the condition required
hereunder; and
(ii) upon request by the Lessor or the Indenture
Trustee, the Lessee shall furnish the Lessor and the
Indenture Trustee with an opinion, reasonably satisfactory
in form and substance to the Lessor and the Indenture
Trustee, of the Lessee's counsel, which may be the Lessee's
General Counsel or Associate General Counsel, to the effect
that such bills of sale or other documents reasonably
requested by the Lessor or the Indenture Trustee are
sufficient to convey title to such Replacement Engine to the
Lessor and with respect to the effectiveness of the
interests in the Indenture Estate which the Indenture
purports to create.
Upon satisfaction of all conditions to such substitution, (x) the
Lessor shall execute and deliver, and cause the Indenture Trustee to execute and
deliver to the Lessee such bills of sale and other documents and instruments as
the Lessee shall reasonably request to evidence the transfer to the Lessee and
vesting of all right, title and interest in and to the replaced Engine in the
Lessee, in "as-is, where-is" condition, free and clear of all right, title and
interest of the Lessor and the Indenture Trustee, and any Lessor's Liens; (y)
the Lessor shall assign to the Lessee all claims it may have against any other
Person relating to an Event of Loss giving rise to such substitution and shall
exercise such rights as it has to cause such assignment to be free and clear of
the Lien of the Indenture and (z) the Lessee shall receive all insurance
proceeds (other than those reserved to others under Section 9(f) hereof) and
proceeds in respect of any Event of Loss giving rise to such replacement to the
extent not previously applied to the purchase price of the Replacement Engine as
provided in Sections 9(e)(i) and 8(e)(B).
Section 8. Loss, Destruction or Requisition.
--------------------------------
(a) Event of Loss with Respect to the Airframe.
------------------------------------------
-17-
Upon the occurrence of an Event of Loss with respect to the Airframe,
the Lessee shall forthwith (and in any event within 30 days after such
occurrence) give the Lessor and the Indenture Trustee notice of such Event of
Loss. The Lessee shall, within 60 days after such occurrence, give the Lessor
and the Indenture Trustee notice of its election to perform one of the following
options (it being agreed that if the Lessee shall not have given the Lessor such
notice of such election, the Lessee shall be deemed to have elected to perform
the option identified in the following clause (ii)):
(i) subject to the satisfaction of the conditions
contained in Section 8(d), on a date not more than 180 days after
the occurrence of the Event of Loss, convey or cause to be
conveyed to the Lessor, and to be leased by the Lessee hereunder
in replacement of the Airframe and Engines with respect to which
the Event of Loss occurred, a Replacement Airframe (together with
the same number of Replacement Engines as the number of Engines,
if any, which were subject to such Event of Loss), such
Replacement Airframe and Replacement Engines to be free and clear
of all Liens except Permitted Liens and to have a value and
utility at least equal to the Airframe and Engines, if any, so
replaced (assuming such Airframe and Engines were in the
condition and repair required by the terms hereof); provided
--------
that, if the Lessee shall not perform its obligation to effect
----
such replacement under this clause (i) during the 180-day period
of time provided herein, it shall give the Lessor and the
Indenture Trustee notice to such effect upon or before the
expiration of such period of time and shall promptly pay on the
first Loss Payment Date next following the thirtieth (30th) day
after the date of such notice to the Lessor, in immediately
available funds, the amount specified in clause (ii) below; or
(ii) pay or cause to be paid to the Lessor in immediately
available funds on a date specified at least 30 days in advance
by the Lessee, which date shall be a Termination Date not more
than 180 days after the occurrence of the Event of Loss, an
amount equal to (A) the arrears portion, if any, of Basic Rent
payable on such Termination Date, or if such Termination Date is
not a date on which Basic Rent is payable, a pro-rata portion
(pro-rated daily) of the arrears portion, if any, of Basic Rent
payable on the next succeeding date on which Basic Rent is
payable, together with all unpaid Termination or Basic Rent, if
any, payable before such payment date plus (B) all unpaid
Supplemental Rent (other than Value) due on or before such
payment date, plus (C) the Termination Value for the Aircraft
determined as of the date of payment or, if such date of payment
is beyond the end of the Term, the Termination Value as of the
last Termination Date of the Term.
(b) Effect of Replacement.
---------------------
-18-
Should the Lessee have provided a Replacement Aircraft as provided for
in Section 8(a)(i), (i) this Lease shall continue with respect to such
Replacement Aircraft as though no Event of Loss had occurred; (ii) the Lessor
shall convey "as-is, where-is", without recourse or warranty except for a
warranty against Lessor's Liens, to the Lessee all right, title and interest of
the Lessor, in and to the Airframe and the Engine or Engines, if any, installed
on the Airframe upon the occurrence of the Event of Loss by executing and
delivering to the Lessee such bills of sale and other documents and instruments
as the Lessee may reasonably request to evidence such conveyance and shall
exercise such rights as it has to cause such Airframe and Engines and the
Purchase Agreement and Assignment with respect to such Airframe and Engines to
be released from the Lien of the Indenture; (iii) the Lessor shall assign to the
Lessee all claims it may have against any other Person arising from the Event of
Loss and (iv) the Lessee shall be entitled to receive all insurance proceeds
(other than those reserved to others under Section 9(f)) and proceeds from any
award in respect of condemnation, confiscation, seizure or requisition,
including any investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Aircraft as provided in Sections
9(e)(iii) and 8(e)(i).
(c) Effect of Termination Value Payment.
-----------------------------------
In the event of a payment in full of the Termination Value for the
Aircraft and other Rent payable as provided in Section 8(a)(ii), (i) this Lease
and the obligations of the Lessee to pay Rent (except for Supplemental Rent
obligations which survive pursuant to Section 3(c) and Articles 6 and 7 of the
Participation Agreement or the Tax Indemnity Agreement or which have accrued but
have not otherwise been paid as of the date of such payment) shall terminate and
the Term shall end, (ii) any remaining insurance proceeds (other than those
reserved to others under Section 9(f)), including any investment interest
thereon, shall be promptly paid over to the Lessee; and (iii) the Lessor shall
convey, "as-is, where-is" without recourse or warranty, except for a warranty
against Lessor's Liens, to the Lessee all right, title and interest of the
Lessor in and to the Airframe and Engines and shall execute and deliver to the
Lessee such bills of sale and other documents and instruments as the Lessee may
reasonably request to evidence such conveyance and shall exercise such rights as
it has to cause to be released from the Lien of the Indenture, the Airframe and
the Engines and the Purchase Agreement and Assignment with respect to such
Airframe and Engines, all claims for damage to such Airframe and Engines, if
any, against third persons arising from the Event of Loss and any interest of
the Lessor in engines (which are not Engines) installed on the Airframe.
(d) Conditions to Airframe Replacement.
----------------------------------
The Lessee's right to substitute a Replacement Aircraft as provided in
Section 8(a)(i) shall be subject to the fulfillment, at the Lessee's sole cost
and expense, in addition to the conditions contained in such Section 8(a)(i), of
the following conditions precedent:
-19-
(i) On the date when the Replacement Aircraft is
delivered to the Lessor (such date being referred to in this
Section 8(d) as the "Replacement Closing Date"), no Event of
Default shall have occurred and be continuing and the Lessor and
the Indenture Trustee shall have received an Officer's
Certificate so certifying;
(ii) On the Replacement Closing Date the following
documents shall have been duly authorized, executed and delivered
by the respective party or parties thereto and shall be in full
force and effect, and an executed counterpart of each thereof
(or, in the case of the FAA Bills of Sale (or a comparable
document, if any, of another Aeronautical Authority, if
applicable) referred to below, a photocopy thereof) shall have
been delivered to the Lessor and the Indenture Trustee:
(A) a Lease Supplement covering the Replacement Aircraft, which
shall have been duly filed for recordation with the FAA;
(B) so long as the Indenture shall not have been discharged and
satisfied, an Indenture Supplement covering the Replacement Aircraft,
which shall have been duly filed for recordation with the FAA;
(C) an FAA ▇▇▇▇ of Sale (or a comparable document, if any, of
another Aeronautical Authority, if applicable) covering the
Replacement Aircraft, executed by the owner thereof in favor of the
Lessor, and dated the Replacement Closing Date;
(D) a full warranty (as to title) ▇▇▇▇ of sale, in form and
substance satisfactory to the Indenture Trustee and the Lessor,
covering the Replacement Aircraft, executed by the owner thereof in
favor of the Lessor, dated the Replacement Closing Date;
(E) as long as the Indenture is in effect, such documents as may
be required under Section 9.08 of the Indenture;
(F) (1) so long as the Indenture shall not have been discharged,
such Uniform Commercial Code financing statements (or any similar
statements or other documents required to be filed or delivered
pursuant to the laws of the jurisdiction in which the Replacement
Aircraft may be registered in accordance with Section 5(e)) covering
the security interests created by the Indenture, and (2) such
"precautionary" Uniform Commercial Code financing statements as are
deemed necessary or desirable by counsel for the Owner Participant or
the Indenture Trustee to protect the ownership interests of the Owner
Trustee and the security interests of the Indenture Trustee in the
Replacement Aircraft; and
-20-
(G) an Officer's Certificate of the Lessee certifying that the
Replacement Aircraft is a Boeing model 737-700 aircraft of a more
advanced model in as good operating condition as, the Aircraft it
replaces assuming such Aircraft had been maintained in the condition
required hereunder;
(iii) On or before the Replacement Closing Date, the
Lessor and the Indenture Trustee (acting directly or by
authorization to their respective special counsel) shall have
received such documents and evidence with respect to the Lessee,
the Lessor, the owner of such Replacement Aircraft or the
Indenture Trustee, as the Lessor or the Indenture Trustee or
their respective special counsel may reasonably request in order
to establish the consummation of the transactions contemplated by
Section 8(a)(i) and this Section 8(d), the taking of all
necessary corporate action in connection therewith and compliance
with the conditions set forth in this Section 8(d), in each case
in form and substance reasonably satisfactory to the Lessor and
the Indenture Trustee;
(iv) The Lessor and the Indenture Trustee (acting
directly or by authorization to their respective special counsel)
shall each have received satisfactory evidence as to the
compliance with Section 9 hereof with respect to the Replacement
Aircraft;
(v) On the Replacement Closing Date, (A) the Lessor
shall receive good title to the Replacement Aircraft free and
clear of Liens (other than Permitted Liens), (B) the Replacement
Aircraft shall have been duly certified by the Aeronautical
Authority as to type and airworthiness in accordance with the
terms of this Lease, and (C) application for registration of the
Replacement Aircraft in accordance with Section 5(e) shall have
been duly made with the Aeronautical Authority;
(vi) the Owner Participant shall have received an
appraisal reasonably satisfactory to it with respect to the
Replacement Aircraft;
(vii) The Lessor and the Indenture Trustee shall have
received (acting directly or by authorization to its special
counsel) (A) an opinion, satisfactory in form and substance to
the Lessor and the Indenture Trustee, of counsel to the Lessee
(which may be the Lessee's General Counsel) to the effect that
the ▇▇▇▇ of sale referred to in clause (ii)(D) above constitutes
an effective instrument for the conveyance of title to the
Replacement Airframe and Replacement Engines, if any, to the
Lessor, and (B) an opinion of qualified FAA counsel (or counsel
in such jurisdiction outside of the United States where the
Aircraft may be registered in accordance with Section 5(e)),
-21-
as to, in the case of FAA counsel, the due recordation of the
Lease Supplement, the Indenture Supplement and all other
documents or instruments the recordation of which is necessary to
perfect and protect the rights of the Lessor and the Indenture
Trustee in the Replacement Aircraft or, in the case of counsel in
another jurisdiction, the taking of all action necessary in such
jurisdiction for such purposes; and
(viii) Either (1) the Owner Participant shall have
received an opinion of independent tax counsel (selected by the
Owner Participant and reasonably acceptable to the Lessee),
reasonably satisfactory to the Owner Participant, to the effect
that there shall be no adverse tax consequences resulting from
such replacement (and the Owner Participant shall use its best
efforts to cause a timely opinion to be delivered) or (2) the
Lessee shall have agreed to indemnify the Owner Participant for
such adverse tax consequences as may be identified in such an
opinion.
(e) Non-Insurance Payments Received on Account of an Event of Loss.
--------------------------------------------------------------
As between the Lessor and the Lessee, any payments on account of an
Event of Loss (other than insurance proceeds or other payments the application
of which is provided for in this Section 8 or elsewhere in this Lease, as the
case may be, or payments in respect of damage to the business or property of the
Lessee) with respect to the Aircraft, an Engine or any Part received at any time
by the Lessor or by the Lessee from any governmental authority or other Person
will be applied as follows:
(i) if such payments are received with respect to an
Event of Loss as to the Aircraft, and the Airframe or the
Airframe and the Engines or engines installed thereon are being
replaced by the Lessee pursuant to Section 8(a)(i), such payments
shall be paid over to, or retained by, the Lessee, provided that
--------
if the Lessee has not completed such replacement, such payments
shall be paid over to, or retained by, the Lessor as security,
and upon completion of, or in connection with a closing for, such
replacement, be paid over to or retained by the Lessee;
(ii) if such payments are received with respect to an
Event of Loss to an Engine or Part that has been or is being
replaced by the Lessee pursuant to the terms hereof, such
payments shall be paid over to, or retained by, the Lessee; and
(iii) if such payments are received with respect to an
Event of Loss as to the Aircraft, and if the Airframe or the
Airframe and the Engines or engines installed thereon has not
been and will not be replaced as contemplated by Section 8(a),
(x) so much of such payments as shall not
-22-
exceed the Termination Value and other amounts required to be
paid by the Lessee pursuant to Section 8(a) hereof shall be
applied in reduction of the Lessee's obligation to pay such
Termination Value and other amounts, to the extent not already
paid by the Lessee, and, after the Termination Value and all
amounts required to be paid to the Lessor pursuant to Section
8(a)(ii) above shall be paid in full, shall be applied to
reimburse the Lessee for such Termination Value and other amounts
up to the full amount thereof, and (y) the balance, if any, of
such payment remaining thereafter shall be applied to reimburse
the Lessee for its reasonable costs (including attorney's fees),
if any, of procuring such payments, and (z) the balance
remaining, if any, shall then be distributed between the Lessor
and the Lessee as their interests may appear.
(f) Requisition for Use.
-------------------
In the event of a requisition for use by any government during the
Term of the Airframe and the Engines, if any, or engines installed on the
Airframe, the Lessee shall promptly notify the Lessor of such requisition and
all of the Lessee's obligations under this Lease shall continue to the same
extent as if such requisition had not occurred except to the extent that the
performance or observance of any obligation by the Lessee shall have been
prevented or delayed by such requisition, provided that the Lessee's obligations
--------
for the payment of money and under Section 9 (except while an assumption of
liability by the government of the United States of the scope referred to in
Section 5(c) is in effect) shall not be reduced or delayed by such requisition.
Any payments received by the Lessor or the Lessee from such government with
respect to such requisition of use shall be paid over to, or retained by, the
Lessee. In the event of an Event of Loss of an Engine resulting from the
requisition for use by a government of such Engine (but not the Airframe), the
Lessee will replace such Engine hereunder by complying with the terms of Section
7(e) and any payments received by the Lessor or the Lessee from such government
with respect to such requisition shall be paid over to, or retained by, the
Lessee.
(g) Certain Payments to be Held As Security.
---------------------------------------
Any amount referred to in this Section 8 or Section 9 hereof which is
payable to the Lessee shall not be paid to the Lessee, or, if it has been
previously paid directly to the Lessee, shall not be retained by the Lessee, if
at the time of such payment a Specified Default shall have occurred and be
continuing, but shall be paid to and held by the Lessor as security for the
obligations of the Lessee under this Lease, unless and until applied by Lessor
to Lessee's obligations and at such time as there shall not be continuing any
such Specified Default, such amount and any gain realized as a result of
Permitted Investments required to be made pursuant to Section 15 or Section 5.08
of the Indenture shall to the extent not so applied be paid over to the Lessee.
Section 9. Insurance.
---------
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(a) Public Liability and Property Damage Insurance.
----------------------------------------------
Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor, maintain or cause to be maintained in
effect at all times during the Term with insurers of recognized responsibility
public liability insurance (including, without limitation, passenger legal
liability, property damage and product liability coverage but excluding
manufacturer's product liability coverage) with respect to the Aircraft in an
amount not less than the Lessee may carry from time to time on other similar
aircraft in its fleet but not less than the Minimum Liability Amount; provided
--------
that an agreement of the Government to insure against or indemnify for
substantially the same risks to at least the same amount shall satisfy the
requirements of this Section 9(a). Such insurance shall be of the type usually
carried by the Lessee with respect to similar aircraft and engines, and covering
risks of the kind customarily insured against by the Lessee.
During any period that the Aircraft is grounded and not in operation
for any reason, the Lessee may modify the insurance required by this Section
9(a)(i) to reduce the amounts of public liability and property damage insurance
and (ii) to modify the scope of the risks covered and the type of insurance, in
both circumstances to conform to such insurance customary in the United States
airlines industry for regional air carriers similarly situated with the Lessee
in respect of similar aircraft which are grounded, not in operation, and stored
or hangared, except that the amounts of coverage and scope of risk covered and
the type of insurance shall be the same as from time to time applicable to
aircraft owned or leased by Lessee on the ground, not in operation, and stored
or hangared.
(b) Insurance Against Loss or Damage to the Aircraft and Engines.
------------------------------------------------------------
Subject to the rights of the Lessee under Section 9(d), the Lessee
shall, without expense to the Lessor, maintain or cause to be maintained in
effect at all times during the Term with insurers of recognized responsibility
all risk, agreed value, ground and flight hull insurance, which may exclude war
risks and allied perils, covering the Aircraft for an amount not less than the
Termination Value from time to time; provided that, neither the Lessee nor any
-------- ----
Permitted Sublessee shall be required to maintain all-risk flight aircraft hull
insurance with respect to any period in which the Aircraft is grounded for any
reason and properly stored or hangared. Such hull insurance or other personal
property insurance of the Lessee shall cover Engines or engines and Parts
temporarily removed from the Airframe, pending replacement by installation of
the same or similar Engines, engines or Parts on the Airframe. Such insurance
shall be of the type usually carried by the Lessee with respect to similar
aircraft and engines, and covering risks of the kind customarily insured against
by the Lessee. If and to the extent that the Lessee or a sublessee operates the
Aircraft (A) on routes where it maintains war risk insurance in effect with
respect to other similar owned or leased aircraft in its fleet, or (B) on routes
(other than routes within the United States, Canada, Mexico, Bermuda and islands
other than Cuba in the Caribbean Basin) where the custom in the industry is to
carry war risk insurance, the Lessee or such sublessee shall maintain or cause
to be maintained
-24-
such insurance in effect with respect to the Aircraft in the lesser of an amount
at least equal to Termination Value or the amount of such insurance customarily
carried by corporations engaged in the same or similar business similarly
situated with the Lessee and owning or operating similar aircraft and engines on
such routes or similar routes, provided that if the requirement to maintain war
risk insurance arises under clause (A) of this sentence, such insurance shall be
maintained in an amount not less than that maintained by the Lessee or such
sublessee on similar aircraft in its fleet. An agreement by the United States
Government to insure against or indemnify for substantially the same risks to at
least the same amount will satisfy any of the requirements of this Section 9(b).
During any period that the Aircraft is on the ground and not in
operation, the Lessee may carry or cause to be carried, in lieu of the insurance
required by this Section 9(b), insurance otherwise conforming with the
provisions of this Section 9(b) except that the scope of the risks and the type
of insurance shall be in substantially similar form, of such types and having
limits within the range of limits (but no less than Termination Value from time
to time) as are customarily obtained by similarly situated United States
carriers in respect of similar aircraft which are grounded, not in operation,
and stored or hangared, provided that the scope of the risks and the type of
--------
insurance shall be the same as from time to time applicable to aircraft owned by
the Lessee of the same type similarly on the ground and not in operation,
provided further that the Lessee shall maintain insurance against risk of loss
-------- -------
or damage to the Aircraft in an amount equal to the Termination Value from time
to time during such period that the Aircraft is on the ground and not in
operation.
(c) Additional Insureds; Loss Payment.
---------------------------------
The Lessee shall cause all policies of insurance carried in accordance
with this Section 9 to name the Additional Insureds as their respective
interests may appear as additional insureds. Such policies shall provide with
respect to such Additional Insureds that (i) none of their respective interests
in such policies shall be invalidated by any act or omission or breach of
warranty or condition contained in such policies by the Lessee or, in the case
of any particular Additional Insured, any other Additional Insured; (ii) no
cancellation or lapse of coverage for nonpayment of premium or otherwise, and no
substantial change of coverage which adversely affects the interests of any such
Additional Insured, shall be effective as to such Additional Insured until 30
days (or such lesser period as may be applicable in the case of any war risk
coverage) after receipt by such Additional Insured of written notice from the
insurers of such cancellation, lapse or change; (iii) they shall have no
liability for premiums, commissions, calls, assessments or advances with respect
to such policies; (iv) such policies will be primary without any right of
contribution from any other insurance carried by such Additional Insureds; and
(v) the insurers waive any rights of set-off, counterclaim, deduction or
subrogation against such Additional Insureds. Each liability policy shall
provide that all the provisions thereof, except the limits of liability, shall
operate in the same manner as if there were a separate policy covering each
insured and provide that the exercise by the insurer of rights of subrogation
derived from rights retained by the Lessee will not delay payment of any claim
that would otherwise be payable but for such rights of subrogation. Each hull
policy shall
-25-
name the Indenture Trustee as loss payee as long as the Indenture shall remain
in effect and thereafter shall name the Lessor as loss payee; provided that, so
-------- ----
long as the insurers shall not have received written notice that an Event of
Default has occurred and is continuing, if insurance proceeds under a hull
policy in the aggregate equal $2,000,000 or less, then such proceeds shall be
payable to the Lessee and, notwithstanding the foregoing, any amounts up to
Termination Value (i) of any proceeds which in the aggregate exceed $2,000,000,
(ii) of any proceeds in respect of a total loss or an Event of Loss or (iii) if
the insurers shall have received written notice that an Event of Default has
occurred and is continuing, any proceeds with respect to any single loss, shall
be payable to such loss payee.
(d) Deductibles and Self-Insurance.
------------------------------
The Lessee may from time to time self-insure, by way of deductible or
premium adjustment provisions in insurance policies or otherwise, the risks
required to be insured against pursuant to this Section 9 in such amounts as are
then self-insured with respect to similar owned or leased aircraft in the
Lessee's fleet but in no case shall such self-insurance in the aggregate exceed
$15,000,000 on a per occurrence or on fleetwide basis. A deductible per
occurrence that is not in excess of the prevailing standard market deductible
for similar aircraft shall be permitted, for each aircraft in the Lessee's
fleet, in addition to such self-insurance.
(e) Application of Hull Insurance Proceeds.
--------------------------------------
Subject to Section 8(g), as between the Lessor and the Lessee, any
payments received under policies of hull or other property insurance required to
be maintained by the Lessee pursuant to Section 9(b), shall be applied as
follows:
(i) if such payments are received with respect to loss or damage
(including an Event of Loss with respect to an Engine) not constituting an
Event of Loss with respect to the Airframe, payments in the aggregate of
$2,000,000 or less shall be paid over to or retained by the Lessee and,
subject to Section 9(c), any payments which in the aggregate are greater
than $2,000,000 shall be paid over to or retained by the Lessor for payment
to the Lessee only upon performance of its repair or replacement
obligation;
(ii) if such payments are received with respect to an Event
of Loss with respect to the Airframe and the Airframe is not being replaced
by the Lessee pursuant to Section 8(a)(i), so much of such payments as
shall not exceed the Termination Value and other amounts required to be
paid by the Lessee pursuant to Section 8(a)(ii) shall be applied in
reduction of the Lessee's obligation to pay such amounts if not already
paid by the Lessee, and to reimburse the Lessee if such amounts shall have
been paid, and the balance, if any, of such payments shall be promptly paid
over to or retained by the Lessee; and
-26-
(iii) if such payments are received with respect to the
Airframe or the Airframe and Engines or engines installed thereon and the
Airframe is being replaced by the Lessee pursuant to Section 8(a)(i), such
payments shall be paid over to, or retained by the Lessee, provided that if
the Lessee has not completed such replacement, such payments shall be paid
over to, or retained by, the Lessor as security, and upon completion of, or
in connection with a closing for, such replacement, be paid over to or
retained by the Lessee.
(f) Insurance for Own Account.
-------------------------
Nothing in this Section 9 shall prohibit the Lessor, the Owner
Participant or the Lessee obtaining insurance with respect to the Aircraft for
its own account (including, without limitation, in the case of the Lessee, hull
insurance under the same policies maintained pursuant to this Section 9 in
amounts in excess of those required to be maintained pursuant to this Section 9)
and any proceeds payable thereunder shall be payable as provided in the
insurance policy relating thereto, provided that no such insurance may be
--------
obtained which would limit or otherwise adversely affect the availability of
coverage or payment of any insurance required to be obtained or maintained
pursuant to this Section 9, it being understood that all salvage rights to the
Airframe or the Engines shall remain with the Lessee's insurers at all times.
(g) Reports, etc.
------------
The Lessee will during the Term furnish to the Lessor and the
Indenture Trustee evidence of renewal of the insurance policies required
pursuant to this Section 9 prior to the cancellation, lapse or expiration of
such insurance policies and, on or before the renewal dates of the insurance
policies carried by the Lessee pursuant to this Section 9, a report signed by a
firm of aircraft insurance brokers, not affiliated with the Lessee, appointed by
the Lessee and reasonably satisfactory to the Lessor, stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof and that such renewal insurance will on and after
the effective date thereof so comply with the terms hereof, provided that all
--------
information contained in such report shall be held confidential by the Lessor
and the Indenture Trustee, and shall not be furnished or disclosed by them to
anyone except the Owner Participant and bona fide prospective transferees of the
Owner Participant and their respective agents (provided that they shall agree
--------
for the benefit of the Lessee to hold all such information similarly
confidential) or as may be required by Applicable Law. The Lessee will instruct
such firm to give prompt written advice to the Lessor and the Indenture Trustee
of any default in the payment of any premium and of any other act or omission on
the part of the Lessee of which it has knowledge and which would in such firm's
opinion invalidate or render unenforceable, in whole or in any material part,
any insurance on the Aircraft. The Lessee will also instruct such firm to
advise the Lessor and the Indenture Trustee in writing at least 30 days prior to
the termination or cancellation of, or material adverse change in, such
insurance carried and maintained on the Aircraft pursuant to this Section 9.
-27-
Section 10. Liens.
-----
The Lessee shall not during the Term directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Airframe or
any Engine or title thereto or any interest therein or in this Lease except (a)
the respective rights of the Lessor and the Lessee as provided herein, the Lien
of the Indenture and the rights of the parties to the other Operative
Agreements; (b) the rights of others under agreements or arrangements to the
extent expressly permitted in Sections 5(b) and 7(c); (c) Liens for Taxes either
not yet due or being contested in good faith by appropriate proceedings so long
as such proceedings do not involve a material danger of the sale, forfeiture or
loss of the Airframe or an Engine; (d) Liens of suppliers, mechanics, workers,
repairers, employees, airport operators, air traffic control authorities or
other like Liens arising in the ordinary course of business and for amounts the
payment of which is either not yet delinquent or is being contested in good
faith (and for the payment of which adequate reserves have been provided) by
appropriate proceedings, so long as such proceedings do not involve a material
danger of the sale, forfeiture or loss of the Airframe or an Engine; (e) Liens
arising out of judgments or awards against the Lessee with respect to which at
the time there shall have been secured a stay of execution; (f) Lessor's Liens,
Trust Company's Liens and Indenture Trustee's Liens; (g) salvage and similar
rights of insurers under policies of insurance maintained with respect to the
Aircraft and (h) Liens with respect to which the Lessee (or any sublessee) has
provided a bond or other security adequate in the reasonable opinion of the
Lessor. Liens described in clauses (a) through (h) above are referred to herein
as "Permitted Liens." The Lessee shall promptly, at its own expense, take such
action as may be necessary to duly discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time during the Term;
Section 11. Recordation and Further Assurances.
----------------------------------
(a) Recordation of Lease.
--------------------
The Lessee shall cause this Lease, any Lease Supplements, and any and
all additional instruments which shall be executed pursuant to the terms hereof
to be kept, filed and recorded and to be re-executed, refiled and re-recorded at
all times during the Term with the FAA or other Aeronautical Authority to the
extent required to perfect and preserve the Lessor's interest in the Aircraft.
(b) Further Assurances.
------------------
The Lessee and the Lessor will each promptly and duly execute and
deliver to the other such further documents and assurances and take such further
action as the other may from time to time reasonably request in order to more
effectively carry out the intent and purpose of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessor and the Lessee hereunder, including, without limitation, if requested
by the Lessor or the Lessee, the execution and delivery of supplements or
amendments hereto, in recordable form,
-28-
subjecting any replacement or substituted aircraft or engine to this Lease and
the recording or filing of counterparts hereof, or of financing statements with
respect hereto.
Section 12. Return of Aircraft and Records.
------------------------------
(a) Return of Aircraft.
------------------
Upon the termination of this Lease at the expiration of the Term or
upon the earlier termination of this Lease pursuant to the terms hereof, unless
the Lessee shall purchase the Aircraft or there shall have been an Event of Loss
with respect to the Aircraft, the Lessee, at its own expense, shall, except as
otherwise expressly provided herein, return the Airframe by delivering the same
to the Lessor in the continental United States of America at a location on the
Lessee's domestic route system chosen by the Lessee, fully equipped with two
Engines or other CFM International model CFM-56-7B20 engines (or engines of a
comparable or another manufacturer of a comparable or an improved model and
suitable for installation and use on the Airframe and owned by the Lessee) duly
installed thereon.
(b) Return of Other Engines.
-----------------------
In the event any engine not owned by the Lessor shall be returned with
the Airframe, such engine shall satisfy the requirements for a Replacement
Engine, and the Lessee shall, at its own expense and concurrently with such
return, furnish the Lessor with a full warranty ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to the Lessor, with respect to each such
engine and shall take such other action as the Lessor may reasonably request in
order that such engine shall be duly and properly titled in the Lessor free and
clear of all Liens other than Lessor's Liens. Upon passage of title such engine
shall be deemed to be an Engine for all purposes hereof and thereupon the Lessor
will transfer to the Lessee, without recourse or warranty except a warranty
against Lessor's Liens, all right, title and interest of the Lessor or any
Affiliate in and to an Engine not installed on the Airframe at the time of the
return thereof and, if the Indenture has not been discharged, shall exercise
such rights as it has to cause such Engine to be released from the Lien of the
Indenture.
(c) Fuel; Records.
-------------
Upon the return of the Aircraft, (i) the Lessee shall have no
obligation with respect to the amount of fuel or oil contained in the Airframe
and the Lessor shall reimburse the Lessee for all fuel contained in the
Aircraft's fuel tanks at the Lessee's then current cost of fuel at the place of
redelivery and (ii) the Lessee shall deliver to the Lessor all logs, manuals,
certificates and inspection, modification and overhaul records which are
required to be maintained with respect thereto under applicable rules and
regulations of the FAA and DOT.
-29-
(d) Condition of Aircraft.
---------------------
The Aircraft when returned to the Lessor shall be in the operating
condition required by Exhibit F hereto.
(e) Delayed Return. (i) In the event that the use of the Aircraft,
--------------
Airframe or any Engine in the normal course of the business of air
transportation is prohibited on the last day of the Term or the date the
Aircraft is required to be redelivered pursuant to Section 14 due to
circumstances beyond the Lessee's or any sublessee's control, the Lessee shall
not be required to return such Aircraft to the Lessor but may retain custody and
control of the Aircraft for a period not in excess of 180 days beyond the last
day of the Term or such date in order to attempt in a diligent manner to remedy
any condition prohibiting such use or (ii) in connection with any sublease of
the Aircraft by the Lessee permitted under the terms of this Lease, the Lessee
may at its option, upon written notice to the Lessor given not less than 30 days
prior to the last day of the Term or such date, extend this Lease for a period
not in excess of 30 days beyond the last day of the Term in order to enable the
Lessee to bring the Aircraft to the condition required under this Section 12 on
its return to the Lessor; provided that in either case, the Lessee shall pay to
--------
the Lessor at monthly intervals the daily equivalent of the average annual Basic
Rent payable during the Term (excluding the Interim Term) pursuant to the terms
hereof for each day of such period.
Section 13. Renewal Option and Purchase Options.
-----------------------------------
(a) Renewal Terms.
-------------
The Lessee shall have the right to extend this Lease for a period
of ___ years beyond the expiration of the Basic Term (the "Fixed Renewal Term").
At the end of the Fixed Renewal Term, the Lessee shall have the right to further
extend this Lease for any number of successive periods of not less than one year
(each a "Subsequent Renewal Term"; the Fixed Renewal Term and each Subsequent
Renewal Term, being hereinafter sometimes called a ("Renewal Term"). The Fixed
Renewal Term will commence at the end of the Basic Term and a Subsequent Renewal
Term will commence at the end of the Fixed Renewal Term or the preceding
Subsequent Renewal Term, as the case may be. Such right to extend this Lease
shall be exercised upon notice to the Lessor not less than 120 days before the
expiration of the Basic Term or the preceding Renewal Term, as the case may be.
Such notice shall be irrevocable except that in the event the Lessee gives such
notice to the Lessor 180 or more days before the end of the Basic Term or the
Renewal Term then in effect, as the case may be, the Lessee may revoke its
election to extend this Lease within 15 days following the determination of the
Fair Market Rental Value of the Aircraft but in no event later than 90 days
prior to the end of the Basic Term or the preceding Renewal Term, as the case
may be. If the Lessee requests a determination of Fair Market Rental Value at
least 180 days before the expiration of the Basic Term or a Renewal Term, as the
case may be, the Lessor and the Lessee shall comply in a timely manner with
their respective obligations under the definition of "Fair Market Rental Value"
to allow any appraisal of Fair Market Rental Value to be completed in sufficient
time to permit the
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Lessee to exercise the revocation right provided above. If no Specified Default
shall have occurred and be continuing on the date of such notice or on the date
of the commencement of any Renewal Term, then this Lease shall be extended for
the additional period of such Renewal Term as specified in such notice on the
same conditions as provided for herein. The Basic Rent payable per annum during
the Fixed Renewal Term shall be the lesser of (i) the then Fair Market Rental
Value for the Aircraft and (ii) [__%] of the average annual Basic Rent over the
Basic Term. The rental payable per annum during any Subsequent Renewal Term
shall be the then Fair Market Rental Value for the Aircraft. Such rental during
each Renewal Term shall be payable semi-annually in arrears. The Termination
Value of the Aircraft during each Renewal Term shall be the lesser of the Fair
Market Sales Value thereof at the commencement of such Renewal Term or ___% of
Lessor's Cost.
(b) Lessee's Purchase Options.
-------------------------
(i) Rights to Purchase.
------------------
The Lessee shall have the right upon notice as provided herein to
purchase the Aircraft (A) on the EBO Date for a price equal to the EBO Amount;
(B) upon the termination of the Basic Term a price equal to the lesser of the
then Fair Market Sales Value of the Aircraft and a price equal to ___% of
Lessor's Cost; or (C) at the end of any Renewal Term for a price equal to the
then Fair Market Sales Value. Upon the payment by the Lessee of the purchase
price for the Aircraft and the arrears portion of Basic Rent, if any, payable on
the date of purchase, together with all unpaid Basic Rent, if any, payable
before such date and all Supplemental Rent then due and payable hereunder, the
Term shall end and the obligations of the Lessee to pay Rent hereunder (except
for Supplemental Rent obligations surviving pursuant to Section 3(c), Articles 6
and 7 of the Participation Agreement or the Tax Indemnity Agreement or which
have otherwise accrued but not been paid as of the date of such payment) shall
cease, and the Lessor shall convey to the Lessee all right, title and interest
of the Lessor in and to the Aircraft on an "as-is, where is" basis, without
recourse or warranty except a warranty against Lessor's Liens.
(ii) Option to Assume Equipment Notes.
--------------------------------
In the event the Lessee elects to purchase the Aircraft pursuant to
clause (A) of Section 13(b)(i), the Lessee may, at its election, assume the
payment obligations of the Lessor with respect to such Equipment Notes as
contemplated by Section 5.10 of the Participation Agreement, in which case the
purchase price to be paid by the Lessee shall be reduced by an amount equal to
the principal of and accrued interest on the Equipment Notes so assumed by the
Lessee.
(iii) Notice of Exercise of Option.
----------------------------
The Lessee's right to purchase provided for in clause (B) or (C) of
Section 13(b)(i) shall be exercised upon notice to the Lessor not less than 180
days before the applicable date of purchase provided in such clause (B) or (C)
as the case may be. Such notice shall be irrevocable,
-31-
except that where the purchase price is or may be measured by the Fair Market
Sales Value of the Aircraft the Lessee may revoke its exercise of an option to
purchase the Aircraft within 15 days following the determination of such Fair
Market Sales Value, but in no event later than 90 days prior to the applicable
date of purchase provided in such clause (B) or (C), as the case may be. The
Lessee's right to purchase provided for in clause (A) of Section 13(b)(i) shall
be exercised upon written notice to the Lessor not less than 30 days before the
EBO Date and shall be irrevocable when given.
Section 14. Voluntary Termination for Obsolescence.
--------------------------------------
(a) Termination by Sale of Aircraft.
-------------------------------
So long as no Event of Default shall have occurred and be
continuing, the Lessee shall have the right at its option five years or more
after commencement of the Basic Term on at least 180 days' prior notice (which
notice shall be irrevocable, except as provided below) to the Lessor and the
Indenture Trustee, specifying a proposed date of termination which shall be a
Termination Date, to terminate this Lease if the chief financial officer of the
Lessee shall have certified in writing to the Lessor that the Aircraft shall
have become obsolete or shall be surplus to the Lessee's equipment requirements.
Subject to the Lessor's preemptive election under Section 14(c), during the
period following the giving of such notice of termination until the Termination
Date, the Lessee, as exclusive agent for the Lessor, shall endeavor to sell the
Aircraft "as is", without any warranty by the Lessor or the Lessee except as to
the Lessor's title, on behalf of the Lessor. The Lessee, in acting as agent for
the Lessor, taking account of the Lessor's right to make a preemptive election
under Section 14(c), shall have no liability to the Lessor for failure to obtain
the best price, shall act in its sole discretion, and shall be under no duty to
solicit bids publicly or in any particular market, and the Lessor acknowledges
that the Lessee's sole interest in acting as such agent is to sell the Aircraft
at a price that reduces or eliminates the Lessee's obligation hereunder to pay
the difference between the sales price and the Termination Value as of such
Termination Date. So long as the Lessor has not exercised its preemptive
election under Section 14(c), the Lessee may, by notice to the Lessor and the
Indenture Trustee, withdraw its notice of termination, and thereupon this Lease
shall continue in full force and effect. Withdrawal of notice of termination
shall not exhaust the Lessee's right to give a further notice of termination as
provided herein. Unless the Lessee shall withdraw its notice of termination as
stated above or the Lessor shall have made a preemptive election to take
possession of the Aircraft in accordance with Section 14(c), on the Termination
Date, or such other date of sale as shall be consented to in writing by the
Lessor and the Lessee, which date shall thereafter be deemed the Termination
Date, the Lessee shall, upon payment in full of the amounts described in Section
14(b), deliver the Airframe and Engines or engines installed thereon to the
party which shall have prior to such date agreed to purchase the same, in the
same manner as if delivery were being made to the Lessor pursuant to Section 12,
and shall duly transfer to such party title to any engines which are not Engines
delivered with the Airframe in accordance with the terms of Section 12. The
Lessor shall, without recourse or warranty (except a warranty as to the absence
of Lessor's Liens), simultaneously therewith sell and convey title to the
Airframe and the Engines or
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engines conveyed to the Lessor as provided in Section 12 for cash to such party
and exercise such rights as it has to cause the Aircraft to be released from the
Lien of the Indenture. Upon the sale of the Airframe and the Engines or engines
conveyed to the Lessor as provided in Section 12 pursuant to this Section 14 and
receipt by the Lessor of all amounts referred to in Section 14(b), the Lessor
will transfer to the Lessee, without recourse or warranty (except a warranty as
to the absence of Lessor's Liens), all right, title and interest of the Lessor
in and to any Engines constituting part of the Aircraft but which were not
delivered to the purchaser with the Airframe.
(b) Payments Due Upon Sale of Aircraft.
----------------------------------
The total selling price realized at any sale of the Airframe and
Engines or engines installed thereon in accordance with this Section 14 shall be
retained by the Lessor and, in addition, on the Termination Date, the Lessee
shall pay to the Lessor or, in the case of Supplemental Rent, to the Persons
entitled thereto, in immediately available funds, an amount equal to the sum of
(A) the excess, if any, of (x) the Termination Value as of the Termination Date,
over (y) the net proceeds of the sale of the Aircraft, plus (B) all unpaid
Supplemental Rent due on or before the Termination Date, plus (C) the arrears
portion, if any, of Basic Rent payable on such Termination Date, or if such
Termination Date is not a Basic Rent Payment Date, a pro-rata portion (pro-rated
daily) of the arrears portion, if any, of Basic Rent payable on the next
succeeding Basic Rent Payment Date, together with all unpaid Basic Rent, if any,
payable before the Termination Date.
(c) Preemptive Election by Lessor.
-----------------------------
Notwithstanding the foregoing provisions of this Section 14, the
Lessor may, within 15 days after receipt of the Lessee's notice of termination,
notify the Lessee of its preemptive election to take possession of the Aircraft,
which notice shall be accompanied by an irrevocable undertaking by the Lessor to
pay to the Indenture Trustee the amount required to pay in full (after giving
effect to any installment of Basic Rent due and payable on such date) the
aggregate unpaid principal amount of the outstanding Equipment Notes, together
with all accrued interest thereon and Make Whole Premium, if any (without
releasing Lessee from its obligations under clause (C) of Section 14(b) in
respect of the payment of such amount). Upon payment by the Lessor of such
amount to the Indenture Trustee, and payment of any Basic Rent due on such date,
the Lessee shall have no obligation to pay Termination Value. On the
Termination Date, if the Lessor shall have paid such amount to the Indenture
Trustee, the Lessee shall deliver the Airframe and Engines or engines installed
thereon to the Lessor in accordance with Section 12 and shall pay all unpaid
Basic Rent, if any, payable before the Termination Date, together with all
accrued Basic Rent (on a per diem basis), if any, which would otherwise have
been paid in arrears on the next following Basic Rent Payment Date, all unpaid
Supplemental Rent due on or before or after the Termination Date, and the Lessor
shall transfer to the Lessee title to any Engines constituting part of the
Airframes but which were not then installed on the Aircraft as provided in
Section 12(b). If the Lessor, having given notice or a preemptive election,
shall fail to perform any of its obligations pursuant to this Section 14(c) and
as a result thereof this Lease shall not be terminated on a proposed Termination
Date, the
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Lessor shall thereafter no longer be entitled to exercise its preemptive
election to retain the Aircraft upon any subsequent termination pursuant to this
Section 14 and the Lessee may at its option at any time thereafter submit a new
termination notice.
(d) Termination of Lease.
--------------------
Upon delivery by the Lessee of the Airframe and Engines or engines
installed thereon and payment by the Lessee of all amounts payable by the Lessee
under either Section 14(b) or 14(c), as the case may be, the obligations of the
Lessee to pay Rent (except for Supplemental Rent obligations surviving pursuant
to the second sentence of Section 3(c) and Articles 6 and 7 of the Participation
Agreement or the Tax Indemnity Agreement or which have otherwise accrued but not
paid as of the Termination Date) shall cease and the Term shall end.
(e) Effect of No Sale or Preemptive Delivery to Lessor.
--------------------------------------------------
If on the Termination Date no sale of the Aircraft shall have
occurred and the Lessee has not delivered the Aircraft to the Lessor pursuant to
Section 14(c), the Lessee's notice given pursuant to Section 14(a) shall be
deemed to be withdrawn as of such date and this Lease shall continue in full
force and effect, without prejudice, however, to any claims the Lessee may have
against any Person under the Participation Agreement or otherwise if a failure
to deliver the Aircraft to the Lessor pursuant to Section 14(c) shall have been
due to a failure of the Lessor to make the payment by the Lessor provided for in
such Section.
Section 15. Investment of Security Funds.
----------------------------
Any monies paid to or retained by the Lessor which are required to
be paid to the Lessee or applied for the benefit of the Lessee (including,
without limitation, amounts payable to the Lessee under Sections 8 and 9), but
which the Lessor is entitled to hold under the terms hereof pending the
occurrence of some event or the performance of some act (including, without
limitation, the remedying of an Event of Default), shall, until paid to the
Lessee or applied as provided herein, be invested by the Lessor (or, if the
Indenture shall not have been discharged, the Indenture Trustee) from time to
time at the direction, risk and expense of the Lessee in Permitted Investments,
subject, in the case of investments by the Indenture Trustee to the terms of
Section 5.08 of the Indenture. There shall be promptly remitted to the Lessee
any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Specified Default shall have occurred
and be continuing, in which case such gains shall be held subject to the
preceding sentence. The Lessee will promptly pay to the Indenture Trustee or the
Lessor, as the case may be, on demand, the amount of any loss realized as the
result of any such investment (together with any fees, commissions and other
expenses, if any, incurred in connection with such investment).
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Section 16. Events of Default.
-----------------
The following events shall constitute Events of Default and each
such Event of Default shall be deemed to exist and continue so long as, but only
so long as, it shall not have been remedied:
(a) The Lessee shall fail to make any payment of (i) Basic Rent,
Termination Value or a payment required by clause (iii) of the second
sentence of Section 3(c) when due and such failure shall continue for a
period of 10 days or (ii) Supplemental Rent (other than Termination Value
or the payment required by clause (iii) of the second sentence of Section
3(c)) within 30 days after receipt by the Lessee of a written demand
therefor from the Lessor or the Indenture Trustee, provided, that in the
--------
case of Supplemental Rent which constitutes an Excepted Payment, such
demand shall only be effective for purposes of this paragraph (a) if sent
by the Owner Participant or the Lessor and such failure shall not become an
Event of Default until the Owner Participant shall have notified the
Indenture Trustee that it has elected to treat such failure as an Event of
Default;
(b) The Lessee shall fail to procure and maintain property or
liability insurance pursuant to Section 9 or such insurance shall be
cancelled or lapse; provided that such lapse or cancellation shall not
--------
constitute an Event of Default until the earlier of 30 days after receipt
by the Lessor or the Indenture Trustee of notice of such lapse or
cancellation or the date that the lapse or cancellation is effective as to
the Lessor, the Owner Participant or the Indenture Trustee;
(c) The Lessee shall operate the Aircraft after having received
notice that the public liability insurance required by Section 9(a) has
lapsed or has been cancelled;
(d) The Lessee shall fail to perform or observe any other covenant
or condition to be performed or observed by it hereunder or under any other
Operative Agreement (other than the Tax Indemnity Agreement), and such
failure shall continue unremedied for a period of 30 days after delivery of
notice of such failure from the Lessor or the Indenture Trustee to the
Lessee, unless such failure is curable and the Lessee shall, after the
delivery of such notice, be diligently proceeding to correct such failure
and shall in fact correct such failure 180 days after delivery of such
notice;
(e) Any representation or warranty made by the Lessee herein or in
any Operative Agreement (other than the Tax Indemnity Agreement) shall
prove to have been incorrect in any material respect when made and shall
remain material at the time in question and shall not be remedied within 30
days after notice thereof has been given to the Lessee by the Lessor or the
Indenture Trustee;
-35-
(f) The Lessee shall consent to the appointment of or taking
possession by a receiver, assignee, custodian, sequestrator, trustee or
liquidator (or other similar official) of itself or of a substantial part
of its property, or the Lessee shall admit in writing its inability to pay
its debts generally as they come due (as provided in 11 U.S.C. (S)
303(h)(1)), or shall make a general assignment for the benefit of its
creditors, or the Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or answer seeking liquidation, reorganization or other
relief with respect to itself or its debts under the Federal bankruptcy
laws, as now or hereafter constituted or any other applicable Federal or
State bankruptcy, insolvency or other similar law or shall consent to the
entry of an order for relief in an involuntary case under any such law or
the Lessee shall file an answer admitting the material allegations of a
petition filed against the Lessee in any such proceeding, or otherwise seek
relief under the provisions of any now existing or future Federal or State
bankruptcy, insolvency or other similar law providing for the
reorganization or winding-up of corporations, or providing for an
agreement, composition, extension or adjustment with its creditors;
(g) An order, judgment or decree shall be entered in any proceeding
by any court of competent jurisdiction appointing, without the consent of
the Lessee, a receiver, trustee or liquidator of the Lessee or of any
substantial part of its property, or any substantial part of the property
of the Lessee shall be sequestered, and any such order, judgment of decree
of appointment or sequestration shall remain in force undismissed, unstayed
or unvacated for a period of 90 days after the date of entry thereof; or
(h) A petition against the Lessee in a proceeding under any
applicable bankruptcy laws or other insolvency or similar laws as now or
hereafter in effect shall be filed and shall not be withdrawn or dismissed
within 90 days thereafter, or, in the case the approval of such petition by
a court of competent jurisdiction is required, the petition as filed or
amended shall be approved by such a court as properly filed and such
approval shall not be withdrawn or the proceeding dismissed within 90 days
thereafter, or a decree or order for relief in respect of the Lessee shall
be entered by a court of competent jurisdiction in an involuntary case
under such bankruptcy, insolvency or similar laws, as now or hereafter
constituted and such decree or order shall remain unstayed in effect for a
period of 90 days, or if, under the provisions of any law providing for
reorganization or winding-up of corporations which may apply to the Lessee,
any court of competent jurisdiction shall assume jurisdiction, custody or
control of the Lessee or of any substantial part of its property and such
jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 90 days;
provided that, notwithstanding anything to the contrary contained in this Lease,
--------
any failure of the Lessee to perform or observe any covenant, condition, or
agreement herein shall not constitute an Event of Default under clause (d) above
if such failure is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as the Lessee is continuing to comply with
-------------
the applicable terms of Section 8.
-36-
Section 17. Remedies.
--------
Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, the Lessor may, at its
option, declare this Lease to be in default by a notice to the Lessee (provided
--------
that this Lease shall be deemed to have been declared in default without the
necessity of such notice upon the occurrence of any Event of Default described
in paragraph (f), (g) or (h) of Section 16); and at any time thereafter so long
as the Lessee shall not have remedied all outstanding Events of Default, the
Lessor may do, and the Lessee shall comply with, one or more of the following
with respect to the Airframe and all or any part of the Engines, as the Lessor
in its sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, Applicable Law then in effect;
provided that during any period the Aircraft is subject to the Civil Reserve Air
--------
Fleet Program in accordance with the provisions of Section 5(b) and in the
possession of the United States government or an instrumentality or agency
thereof, the Lessor shall not, on account of any Event of Default, be entitled
to do any of the following in such manner as to limit the Lessee's control under
this Lease (or any sublessee's control under any sublease permitted by the terms
of this Lease) of any Airframe or any Engines, unless at least 60 days' (or such
lesser period, if any, as may then be applicable under the Military Airlift
Command Program of the United States Government) prior notice of default
hereunder shall have been given by the Lessor by registered or certified mail to
the Lessee (or any sublessee) with a copy addressed to the Contracting Office
Representative for the Military Airlift Command of the United States Air Force
under any contract with Lessee (or any sublessee) relating to the Aircraft:
(a) Cause the Lessee, upon the written demand of the Lessor and at
the Lessee's expense to, and the Lessee shall, promptly return the Airframe
and all or such part of the Engines as the Lessor may demand to the Lessor
in the manner and condition required by, and otherwise in accordance with
all of the provisions of, Section 12 as if the Airframe and such Engines
were being returned at the end of the Term; or the Lessor, at its option,
may cause public officials acting pursuant to judicial order obtained in
summary proceedings or otherwise to enter upon the premises where the
Airframe or any or all Engines are located or reasonably believed to be
located and take immediate possession of and remove such Airframe or
Engines, and the Lessee shall comply therewith, all without liability to
the Lessor for or by reason of such entry or taking possession or removal,
whether for the restoration of damage to property caused by such taking
possession or removal; or otherwise; and the Lessee shall promptly execute
and deliver to the Lessor such instruments of title or other documents as
the Lessor may deem necessary or advisable to enable the Lessor or its
agent to obtain possession of the Airframe or the Engines, provided that if
--------
the Lessee shall for any reason fail to execute and deliver such
instruments and documents after such request, the Lessor shall be entitled,
in a proceeding to which the Lessee shall be a necessary party, to a
judgment for specific performance, conferring the right to immediate
possession upon the Lessor and requiring the Lessee to execute and deliver
such instruments and documents to the Lessor;
-37-
(b) Sell or otherwise dispose of all or any part of the Aircraft, at
public or private sale, whether or not the Lessor shall at the time have
possession thereof, as the Lessor may determine, or hold, use, operate,
lease to others or keep idle all or any part of the Aircraft, Airframe or
any Engine as the Lessor, in its sole discretion, may determine, in any
such case free and clear of any rights or claims of whatsoever kind of the
Lessee except as hereinafter set forth in this Section 17 and without any
duty to account to the Lessee with respect to such action or inaction or
for any proceeds with respect thereto except to the extent required by
paragraph (d) below in the event the Lessor elects to exercise its rights
under said paragraph in lieu of its rights under paragraph (c) below;
(c) Whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a) or
paragraph (b) above with respect to the Aircraft, the Lessor, by written
notice to the Lessee specifying a payment date (which shall be a
Termination Date) not earlier than 10 days from the date of such notice,
may require the Lessee to pay to the Lessor, and the Lessee shall pay to
the Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty, any installment of
Basic Rent due on or before such payment date plus an amount equal to the
excess, if any, of (i) Termination Value for the Aircraft, determined as of
such payment date over (ii) the Fair Market Sales Value for the Aircraft,
computed as of such payment date, together with interest, to the extent
permitted by Applicable Law, at the Past Due Rate on the amount of such
excess, if any, from such payment date, to the date of actual payment of
such amount; provided that, in any such instance in which the Lessor is
-------- ----
unable to repossess the Aircraft due to circumstances not relating to or
caused by any Lessee Person and the Fair Market Sales Value thereof is
deemed to be zero, upon receipt of any such payment under this clause (c)
and all other amounts due hereunder, the Lessor shall convey, as-is, where-
is, without recourse or warranty, other than a warranty against Lessor's
Liens, to the Lessee all right, title and interest of the Lessor in and to
the Airframe and Engines, and execute and deliver to the Lessee such bills
of sale and other documents and instruments as the Lessee may reasonably
request to evidence such conveyance;
(d) In the event the Lessor, pursuant to paragraph (b) above, shall
have sold the Aircraft upon reasonable notice to the Lessee, the Lessor in
lieu of exercising its rights under paragraph (c) above with respect to the
Aircraft, may, if it shall so elect, require the Lessee to pay the Lessor,
and the Lessee shall pay to the Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of
the Basic Rent due after the date on which such sale occurs but in addition
to any installment of Basic Rent due on or up to the date on which such
sale occurs), the amount of any deficiency of the net proceeds of such sale
below the Termination Value of the Aircraft, determined as of the
Termination Date immediately preceding the date of such sale, together with
interest, to the extent permitted by Applicable Law, at the Past Due Rate
on the amount of such deficiency from such Termination Date to the date of
actual payment; and
-38-
(e) (i) Rescind, cancel or terminate this Lease or (ii) exercise
any other right or remedy which may be available under Applicable Law or
proceed by appropriate court action to enforce the terms hereof or to
recover damages (but in all events consistent with the liquidation of
damages agreement set forth herein) for the breach hereof.
In addition, the Lessee shall be liable for any unpaid Supplemental Rent due
hereunder before or after any termination hereof (which obligations shall
survive following such termination), including all reasonable costs and expenses
including attorney's fees and disbursements incurred by the Lessor, the Owner
Participant or the Indenture Trustee by reason of the occurrence of any Event of
Default or the exercise of the Lessor's remedies with respect thereto including
without limitation all costs and expenses incurred in connection with the return
of the Airframe or any Engine in accordance with, and in the condition required
by, the terms of Section 12 or any appraisal of the Aircraft required for
purposes of this Section 17. At any sale of the Aircraft, the Airframe or any
Engine, or portion thereof pursuant to this Section 17, the Lessor or the Owner
Participant may bid for and purchase such property. Except as otherwise
expressly provided above, no remedy referred to in this Section 17 is intended
to be exclusive (but the liquidation of damages provided in this Section 17
shall, to the extent required by Applicable Law, be the exclusive liquidated
damages remedy), but each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to the Lessor for the Event of
Default at law or in equity; and the exercise or beginning of exercise by the
Lessor of any one or more of such remedies shall not preclude the simultaneous
or later exercise by the Lessor of any or all such other remedies. No express or
implied waiver by the Lessor of any Event of Default hereunder shall in any way
be, or be construed to be, a waiver of any future or subsequent Event of
Default.
Section 18. Lessor's Right to Perform for the Lessee.
----------------------------------------
If the Lessee fails to make any payment of Rent required to be made
by it hereunder or fails to perform or comply with any of its agreements
contained herein the Lessor may, upon prior notice to the Lessee, itself make
such payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Past Due
Rate, shall be deemed Supplemental Rent, payable by the Lessee upon demand;
provided, that nothing in this Section 18 shall be deemed to permit the Lessor
--------
to exercise any control over the operation or maintenance of the Aircraft or any
part thereof while it is being utilized in the air transportation services of
the Lessee or any Permitted Sublessee without the consent of the Lessee.
Section 19. Bankruptcy.
----------
It is the intention of the parties that the Lessor (and the
Indenture Trustee as assignee of the Lessor under the Indenture) shall be
entitled to the benefits of 11 U.S.C. (S) 1110 with respect to the right to
repossess the Airframe, Engines and Parts as provided herein, and in any
-39-
circumstances where more than one construction of the terms and conditions of
this Lease is possible, a construction which would preserve such benefits shall
control over any construction which would not preserve such benefits or would
render them doubtful. To the extent consistent with the provisions of 11 U.S.C.
(S) 1110 or any analogous section of the Federal bankruptcy laws, as amended
from time to time, it is hereby expressly agreed and provided that,
notwithstanding any other provisions of the Federal bankruptcy laws, as amended
from time to time, any right of the Lessor to take possession of the Aircraft in
compliance with the provisions of this Lease shall not be affected by the
provisions of 11 U.S.C. (S) 362 or 363, as amended from time to time, or any
analogous provisions of any superseding statute or any power of the bankruptcy
court to enjoin such taking of possession.
Section 20. Assignment: Benefit and Binding Effect.
--------------------------------------
(a) Assignment by the Lessee.
------------------------
The Lessee may not, without the prior written consent of the
Lessor, assign any of its rights hereunder except as otherwise expressly
provided herein.
(b) Assignment by the Lessor.
------------------------
The Lessor's interest in this Lease has been assigned as security
to the Indenture Trustee pursuant to the Indenture for the benefit of the
holders from time to time of the Equipment Notes, and the Lessee acknowledges
due notice of, and consents to, such security assignment. The Lessor may not,
without the prior consent of the Lessee, otherwise assign any of its rights
under or interest in this Lease except to a successor Owner Trustee or
additional trustee referred to in Section 9.01 of the Participation Agreement
and Section 9.01 of the Trust Agreement or as otherwise expressly provided
herein.
(c) Benefit and Binding Effect.
--------------------------
The terms and provisions of this Lease shall be binding upon and,
subject to the limitations on assignment of rights hereunder, inure to the
benefit of the Lessor and the Lessee and their respective successors and
permitted assigns. Nothing herein shall be construed as creating rights in any
other Person. In no event shall any of the representations, warranties or
agreements of the Lessee herein or in the Participation Agreement be assignable
to or inure to the benefit of or be enforceable by or on behalf of any Person
which, whether as purchaser or lessee or otherwise, conducts flight or ground
operations with the Aircraft or any part thereof at any time following the Term.
(d) Sublessee's Performance and Rights.
----------------------------------
Any obligation imposed on the Lessee in this Lease shall require
only that the Lessee perform or cause to be performed such obligation, even if
stated herein as a direct obligation, and
-40-
the performance of any such obligation by any sublessee or transferee of the
Airframe or any Engine or Part permitted by the terms hereof under a sublease or
transfer agreement then in effect shall constitute performance by the Lessee and
to the extent of such performance discharge such obligation by the Lessee.
Except as otherwise expressly provided herein, any right granted to the Lessee
in this Lease shall grant the Lessee the right to exercise such right or permit
such right to be exercised by any such sublessee or transferee. The inclusion of
specific references to obligations or rights of any such sublessee or transferee
in certain provisions of this Lease shall not in any way prevent or diminish the
application of the provisions of the two sentences immediately preceding with
respect to obligations or rights in respect of which specific reference to any
such sublessee or transferee has not been made in this Lease.
Section 21. Owner Trustee's Limitation on Liability.
---------------------------------------
Trust Company is entering into this Lease solely as Owner Trustee
under the Trust Agreement and not in its individual capacity and neither Trust
Company nor any entity acting as successor Owner Trustee or additional Owner
Trustee under the Trust Agreement shall be personally liable for, or for any
loss in respect of, any of the statements, representations, warranties,
agreements or obligations stated to be those of the Lessor hereunder, as to
which all interested parties shall look solely to the Trust Estate, except to
the extent expressly provided otherwise in any other Operative Agreement,
provided, however, that nothing in this Section 21 shall be construed to limit
-------- -------
in scope or substance the liability of Trust Company or any entity acting as
successor Owner Trustee or additional Owner Trustee under the Trust Agreement in
its individual capacity for the consequences of its own willful misconduct or
gross negligence or (in receiving, handling or remitting funds) its simple
negligence, or the inaccuracy or breach of its representations, warranties or
covenants made in such capacity in any other Operative Agreement.
Section 22. Certain Agreements of Lessee.
----------------------------
The Lessee will 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 this Lease, each Lease Supplement, the Trust Agreement, the
Indenture, each Indenture Supplement and any financing statements or other
instruments as are necessary or requested by the Owner Participant or the
Indenture Trustee and appropriate, to maintain, so long as the Indenture or this
Lease is in effect, the perfection of the security interest created by the
Indenture and any security interest that may be claimed to have been created by
this Lease and the ownership interest of the Owner Trustee in the Aircraft, and
will furnish to the Owner Trustee, the Indenture Trustee and the Owner
Participant 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 them to take such action.
-41-
Section 23. Miscellaneous.
-------------
(a) 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, or by overnight delivery service or delivered by hand. Any notice
shall be directed to the Lessee, the Lessor, the Indenture Trustee or any other
party to the Participation Agreement to the respective addresses set forth in
Section 12.01 to the Participation Agreement or to such other address or
telecopy number as any such party may designate pursuant to Section 12.01 of the
Participation Agreement.
(b) Counterparts.
------------
This Lease may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall, subject to the
next sentence and the legends appearing on the cover and signature page hereof,
be an original, but all such counterparts shall together constitute but one and
the same instrument. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL
PAPER (AS THE TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE INDENTURE TRUSTEE ON
THE SIGNATURE PAGE THEREOF.
(c) Amendments.
----------
Neither this Lease nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified orally, but only by an instrument in
writing signed by the Lessor and the Lessee provided, however, that unless and
-------- -------
until the Indenture has been discharged, except as otherwise provided in the
Indenture, no termination, amendment, supplement, waiver or modification of, or
waiver by or consent of the Lessor in respect of, any of the provisions of this
Lease shall be effective unless the Indenture Trustee shall have joined in such
amendment, modification, waiver or consent or shall have given its prior consent
thereto.
-42-
(d) Agreement to Lease.
------------------
It is the intent of the parties to this Lease that for all purposes
(including, without limitation, U.S. Federal income tax purposes) this Lease
will be a true lease, and that this Lease conveys to the Lessee no right, title
or interest in the Aircraft except as a lessee.
(e) Governing Law.
-------------
(i) THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(ii) 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 LEASE.
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET
FORTH PURSUANT TO SECTION 12.01 OF THE PARTICIPATION AGREEMENT. EACH PARTY
HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN
ACCORDANCE WITH THIS SECTION 23(e)(iii), 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.
(iv) 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 LEASE OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS.
-43-
(v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING
TO THIS LEASE.
(f) Severability.
------------
Any provision of this Lease 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.
(g) Survival.
--------
The representations, warranties, indemnities and covenants set forth
herein shall survive the delivery of the Aircraft, the transfer of any interest
of Owner Participant in this Lease, the other Operative Agreements, the Trust
Estate and the Trust Agreement and the transfer of any interest by any Holder of
its Equipment Notes.
(h) Article 2A.
----------
The Lessor and the Lessee agree that this Lease is a "finance lease"
for purposes of Article 2A of, and as defined in Section 2-A-103 of the Uniform
Commercial Code. The Lessee agrees that no right or remedy granted solely by
reason of Article 2A of the Uniform Commercial Code shall be available to the
Lessee as against the Lessor unless expressly provided in this Lease.
* * *
-44-
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease to be duly executed by their authorized officers as of the day and year
first above written.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual capacity,
except as otherwise expressly provided herein
but solely as Owner Trustee
By: _____________________________________
Name:
Title:
MIDWAY AIRLINES CORPORATION
By: _____________________________________
Name:
Title:
-45-
Exhibit A
to Lease
LEASE SUPPLEMENT NO. [N3 ML]
-----------------------------------
THIS LEASE SUPPLEMENT No. ____ [N3__ML] dated _______________, 200__,
between FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee, except as otherwise provided herein, the
Lessor, and MIDWAY AIRLINES CORPORATION, a Delaware corporation, the Lessee;
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Lessor and the Lessee have heretofore entered into that
certain Lease Agreement [N3__ML], dated as of ______________ (the "Lease", the
terms defined therein being herein used with the same meaning), which Lease
provides, among other things, for the execution and delivery of Lease
Supplements in substantially the form hereof for the purpose of leasing a
specific Aircraft under the Lease when delivered by the Lessor to the Lessee in
accordance with the terms thereof;
WHEREAS, the Lease, a counterpart of which is attached hereto and made
a part hereof, relates to the Aircraft and Engines described in Schedule I
hereto and this Lease Supplement, together with such attachment, is being filed
for recordation on the date hereof with the FAA as one document;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, and pursuant to Section 2 of the Lease, the Lessor and
the Lessee hereby agree as follows:
1. The Lessor hereby delivers and leases to the Lessee, and the
Lessee hereby accepts and leases from the Lessor, under the Lease as herein
supplemented, the Aircraft, described in Schedule I hereto.
2. The Delivery Date is the date of this Lease Supplement set forth
in the opening paragraph hereof.
3. The Basic Term shall commence on the Delivery Date and continue
through ___________ (the "Expiration Date"), unless terminated earlier as
provided in the Lease.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Documents.
5. All of the terms and provisions of the Lease are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.
6. This Lease Supplement may be executed by the parties hereto
in separate counterparts and all such counterparts shall together constitute but
one and the same instrument. To the extent, if any, that this Lease Supplement
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease Supplement or the Lease may be created through the transfer or possession
of any counterpart other than the original counterpart of each thereof
containing the receipt therefor executed by the Indenture Trustee on the
signature page of each thereof.
7. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease Supplement to be duly executed by their authorized officers as of the day
and year first above written.
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity, except as otherwise
expressly provided herein but solely as Owner
Trustee
By: ________________________________________
Name:
Title:
MIDWAY AIRLINES CORPORATION
By: ________________________________________
Name:
Title:
THE LESSOR HAS ASSIGNED THIS LEASE SUPPLEMENT TO THE INDENTURE TRUSTEE
AS SECURITY. TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES
CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN
EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE
SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART
HEREOF OTHER THAN THE ORIGINAL COUNTERPART CONTAINING THE RECEIPT THEREFOR
EXECUTED BY THE INDENTURE TRUSTEE IMMEDIATELY FOLLOWING THIS LEGEND.
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ___ day of ___________, 200__.
ALLFIRST BANK, as Indenture Trustee
By:______________________________
Name:
Title:
SCHEDULE I
TO EXHIBIT A
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
Manufacturer's FAA Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------ -------------
The Boeing Company 737-700 N3__ML _____
ENGINES
Manufacturer's Manufacturer's
Manufacturer Model Serial Numbers
------------ ----- --------------
CFM International, Inc. CFM-56-7B20 __________
__________
Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.
Exhibit B
Certain Economic Information
"EBO Amount" shall mean $___________________.
----------
"EBO Date" shall mean _______________________________ ________.
--------
"Lessor's Cost" shall mean $________________.
-------------
"Minimum Liability Amount" shall mean $200,000,000.
------------------------
"Seller" shall mean ____________________.
------
"TV Rate" shall mean a rate equal to the rate per annum announced from time to
-------
time by Citibank, N.A. as its prime rate plus two percent (2%) per annum.
Exhibit C
Basic Rent
----------
Basic Rent Payment Date Amount
----------------------- ------
Exhibit D
Termination Values
------------------
Termination Date Termination Value
---------------- -----------------
Exhibit E
Lists of Countries
------------------
Exhibit E-1 - Permitted for Re-Registration
-------------------------------------------
Australia Ireland
Austria Italy
Belgium Japan
Canada Luxembourg
Denmark Netherlands
Finland New Zealand
Fiance Norway
Germany Spain
Greece Sweden
Iceland Switzerland
United Kingdom
Exhibit E-2 - Permitted for Subleasing
--------------------------------------
Argentina Iceland
Australia Ireland
Austria Italy
Belgium Jamaica
Bermuda Japan
Brazil Liechtenstein
Canada Netherlands
Chile Norway
Denmark Portugal
Finland Singapore
France Spain
Germany Sweden
Switzerland Taiwan
United Kingdom
Exhibit F
Return Conditions
-----------------
The return conditions shall be as agreed to by the Lessee and the Owner
Participant on or prior to the Delivery Date.
[Exhibit A-3 to Note Purchase Agreement
Form of Leased Aircraft Indenture]
================================================================================
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML]
dated as of _________ ___, 200_
between
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly
provided herein, but solely
Owner Trustee
and
ALLFIRST BANK,
as Indenture Trustee
================================================================================
COVERING ONE BOEING MODEL 737-700 AIRCRAFT
BEARING U.S. REGISTRATION NO. N3__ML
AND MANUFACTURER'S SERIAL NUMBER _____
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS........................................................................... 7
Section 1.01. Definitions............................................................. 7
ARTICLE II ISSUE, EXECUTION, FORM AND
REGISTRATION OF EQUIPMENT NOTES....................................................... 7
Section 2.01. Authentication and Delivery of Equipment Notes.......................... 7
Section 2.02. Execution of Equipment Notes............................................ 8
Section 2.03. Authentication.......................................................... 8
Section 2.04. Form and Terms of Equipment Notes; Payments on
Equipment Notes......................................................... 8
Section 2.05. Payments from Indenture Estate Only..................................... 10
Section 2.06. Registration, Transfer and Exchange..................................... 11
Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Equipment
Notes................................................................... 12
Section 2.08. Cancellation of Equipment Notes; Destruction Thereof.................... 13
Section 2.09. Termination of Interest in Indenture Estate............................. 13
Section 2.10. Equipment Notes in Respect of Replacement Aircraft...................... 14
Section 2.11. Assumption of Obligations Under Equipment Notes and
Other Operative Agreements.............................................. 14
Section 2.12. Subordination........................................................... 14
ARTICLE III COVENANTS............................................................................. 15
Section 3.01. Payment of Principal, MakeWhole Premium and Interest.................... 15
Section 3.02. Offices for Payments, etc............................................... 15
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture
Trustee................................................................. 15
Section 3.04. Paying Agents........................................................... 15
Section 3.05. Covenants of the Owner Trustee.......................................... 15
Section 3.06. [Reserved].............................................................. 16
Section 3.07. Disposal of Indenture Estate............................................ 16
Section 3.08. No Representations or Warranties as to Aircraft or
Documents............................................................... 16
Section 3.09. Further Assurances; Financing Statements................................ 17
ARTICLE IV HOLDER LISTS.......................................................................... 17
Section 4.01. Holder Lists: Ownership of Equipment Notes.............................. 17
ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE INDENTURE ESTATE...................................................... 18
-i-
Section 5.01. Basic Rent Distribution................................................. 18
Section 5.02. Event of Loss and Replacement; Prepayment............................... 19
Section 5.03. Payment After Indenture Event of Default, etc........................... 20
Section 5.04. Certain Payments........................................................ 22
Section 5.05. Other Payments.......................................................... 22
Section 5.06. Payments to Owner Trustee............................................... 23
Section 5.07. Application of Payments................................................. 23
Section 5.08. Investment of Amounts Held by Indenture Trustee......................... 23
Section 5.09. Withholding Taxes....................................................... 24
ARTICLE VI PREPAYMENT OF EQUIPMENT NOTES......................................................... 24
Section 6.01. No Prepayment Except as Specified....................................... 24
Section 6.02. Prepayment of Equipment Notes........................................... 25
Section 6.03. Notice of Prepayment to Holders......................................... 26
Section 6.04. Deposit of Prepayment Price............................................. 27
Section 6.05. Equipment Notes Payable on Prepayment Date.............................. 27
ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES
OF INDENTURE TRUSTEE AND HOLDERS............................................... 27
Section 7.01. Indenture Event of Default.............................................. 27
Section 7.02. Remedies................................................................ 29
Section 7.03. Return of Aircraft, etc................................................. 31
Section 7.04. Indenture Trustee May Prove Debt........................................ 34
Section 7.05. Remedies Cumulative..................................................... 36
Section 7.06. Suits for Enforcement................................................... 36
Section 7.07. Discontinuance of Proceedings........................................... 36
Section 7.08. Unconditional Right of Holders to Payments on Equipment
Notes................................................................... 36
Section 7.09. Control by Holders...................................................... 37
Section 7.10. Waiver of Past Indenture Default........................................ 37
Section 7.11. Notice of Indenture Default............................................. 37
ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE
AND THE OWNER PARTICIPANT...................................................... 38
Section 8.01. Certain Rights of Owner Trustee and Owner Participant................... 38
Section 8.02. Owner Participant's Right to Prepay or Purchase the
Equipment Notes......................................................... 41
Section 8.03. Certain Rights of Owner Participant..................................... 42
ARTICLE IX CONCERNING THE INDENTURE TRUSTEE...................................................... 43
Section 9.01. Acceptance of Trusts.................................................... 43
Section 9.02. Duties Before, and During, Existence of Indenture Event
of Default.............................................................. 43
Section 9.03. Certain Rights of the Indenture Trustee................................. 45
-ii-
Section 9.04. Indenture Trustee Not Responsible for Recitals, Equipment
Notes, or Proceeds...................................................... 46
Section 9.05. Indenture Trustee and Agents May Hold Equipment
Notes; Collections, etc................................................. 46
Section 9.06. Moneys Held by Indenture Trustee........................................ 46
Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate,
etc..................................................................... 47
Section 9.08. Replacement Airframes and Replacement Engines........................... 47
Section 9.09. Indenture Supplement for Replacements................................... 50
Section 9.10. Effect of Replacement................................................... 50
Section 9.11. Compensation............................................................ 50
ARTICLE X CONCERNING THE HOLDERS................................................................. 51
Section 10.01. Evidence of Action Taken by Holders..................................... 51
Section 10.02. Proof of Execution of Instruments and of Holding of
Equipment Notes......................................................... 51
Section 10.03. Holders to Be Treated as Owners......................................... 51
Section 10.04. Equipment Notes Owned by Owner Trustee or Lessee
Deemed Not Outstanding.................................................. 52
Section 10.05. ERISA................................................................... 52
ARTICLE XI INDEMNIFICATION OF INDENTURE
TRUSTEE BY OWNER TRUSTEE............................................................... 53
ARTICLE XII SUCCESSOR TRUSTEES.............................................................. 54
Section 12.01. Notice of Successor Owner Trustee....................................... 54
Section 12.02. Resignation and Removal of Indenture Trustee:
Appointment of Successor................................................ 54
Section 12.03. Persons Eligible for Appointment as Indenture
Trustee................................................................. 55
Section 12.04. Acceptance of Appointment by Successor Trustee.......................... 55
Section 12.05. Merger, Consolidation or Succession to Business of
Indenture Trustee....................................................... 56
Section 12.06. Appointment of Separate Trustees........................................ 56
ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS................................................... 58
Section 13.01. Supplemental Indentures Without Consent of Holders...................... 58
Section 13.02. Supplemental Indentures With Consent of Holders......................... 60
Section 13.03. Effect of Supplemental Indenture........................................ 61
Section 13.04. Documents to Be Given to Indenture Trustee.............................. 61
Section 13.05. Notation on Equipment Notes in Respect of
Supplemental Indentures................................................. 61
Section 13.06. No Request Necessary for Lease Supplement or
-iii-
Indenture Supplement.................................................... 61
Section 13.07. Notices to Liquidity Providers.......................................... 62
ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS................................................................ 62
Section 14.01. Satisfaction and Discharge of Indenture: Termination
of Indenture............................................................ 62
Section 14.02. Application by Indenture Trustee of Funds Deposited
for Payment of Equipment Notes.......................................... 63
Section 14.03. Repayment of Moneys Held by Paying Agent................................ 63
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee
and Paying Agent........................................................ 63
ARTICLE XV MISCELLANEOUS................................................................... 63
Section 15.01. Capacity in Which Acting................................................ 63
Section 15.02. No Legal Title to Indenture Estate in Holders........................... 63
Section 15.03. Sale of Indenture Estate by Indenture Trustee is
Binding................................................................. 64
Section 15.04. Indenture Benefits Trustees, Participants, Lessee, and
Liquidity Providers Only................................................ 64
Section 15.05. No Action Contrary to Lessee's Rights Under the Lease................... 64
Section 15.06. Notices................................................................. 64
Section 15.07. Officer's Certificates and Opinions of Counsel.......................... 64
Section 15.08. Severability............................................................ 65
Section 15.09. No Oral Modifications or Continuing Waivers............................. 65
Section 15.10. Successors and Assigns.................................................. 65
Section 15.11. Headings................................................................ 66
Section 15.12. Normal Commercial Relations............................................. 66
Section 15.13. Governing Law; Counterparts............................................. 66
Section 15.14. Lessee's Right of Quiet Enjoyment. .................................... 66
Annex A Principal Amount of Equipment Notes
Annex B Amortization Schedule
Exhibit A Form of Indenture Supplement
Schedule I to Equipment Note Principal Amortization
-iv-
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML]
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML] dated as of
___________ (the "Indenture"), between FIRST UNION TRUST COMPANY, NATIONAL
---------
ASSOCIATION, a national banking association, not in its individual capacity,
except as otherwise specifically set forth herein (when acting in such
individual capacity, "Trust Company"), but solely as owner trustee (the "Owner
------------- -----
Trustee") under the Trust Agreement, as defined herein, and ALLFIRST BANK, a
-------
Maryland state-chartered commercial bank (when acting in its individual
capacity, "Allfirst"), as Indenture Trustee hereunder (the "Indenture Trustee").
-------- -----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article I hereof;
WHEREAS, the Owner Participant and Trust Company have, prior to the
execution and delivery of this Indenture, entered into the Trust Agreement,
whereby, among other things, Trust Company has declared a certain trust for the
use and benefit of the Owner Participant, subject, however, to the Lien of this
Indenture for the use and benefit of, and with the priority of payment to, the
holders of the Equipment Notes issued hereunder, and the Owner Trustee is
authorized and directed to execute and deliver this Indenture;
WHEREAS, the Owner Trustee desires by this Indenture, among other
things (i) to provide for the issuance by the Owner Trustee of Equipment Notes
as provided in the Participation Agreement, and (ii) to provide for the
assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee,
as part of the Indenture Estate hereunder of, among other things, certain of the
Owner Trustee's estate, right, title and interest in and to the Aircraft and the
Indenture Documents and certain payments and other amounts (other than Excepted
Payments) received hereunder or thereunder in accordance with the terms hereof,
as security for the Secured Obligations;
WHEREAS, all things have been done to make the Equipment Notes, when
executed by the Owner Trustee, and authenticated, issued and delivered
hereunder, the valid obligations of the Owner Trustee; and
WHEREAS, all things necessary to make this Indenture the valid,
binding and legal obligation of the Owner Trustee, enforceable in accordance
with its terms, have been done and performed and have happened.
NOW, THEREFORE, the parties agree as follows:
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the mutual promises contained
herein and to secure (i) the prompt payment of the principal of and Make-Whole
Premium, if any, and interest on, and all other amounts due with respect to, all
the Equipment Notes from time to time outstanding under this Indenture and all
other amounts due hereunder and (ii) the performance and observance by the Owner
Trustee and the Lessee of all the agreements, covenants and provisions in this
Indenture, the Equipment Notes, the Participation Agreement and in the Lease
contained for the benefit of the Holders, and the prompt payment of any and all
amounts from time to time owing under the Participation Agreement by the Owner
Trustee or the Lessee to the Holders and each of the Indenture Indemnitees
(provided that, with respect to amounts owed to the Liquidity Providers which
relate to amounts due under the Liquidity Facilities, the amounts secured hereby
shall only include such amounts to the extent due and owing pursuant to the
final paragraph of Section 2.04 hereof) (collectively the "Secured Obligations")
-------------------
and for the uses and purposes and subject to the terms and provisions of this
Indenture, and in consideration of the premises and of the covenants in this
Indenture and in the Equipment Notes and of the purchase of the Equipment Notes
by their Holders, and of the sum of $1 paid to the Owner Trustee by the
Indenture Trustee at or before the delivery of this Indenture, the receipt and
sufficiency of which are hereby acknowledged, the Owner Trustee has granted,
bargained, assigned, transferred, conveyed, mortgaged, pledged, granted a first
priority security interest in and confirmed, and does hereby grant, bargain,
assign, transfer, convey, mortgage, pledge and grant a first priority security
interest in and confirm to the Indenture Trustee, its successors and assigns, in
trust for the equal and ratable security and benefit of the Holders and each of
the Indenture Indemnitees, a first priority security interest in and first
mortgage Lien on all estate, right, title and interest of the Owner Trustee in,
to and under the following described property, rights and privileges other than
Excepted Payments, which collectively, excluding Excepted Payments but including
all property specifically subjected to the Lien of this Indenture by the terms
hereof, by any supplement to this Indenture (including the Indenture Supplement)
or any mortgage supplemental to this Indenture, are included within the
Indenture Estate, subject always to the rights of or granted to the Owner
Trustee or the Owner Participant hereunder and to the other terms and conditions
of this Indenture:
(1) The Airframe, as described in the Indenture Supplement, and any
airframe substituted in replacement thereof pursuant to the provisions of this
Indenture; the Engines, as the same are more particularly described in the
Indenture Supplement, whether or not such Engines shall be installed in or
attached to the Airframe or any other airframe, and any Replacement Engine
therefor; and all Parts in respect of the Airframe and the Engines and all
records, logs and other documents at any time maintained with respect to the
foregoing property;
(2) The Lease and all Rent thereunder, including, without limitation, all
amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder
and including all rights of the Owner Trustee to execute any election or option
or to give or receive any notice, consent, waiver or approval under or in
respect of the Lease or to accept any surrender of the Aircraft or any part
-2-
thereof, as well as any rights, powers or remedies on the part of the Owner
Trustee, whether arising under the Lease or by statute or at law or in equity or
otherwise arising out of any Event of Default;
(3) The Purchase Agreement (to the extent assigned by the Purchase
Agreement Assignment), the Purchase Agreement Assignment, the PAA Consent, the
Engine Warranty Assignment, the CFM Warranty, the Engine Manufacturer's Consent,
the FAA ▇▇▇▇ of Sale, the Warranty ▇▇▇▇ of Sale and the Participation Agreement
(to the extent of amounts payable to the Owner Trustee thereunder)
(collectively, and together with the Lease, the "Indenture Documents"),
including all rights of the Owner Trustee to execute any election or option or
to give or receive any notice, consent, waiver or approval under or in respect
of any of the foregoing documents and instruments;
(4) All the tolls, rents, issues, profits, products, revenues and other
income (including sales proceeds) of the property subjected or required to be
subjected to the Lien of this Indenture, and all of the estate, right, title and
interest of the Owner Trustee in and to the same and every part of said
property;
(5) All other moneys and securities (including Permitted Investments) now
or hereafter paid or deposited or required to be paid or deposited to or with
the Indenture Trustee by or for the account of the Owner Trustee pursuant to any
term of any Operative Agreement, except the Tax Indemnity Agreement, and held or
required to be held by the Indenture Trustee hereunder;
(6) All requisition and insurance proceeds with respect to the Aircraft or
any part thereof (to the extent of the Owner Trustee's interest therein pursuant
to the terms of the Lease), including insurance required to be maintained by the
Lessee under Section 9 of the Lease; and
(7) All proceeds of the foregoing.
EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security
interest of this Indenture and from the Indenture Estate, (i) all Excepted
Payments, including without limitation all right, title and interest of the
Owner Participant in, to and under the Tax Indemnity Agreement and any moneys
due or to become due under the Tax Indemnity Agreement and all rights to collect
and enforce Excepted Payments and (ii) rights of, granted to or retained by the
Owner Trustee or the Owner Participant hereunder and SUBJECT TO the following
provisions:
(a) (i) whether or not an Indenture Event of Default shall occur and be
continuing, the Owner Trustee and the Owner Participant shall at all times
retain the right, to the exclusion of the Indenture Trustee: (A) to
Excepted Payments and to commence an action at law to obtain or otherwise
demand, ▇▇▇ for or receive and enforce the payment of such Excepted
Payments, (B) to exercise any election or option or make any decision or
determination or to give or receive any notice (including notice of
Default), consent, waiver or approval in respect of any such Excepted
Payment, (C) to adjust (and make any decision or determination or give any
notice or consent with respect to) Basic Rent and the percentag-
-3-
es relating to Termination Value and the EBO Amount, as provided in Section
3(d) of the Lease and Section 13.01 of the Participation Agreement, (D) to
exercise any election or option to make any decision or determination, or
to give or receive any notice, consent, waiver or approval, or to take any
other action in respect of, but in each case only to the extent relating
to, Excepted Payments (except for, in respect of any portion of Basic Rent
constituting an Excepted Payment, any action changing the manner by which
such Basic Rent is to be paid), (E) to exercise the rights of the "Lessor"
with respect to solicitations of bids, and the election to retain the
Aircraft pursuant to Section 14(c) of the Lease, (F) to exercise the right
of "Lessor" to determine the Fair Market Rental Value or Fair Market Sales
Value pursuant to the respective definitions thereof, (G) to exercise all
other rights of the Lessor under Section 13 of the Lease with respect to
the retention or purchase by the Lessee or the Lessor of the Aircraft or
the exercise by the Lessee of the Lessee's renewal or purchase options, (H)
to retain all rights with respect to insurance maintained for its own
account which Section 9(f) of the Lease specifically confers on the "Owner
Participant", (I) to approve appraisers, lawyers and other professionals
and receive notices, certificates, reports, filings, opinions and other
documents, in each case with respect to matters relating to the Owner
Participant's tax position, (J) to select or approve any accountants or
experts to be used in the verification of any Rent adjustment, and (K) to
exercise, to the extent necessary to enable it to exercise its rights under
Section 8.03 hereof, the rights of the "Lessor" under Section 18 of the
Lease;
(ii) whether or not an Indenture Event of Default shall occur and be
continuing, the Owner Trustee and the Indenture Trustee shall each have the
rights separately but not to the exclusion of the other: (A) to receive
from the Lessee all notices, certificates, reports, filings, opinions of
counsel, copies of all documents and all information which the Lessee is
permitted or required to give or furnish to the "Lessor" pursuant to the
Lease or to the Owner Trustee pursuant to any other Operative Agreement,
(B) to exercise inspection rights pursuant to Section 6 of the Lease
(provided that if an Indenture Event of Default shall be continuing, no
inspection right of the Owner Trustee shall interfere with the efforts of
the Indenture Trustee to exercise remedies under the Lease or this
Indenture), (C) to maintain separate insurance pursuant to Section 9(f) of
the Lease and to retain all rights with respect to such insurance
maintained for its own account, and (D) to give any notice of default under
Section 16 of the Lease;
(iii) subject to the last sentence of this clause (a), so long as no
Indenture Event of Default shall have occurred and be continuing (but
subject to the provisions of Section 8.01), the Owner Trustee shall retain
the right, to the exclusion of the Indenture Trustee, to exercise all
rights of the "Lessor" under the Lease (other than the right to receive any
funds to be delivered to the "Lessor" under the Lease (except funds which
constitute or are delivered with respect to Excepted Payments)) and under
the Purchase Agreement;
(iv) subject to the last sentence of this clause (a), at all times
the Owner Trustee shall have the right as Lessor, but not to the exclusion
of the Indenture Trustee, to seek
-4-
specific performance of the covenants of the Lessee under the Lease
relating to the protection, insurance, maintenance, possession and use of
the Aircraft; and
(v) at all times the Owner Trustee and the Owner Participant shall
have the rights granted to them under Articles VI, VIII and X and Section
7.02 hereof.
Notwithstanding the foregoing, but subject always to the provisions of
Section 15.05 hereof, the Indenture Trustee shall at all times have the right,
to the exclusion of the Owner Trustee and the Owner Participant, to (A) (other
than with respect to Excepted Payments) declare the Lease to be in default under
Section 17 thereof and (B) subject only to the provisions of this Indenture
(other than in connection with Excepted Payments), exercise the remedies set
forth in such Section 17 of the Lease.
(b) The leasehold interest granted to the Lessee by the Lease
shall not be subject to the security interest granted by this Indenture,
and nothing in this Indenture shall affect the rights of the Lessee under
the Lease so long as no Event of Default has occurred and is continuing.
HABENDUM CLAUSE
TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee, its
successors and assigns, in trust for the equal and ratable benefit and security
of the Holders and the Indenture Indemnitees, except as provided in Section 2.12
and Article V hereof, without any priority of any one Equipment Note over any
other and for the uses and purposes and subject to the terms and conditions set
forth in this Indenture and the rights of the Owner Trustee and the Owner
Participant under this Indenture.
It is expressly agreed that anything contained in this Indenture to the
contrary notwithstanding, the Owner Trustee shall remain liable under the
Indenture Documents and the Equipment Notes to perform all of the obligations
assumed by it under any of those documents, all in accordance with and pursuant
to the terms and provisions of those documents, and the Indenture Trustee, the
Holders and the Indenture Indemnitees shall have no obligation or liability
under the Indenture Documents by reason of or arising out of the assignment
under this Indenture, nor shall the Indenture Trustee or the Holders or the
Indenture Indemnitees be required or obligated in any manner to perform or
fulfill any obligations of the Owner Trustee under or pursuant to the Indenture
Documents and the Equipment Notes or, except as expressly provided in this
Indenture, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
Effective upon the occurrence and continuance of an Indenture Event of
Default, to the extent permitted by Applicable Law, the Owner Trustee hereby
constitutes the Indenture Trustee the true
-5-
and lawful attorney of the Owner Trustee, irrevocably, with full power (in the
name of the Owner Trustee or otherwise), subject to the terms and conditions of
this Indenture, to ask, require, demand, receive, compound and give acquittance
for any and all Basic Rent, Supplemental Rent payable to the Owner Trustee and
Termination Value payments, insurance proceeds and any and all moneys and claims
for moneys due and to become due under or arising out of the Lease (subject to
Section 8.01 hereof) or the other Indenture Documents (other than Excepted
Payments), to endorse any checks or other instruments or orders in connection
with the same and to file any claims, take any action or institute any
proceeding which the Indenture Trustee may deem to be necessary or advisable in
the premises. Without limiting the generality of the foregoing, but subject to
the provisions of Sections 7.02 and 7.03 hereof and the rights of the Owner
Trustee and the Owner Participant under Section 8.02 hereof, during the
continuance of any Indenture Event of Default, to the extent permitted by
Applicable Law, the Indenture Trustee shall have the right under such power of
attorney to accept any offer in connection with the exercise of remedies as set
forth herein of any purchaser to purchase the Airframe and Engines and upon such
purchase to execute and deliver in the name of and on behalf of the Owner
Trustee an appropriate ▇▇▇▇ of sale and other instruments of transfer relating
to the Airframe and Engines, when purchased by such purchaser, and to perform
all other necessary or appropriate acts with respect to any such purchase, and
in its discretion to file any claim or take any other action or proceedings,
either in its own name or in the name of the Owner Trustee or otherwise, which
the Indenture Trustee may deem necessary or appropriate to protect and preserve
the right, title and interest of the Indenture Trustee in and to such Rents and
other sums and the security intended to be afforded hereby; provided, however,
-------- -------
that no action of the Indenture Trustee pursuant to this paragraph shall
increase the obligations or liabilities of the Owner Trustee to any Person
beyond those obligations and liabilities specifically set forth in this
Indenture and in the other Operative Agreements.
Under the Lease the Lessee is directed to make all payments of Rent (other
than Excepted Payments not constituting Basic Rent) payable to the Owner Trustee
and all other amounts (other than Excepted Payments not constituting Basic Rent)
which are required to be paid to or deposited with the Owner Trustee pursuant to
the Lease directly to the Indenture Trustee at such address in the United States
of America as the Indenture Trustee shall specify for application as provided in
this Indenture. The Owner Trustee agrees that if, notwithstanding such
provision, it shall have received any such amounts, promptly on receipt of any
such payment, it will transfer to the Indenture Trustee any and all moneys from
time to time received by the Owner Trustee constituting part of the Indenture
Estate for distribution by the Indenture Trustee pursuant to this Indenture,
except that the Owner Trustee shall accept for distribution pursuant to the
Trust Agreement (i) any amounts distributed to it by the Indenture Trustee under
this Indenture and (ii) any Excepted Payments.
The Owner Trustee agrees that at any time and from time to time, upon the
written request of the Indenture Trustee, the Owner Trustee will, at the expense
of the Lessee, promptly and duly execute and deliver or cause to be duly
executed and delivered any and all such further instruments and documents as the
Indenture Trustee may reasonably deem desirable in obtaining the full benefits
of the assignment hereunder and of the rights and powers herein granted;
provided however, that the Owner Trustee shall have no obligation to execute and
-------- -------
deliver or cause to be executed or delivered
-6-
to the Indenture Trustee any such instrument or document if such execution and
delivery would result in the imposition of additional liabilities on the Owner
Trustee or the Owner Participant or would result in a burden on the Owner
Participant's business activities, unless the Owner Trustee or the Owner
Participant, as the case may be, is indemnified to its reasonable satisfaction
against any losses, liabilities and expenses incurred in connection with such
execution and delivery.
The Owner Trustee does hereby warrant and represent that it has not
assigned, pledged or otherwise disposed of, and hereby covenants that it will
not assign or pledge or otherwise dispose of, so long as the assignment
hereunder shall remain in effect and shall not have been terminated pursuant to
Section 14.01 hereof, any of its right, title or interest hereby assigned, to
anyone other than the Indenture Trustee, and that it will not, except in respect
of Excepted Payments or otherwise as provided in or permitted by this Indenture,
enter into an agreement amending or supplementing any of the Indenture
Documents, settle or compromise any claim (other than claims in respect of
Excepted Payments) against the Lessee arising under any of the Indenture
Documents, or submit or consent to the submission of any dispute, difference or
other matter arising under or in respect of any of the Indenture Documents, to
arbitration thereunder.
Concurrently with the delivery of this Indenture, the Owner Trustee has
delivered to the Indenture Trustee executed counterparts of the Trust Agreement.
It is hereby further covenanted and agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless the context otherwise requires,
-----------
capitalized terms utilized herein shall have the meanings set forth or
incorporated by reference, and shall be construed in the manner described, in
Appendix A to the Lease Agreement [N3__ML] dated as of the date hereof between
the Owner Trustee and Midway Airlines Corporation.
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF EQUIPMENT NOTES
Section 2.01. Authentication and Delivery of Equipment Notes. Upon the
----------------------------------------------
execution and delivery of this Indenture, and from time to time thereafter,
Equipment Notes in the aggregate principal amount set forth on Annex A hereto
shall be executed by the Owner Trustee and delivered to the Indenture Trustee
for authentication, and the Indenture Trustee shall thereupon authenticate and
deliver said Equipment Notes to or upon the oral or written order of the Owner
Trustee, signed,
-7-
if written, by an authorized officer of the Owner Trustee, without any further
action by the Owner Trustee.
Section 2.02. Execution of Equipment Notes. The Equipment Notes shall be
----------------------------
signed on behalf of the Owner Trustee by an authorized officer of Trust Company.
Such signatures may be the manual or facsimile signatures of such officer and
minor errors or defects in any reproduction of any such signature shall not
affect the validity or enforceability of any Equipment Note which has been duly
authenticated and delivered by the Indenture Trustee. In case any officer of
Trust Company who shall have signed any of the Equipment Notes shall cease to be
such officer before the Equipment Notes so signed shall be authenticated and
delivered by the Indenture Trustee, such Equipment Note nevertheless may be
authenticated and delivered as though the person who signed such Equipment Note
had not ceased to be such officer of Trust Company; and any Equipment Note may
be signed on behalf of the Owner Trustee by such person or persons as, at the
actual date of the execution of such Equipment Note, shall be the proper
officers of Trust Company, although at the date of the execution and delivery of
this Indenture any such person was not such an officer. Equipment Notes bearing
the facsimile signatures of individuals who were authorized officers of Trust
Company at the time such Equipment Notes were issued shall bind the Owner
Trustee, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Equipment
Notes or did not hold such offices at the respective dates of such Equipment
Notes.
Section 2.03. Authentication. Only such Equipment Notes as shall bear
--------------
thereon a certificate of authentication substantially in the form set forth in
Exhibit B, executed by the Indenture Trustee by manual signature of one of its
authorized officers, shall be entitled to the security and benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the
Indenture Trustee upon any Equipment Note executed by the Owner Trustee shall be
conclusive evidence that the Equipment Note so authenticated has been duly
authenticated and delivered hereunder and that the Holder, as evidenced on the
Register, is entitled to the security and benefits of this Indenture.
Section 2.04. Form and Terms of Equipment Notes; Payments on Equipment
--------------------------------------------------------
Notes. The Equipment Notes and the Indenture Trustee's certificate of
-----
authentication shall be substantially in the form set forth in Exhibit B hereto.
The Equipment Notes shall be issuable as registered securities without coupons
and shall be numbered, lettered, or otherwise distinguished in such manner or in
accordance with such plans as the Owner Trustee may determine with the approval
of the Indenture Trustee.
The Equipment Notes shall be issued in registered form only and in
denominations of $1,000 and any integral multiple thereof, shall be dated the
Delivery Date, shall be issued in three separate series consisting of Series A,
Series B and Series C and the Equipment Notes of each series shall be issued in
the respective aggregate principal amounts, and shall bear interest at the
respective rates per annum, specified on Annex A. Interest shall be calculated
on the basis of a 360-day year of twelve 30-day months.
-8-
Any of the Equipment Notes may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market in
which the Equipment Notes are admitted to trading, or to conform to general
usage.
Each Equipment Note shall bear interest from the date of original issuance
thereof or from the most recent date to which interest has been paid, and shall
be payable in arrears on each Payment Date until maturity; provided that, such
-------------
interest rate shall be increased by 0.5% per annum, as provided in Section 2(d)
and the penultimate paragraph of Section 3 of the Registration Rights Agreement.
The principal amount of each Equipment Note shall be payable on the dates and in
the installments as set forth in Annex B hereto.
Notwithstanding the preceding paragraph, each Equipment Note shall bear
interest at the Past Due Rate on any principal, interest and any other amount
payable hereunder or under such Equipment Note, which shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full, payable from time to time on demand
of the Indenture Trustee.
The principal of, and Make-Whole Premium, if any, and interest on, the
Equipment Notes shall be payable at the Corporate Trust Department of the
Indenture Trustee or at any office or agency maintained for such purpose
pursuant to Section 3.02 hereof in immediately available funds prior to 12:00
noon (New York time) on the due date thereof and the Indenture Trustee shall
remit all such amounts received by it to the Holders at such account or accounts
at such financial institution or institutions as the Holders shall have
designated to the Indenture Trustee in writing, in immediately available funds,
such payment to be made if the payment was received prior to 12:00 noon New York
time by the Indenture Trustee on any Business Day, by 1:00 p.m. New York time on
such Business Day; otherwise, the Indenture Trustee shall make payment promptly,
but not later than 11:00 A.M. New York time on the next succeeding Business Day.
If any amount payable under the Equipment Notes, or under this Indenture, falls
due on a day that is not a Business Day, then such sum shall be payable on the
next succeeding Business Day, without (provided that payment is made on such
next succeeding Business Day) additional interest thereon for the period of such
extension.
The Holder at the close of business on any Record Date with respect to any
Payment Date shall be entitled to receive the interest if any payable on such
Payment Date notwithstanding any transfer or exchange of such Equipment Note
subsequent to the Record Date and prior to such Payment Date, except if and to
the extent the Owner Trustee shall default in the payment of the interest due on
such Payment Date, in which case such defaulted interest shall be paid to the
Holder at the close of business on a subsequent Record Date (which shall be not
less than five or more than 15 Business Days prior to the date of payment of
such defaulted interest) established by notice given by mail by or on behalf of
the Owner Trustee to the Holders not less than 15 days preceding such subsequent
Record Date.
-9-
The Owner Trustee agrees to pay to the Indenture Trustee (but only to the
extent not payable under Section 6(a) or 6(b) of the Note Purchase Agreement
(whether or not in fact paid)) for distribution in accordance with Section 5.04
hereof (a) any and all indemnity amounts received by the Owner Trustee which are
payable by the Lessee to (i) the Indenture Trustee in its individual capacity,
(ii) the Subordination Agent or (iii) each Liquidity Provider, in each case
pursuant to Article 6 or 7 or Section 8.01(b) of the Participation Agreement (it
being acknowledged that the Lessee has been instructed to pay such amounts to
the Person or Persons entitled thereto) and (b) the Owner Trustee's pro rata
share of all amounts owed to each Liquidity Provider by the Subordination Agent
under each Liquidity Facility other than amounts due as (i) repayments of the
principal of advances thereunder, (ii) interest on Downgrade Drawings and Non-
Extension Drawings, except to the extent exceeding Investment Earnings thereon
and (iii) interest on Interest Drawings and Final Drawings except to the extent
included in Net Interest and Related Charges. As used in this Section, the Owner
Trustee's pro rata share means as of any time:
(A) with respect to all amounts other than Net Interest and Related
Charges, a fraction the numerator of which is the aggregate principal balance
then outstanding of the Equipment Notes issued under this Indenture and the
denominator of which is the aggregate principal balance of all Equipment Notes
issued under this Indenture and the Related Indentures, and
(B) with respect to all Net Interest and Related Charges (x) if there
exists a Payment Default under any Equipment Note issued under this Indenture a
fraction, the numerator of which is the aggregate principal balance then
outstanding of Equipment Notes issued under this Indenture and the denominator
of which is the aggregate principal balance then outstanding of all Equipment
Notes issued under this Indenture and the Related Indentures under which there
exists a Payment Default or (y) at all other times, zero.
As used in this Section, "Net Interest and Related Charges" means the sum of (i)
--------------------------------
the amount, if any, by which interest payable to each Liquidity Provider on any
Interest Drawing and Final Drawing exceeds the amount which would be payable if
such drawings bore interest at the weighted average Past Due Rate applicable to
amounts in default on all Equipment Notes plus (ii) any amounts payable under
Section 3.1, Section 3.2, Section 3.3, Section 3.9 or Section 7.7 of each
Liquidity Facility (or similar provisions of any replacement Liquidity Facility)
which result from any Interest Drawing or Final Drawing. As used in this
Section, a "Payment Default" when used in connection with an Equipment Note
---------------
issued hereunder or an Equipment Note issued under any Related Indenture means a
default in the payment of principal thereof or interest thereon (which default
has not been cured), other than solely because of acceleration.
Section 2.05. Payments from Indenture Estate Only. All payments to be made
-----------------------------------
by the Owner Trustee under this Indenture shall be made only from the income and
the proceeds from the Lessor's Estate to the extent included in the Indenture
Estate and from any other amounts of the type described in Section 8.03 hereof
(but only to the extent actually received by the Indenture Trustee) and only to
the extent that the Owner Trustee shall have sufficient income or proceeds from
the Lessor's Estate to the extent included in the Indenture Estate (and such
other amounts) to enable the
-10-
Indenture Trustee to make distributions of the amounts due in respect of the
Equipment Notes in accordance with the terms hereof and thereof. Each Holder by
its acceptance of an Equipment Note, and the Indenture Trustee, as applicable,
agrees that it will look solely to the income and proceeds from the Indenture
Estate (and such other amounts of the type described in Section 8.03 hereof but
only to the extent actually received by the Indenture Trustee) to the extent
available for distribution to it as provided herein and that none of the Owner
Participant, the Owner Trustee, Trust Company or the Indenture Trustee is
personally liable to such Holder or the Indenture Trustee for any amounts
payable under this Indenture or such Equipment Note or for any amounts payable
or liability under any Equipment Note or this Indenture, except as expressly
provided herein in the case of Trust Company, the Owner Trustee or the Indenture
Trustee.
Trust Company is not personally liable to any Holder, the Lessee or the
Indenture Trustee for any amounts payable under this Indenture or for any
liability under this Indenture or the Equipment Notes, except as a result of
Trust Company's gross negligence or willful misconduct (or simple negligence in
the handling of funds), or as otherwise expressly provided herein or in the
Participation Agreement.
If (1) all or any part of the Lessor's Estate becomes the property of a
debtor subject to the reorganization provisions of the Bankruptcy Code, (2)
pursuant to such reorganization provisions the Owner Participant is required, by
reason of such Owner Participant being held to have recourse liability directly
or indirectly, to make payment on account of any amount payable as principal of
or interest, Make-Whole Premium or other amounts payable on the Equipment Notes,
and (3) the Indenture Trustee or a Holder actually receives any Recourse Amount
which reflects any payment by an Owner Participant on account of (2) above, then
the Indenture Trustee or such Holder, as the case may be, shall promptly refund
to such Owner Participant such Recourse Amount. Nothing contained in this
paragraph shall prevent the Indenture Trustee from enforcing any personal
recourse obligation (and retaining the proceeds thereof) of the Owner
Participant under the Participation Agreement, or from retaining any amount paid
by the Owner Participant under Sections 8.02 and 8.03 hereof. For purposes of
this Section 2.05, "Recourse Amount" means the amount by which the portion of
such payment by the Owner Participant on account of clause (2) above received by
the Indenture Trustee or the relevant Holder, as the case may be, exceeds the
amount which would have been received by the Indenture Trustee or such Holder,
as the case may be, if the Owner Participant had not become subject to the
recourse liability referred to in (2) above.
Section 2.06. Registration, Transfer and Exchange. The Indenture Trustee
-----------------------------------
will keep, on behalf of the Owner Trustee, at each office or agency to be
maintained for the purpose as provided in Section 3.02 hereof a Register or
Registers on which, subject to such reasonable regulations as it may prescribe,
it will register, and will register the transfer of, Equipment Notes as provided
in this Article. Such Register shall be in written form in the English language
or in any other form capable of being converted into such form within a
reasonable period of time. Upon due presentation for registration of transfer of
any Equipment Note at any such office or agency, the Owner Trustee shall execute
and the Indenture Trustee shall authenticate and deliver in the name of the
transferee or transferees, in authorized denominations, a new Equipment Note or
Equipment Notes of the same
-11-
Series, and with the same principal amount, interest rate and amortization
schedule, for an equal aggregate principal amount; provided, that such Equipment
--------
Note being transferred shall be canceled in accordance with Section 2.08 hereof
simultaneously with the issuance of the new Equipment Note. Any Equipment Note
or Equipment Notes may be exchanged for an Equipment Note or Equipment Notes of
the same Series but in other authorized denominations, in an equal aggregate
principal amount. Equipment Notes to be exchanged shall be surrendered at any
office or agency to be maintained by the Indenture Trustee for the purpose as
provided in Section 3.02 hereof, and the Owner Trustee shall execute and the
Indenture Trustee shall authenticate and deliver in exchange therefor the
Equipment Note or Equipment Notes which the Holder making the exchange shall be
entitled to receive, bearing numbers not contemporaneously or previously
outstanding.
All Equipment Notes presented for registration of transfer, exchange,
prepayment or payment shall (if so required by the Owner Trustee or the
Indenture Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Owner Trustee
and the Indenture Trustee duly executed by the Holder or its attorney duly
authorized in writing and (except in the case of transfers pursuant to Article
13 of the Participation Agreement) the Indenture Trustee may require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act. The Indenture Trustee may require payment from the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any exchange or registration of transfer of Equipment Notes. No
service charge shall be levied for any such transaction. The Indenture Trustee
shall not be required to exchange or register a transfer of any Equipment Notes
(a) for a period of 15 days immediately preceding the first mailing of notice of
prepayment of such Equipment Notes or (b) with respect to which notice of
prepayment has been given pursuant to Section 6.03 hereof and such notice has
not been revoked. All Equipment Notes issued upon any transfer or exchange of
Equipment Notes shall be valid obligations of the Owner Trustee, evidencing the
same debt, and entitled to the same security and benefits under this Indenture,
as the Equipment Notes surrendered upon such transfer or exchange. Any such
transferee of an Equipment Note, by its acceptance of an Equipment Note, agrees
to the provisions of the Participation Agreement applicable to Holders, and
shall be deemed to have covenanted to the parties to the Participation Agreement
as to the matters covenanted by the original Loan Participant in the
Participation Agreement.
Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Equipment
--------------------------------------------------------
Notes. In case any Equipment Note shall become mutilated, defaced or be
-----
apparently destroyed, lost or stolen, the Owner Trustee in its discretion may
execute, and upon the written request of any Holder shall execute, and the
Indenture Trustee shall authenticate and deliver in replacement thereof, a new
Equipment Note, payable to the same Holder, bearing the same principal amount
and interest rate as the Equipment Note being replaced and bearing a number not
contemporaneously or previously outstanding, in exchange and substitution for
the mutilated or defaced Equipment Note, or in lieu of and substitution for the
Equipment Note so apparently destroyed, lost or stolen. In the case of any
Equipment Note so apparently destroyed, lost or stolen, the applicant for a
substitute Equipment Note shall furnish to the Owner Trustee and to the
Indenture Trustee such security or indemnity as may be required by them to
indemnify and defend and to hold each of them harmless and evidence
-12-
to their satisfaction of the apparent destruction, loss or theft of such
Equipment Note and of the ownership thereof.
Upon the issuance of any substitute Equipment Note, the Owner Trustee or
the Indenture Trustee may require payment from the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses incurred in connection therewith. In
case any Equipment Note which has matured or is about to mature, or has been
called for prepayment in full, shall become mutilated or defaced or be
apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing
a substitute Equipment Note, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated or defaced Equipment Note),
if the applicant of any Equipment Note so apparently destroyed, lost or stolen,
for such payment shall furnish to the Owner Trustee and to the Indenture Trustee
such security or indemnity as any of them may require to hold each of them
harmless and the applicant shall also furnish to the Owner Trustee and the
Indenture Trustee evidence to their satisfaction of the apparent destruction,
loss or theft of such Equipment Note and of the ownership thereof.
Every substitute Equipment Note issued pursuant to the provisions of this
Section by virtue of the fact that any Equipment Note is apparently destroyed,
lost or stolen shall constitute an original additional contractual obligation of
the Owner Trustee, whether or not the apparently destroyed, lost or stolen
Equipment Note shall be enforceable at any time by anyone and shall be entitled
to all the security and benefits of (but shall be subject to all the limitations
of rights set forth in) this Indenture equally and proportionately with any and
all other Equipment Notes duly authenticated and delivered hereunder. All
Equipment Notes shall be held and owned upon the express condition that, to the
extent permitted by law, the foregoing provisions are exclusive with respect to
the replacement or payment of mutilated, defaced, or apparently destroyed, lost
or stolen Equipment Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments or
other securities without their surrender.
Section 2.08. Cancellation of Equipment Notes; Destruction Thereof. All
----------------------------------------------------
Equipment Notes surrendered for payment, prepayment, registration of transfer or
exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee
or the Indenture Trustee, shall be delivered to the Indenture Trustee for
cancellation or, if surrendered to the Indenture Trustee, shall be canceled by
it; and no Equipment Notes shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Indenture Trustee
shall destroy cancelled Equipment Notes held by it and deliver a certificate of
destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the
Equipment Notes, such acquisition shall not operate as a prepayment or
satisfaction of the indebtedness represented by such Equipment Notes unless and
until the same are delivered to the Indenture Trustee for cancellation.
Section 2.09. Termination of Interest in Indenture Estate. A Holder shall
-------------------------------------------
not, as such, have any further interest in, or other right with respect to, the
Indenture Estate when and if the principal amount of and Make-Whole Premium, if
any, and interest on and other amounts due under all
-13-
Equipment Notes held by such Holder and all other sums payable to such Holder
hereunder and under the other Operative Agreements shall have been paid in full.
Section 2.10. Equipment Notes in Respect of Replacement Aircraft. Upon the
--------------------------------------------------
execution and delivery of a supplement to this Indenture covering a Replacement
Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each
Equipment Note shall be deemed to have been issued in connection with such
Replacement Airframe and/or Replacement Engine and (in the case of a Replacement
Airframe) each Equipment Note issued thereafter upon a transfer or exchange of,
or as a replacement for, an Equipment Note, shall be designated as having been
issued in connection with such Replacement Airframe, but without any other
change therein except as provided for in this Article II.
Section 2.11. Assumption of Obligations Under Equipment Notes and Other
---------------------------------------------------------
Operative Agreements. If, in accordance with and subject to the satisfaction of
--------------------
the conditions set forth in Section 5.10 of the Participation Agreement, the
Lessee shall assume all of the obligations of the Owner Trustee hereunder, under
the Equipment Notes, and under all other Operative Agreements, the Owner
Participant and the Owner Trustee shall be released and discharged from any
further obligations hereunder and under the Equipment Notes and all other
Operative Agreements (except for any recourse obligations of the Owner
Participant or the Owner Trustee in its individual capacity with respect to
matters arising out of events occurring prior to such assumption).
Section 2.12. Subordination. (a) The Owner Trustee and, by acceptance of
-------------
its Equipment Notes of any Series, each Holder of such Series, hereby agree that
no payment or distribution shall be made on or in respect of the Secured
Obligations owed to such Holder of such Series, including any payment or
distribution of cash, property or securities after the commencement of a
proceeding of the type referred to in clause (iv), (v) or (vi) of Section 7.01
hereof, except as expressly provided in Article V hereof.
(b) By the acceptance of its Equipment Notes of any Series (other than
Series A), each Holder of such Series agrees that in the event that such Holder,
in its capacity as a Holder, shall receive any payment or distribution on any
Secured Obligations in respect of such Series which it is not entitled to
receive under this Section 2.12 or Article V hereof, it will hold any amount so
received in trust for the Senior Holder (as defined in Section 2.12(c) hereof)
and will forthwith turn over such payment to the Indenture Trustee in the form
received to be applied as provided in Article V hereof.
(c) As used in this Section 2.12, the term "Senior Holder" shall mean, (i)
-------------
the Holders of Series A Equipment Notes until the Secured Obligations in respect
of Series A Equipment Notes have been paid in full, (ii) after the Secured
Obligations in respect of Series A Equipment Notes have been paid in full, the
Holders of Series B Equipment Notes until the Secured Obligations in respect of
Series B Equipment Notes have been paid in full, and (iii) after the Secured
Obligations in respect of Series B Equipment Notes have been paid in full, the
Holders of Series C Equipment Notes until the Secured Obligations in respect of
Series C Equipment Notes have been paid in full.
-14-
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal, Make-Whole Premium and Interest. The
-----------------------------------------------------
Owner Trustee covenants and agrees that it will, subject to Section 2.05 hereof,
duly and punctually pay or cause to be paid the principal of, and interest and
Make-Whole Premium, if any, and all other amounts due on, each of the Equipment
Notes and under this Indenture at the place or places, at the respective times
and in the manner provided in this Indenture and in the Equipment Notes.
Section 3.02. Offices for Payments, etc. So long as any of the Equipment
-------------------------
Notes remain outstanding, the Indenture Trustee will maintain the following: (a)
an office or agency where the Equipment Notes may be presented for payment and
(b) a facility or agency where the Equipment Notes may be presented for
registration of transfer and for exchange and for prepayment as provided in this
Indenture (the "Registrar"). The Registrar shall keep a register (the
---------
"Register") with respect to the Equipment Notes and their transfer and exchange.
--------
The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars")
-------------
for the Equipment Notes and may terminate any such appointment at any time upon
written notice. The term "Registrar" includes any Co-Registrar. The Indenture
Trustee shall initially act as Registrar.
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture
----------------------------------------------------
Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the
-------
office of Indenture Trustee, will, with the consent of the Lessee, appoint, in
the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there
shall at all times be an Indenture Trustee hereunder.
Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole
-------------
discretion shall appoint a paying agent (the "Paying Agent"), it will cause the
------------
Paying Agent to execute and deliver an instrument in which the Paying Agent
shall agree with the Indenture Trustee, subject to the provisions of this
Section:
(a) that it will hold all sums received by it as such agent
for the payment of the principal of, and interest and Make-Whole Premium,
if any, on the Equipment Notes (whether such sums have been paid to it by
the Indenture Trustee or the Owner Trustee) in trust for the benefit of the
Holders or of the Indenture Trustee, and
(b) that it will give the Indenture Trustee notice of any
failure by the Owner Trustee to make any payment of the principal of or
interest or Make-Whole Premium, if any, on the Equipment Notes when the
same shall be due and payable.
Anything in this Section to the contrary notwithstanding, the agreements to
hold sums in trust as provided in this Section are subject to the provisions of
Sections 14.03 and 14.04 hereof.
-15-
Section 3.05. Covenants of the Owner Trustee.
------------------------------
(a) The Owner Trustee hereby covenants and agrees as follows:
(i) in the event a Responsible Officer of the Owner Trustee shall
have actual knowledge of an Indenture Event of Default, an Indenture
Default or an Event of Loss, the Owner Trustee will give prompt written
notice of such Indenture Event of Default, Indenture Default or Event of
Loss to the Indenture Trustee, the Lessee and the Owner Participant;
(ii) the Owner Trustee will furnish to the Indenture Trustee,
promptly upon receipt thereof by a Responsible Officer of the Owner
Trustee, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to the
Owner Trustee under the Lease, including, without limitation, a copy of
each report or notice from an insurer or an insurance broker received
pursuant to Section 9 of the Lease, to the extent that the Operative
Agreements do not provide that the same shall be furnished to the Indenture
Trustee;
(iii) the Owner Trustee will not enter into any business or other
activity other than the business of owning the Aircraft, the leasing
thereof to the Lessee and the carrying out of the transactions contemplated
hereby and by the Lease, the Participation Agreement, the Trust Agreement
and the other Operative Agreements; and
(iv) except as contemplated by the Operative Agreements, the Owner
Trustee will not contract for, create, incur or assume any debt, and will
not guarantee (directly or indirectly or by an instrument having the effect
of assuring another's payment or performance on any obligation or
capability of so doing, or otherwise), endorse or otherwise take action to
become contingently liable, directly or indirectly, in connection with the
debt of any other Person.
Section 3.06. [Reserved].
Section 3.07. Disposal of Indenture Estate. At any time and from time to
----------------------------
time any part of the Indenture Estate may be sold or disposed of in accordance
with the provisions of this Indenture and the Lease. The Indenture Trustee
shall, from time to time, release any part of the Indenture Estate so sold or
disposed of or as to which an Event of Loss has occurred or as to which the
Lease has been terminated from the Lien of this Indenture. In addition, to the
extent that such property constitutes an Airframe or Engine, the further
requirements of Section 9.08 hereof shall be satisfied.
Section 3.08. No Representations or Warranties as to Aircraft or Documents.
------------------------------------------------------------
NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR TRUST COMPANY NOR THE
OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP,
VALUE, CONDITION, DESIGN, COMPLIANCE WITH
-16-
SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF
THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE
AIRCRAFT OR ANY ENGINE WHATSOEVER, except that Trust Company warrants that on
the Delivery Date (a) the Owner Trustee shall have received whatever title was
conveyed to it by the Seller, and (b) the Aircraft shall be free and clear of
Lessor's Liens attributable to Trust Company. Neither Trust Company nor the
Indenture Trustee makes or shall be deemed to have made any representation or
warranty as to the validity, legality or enforceability of this Indenture, the
Trust Agreement, the Equipment Notes or any Indenture Document or as to the
correctness of any statement contained in any thereof, except for the
representations and warranties of Trust Company and the Indenture Trustee made
under this Indenture or in the Participation Agreement.
Section 3.09. Further Assurances; Financing Statements. At any time and
----------------------------------------
from time to time, upon the request of the Indenture Trustee, the Owner Trustee,
at the expense of the Lessee, shall promptly and duly execute and deliver any
and all such further instruments and documents as may be specified (and in the
form included) in such request and as are reasonably necessary or advisable to
perfect, preserve or protect the Liens and assignments created or intended to be
created hereby, or to obtain for the Indenture Trustee the full benefit of the
specific rights and powers granted herein, including, without limitation, the
execution and delivery of Uniform Commercial Code financing statements and
continuation statements with respect thereto, or similar instruments relating to
the perfection of the Liens or assignments created or intended to be created
hereby.
ARTICLE IV
HOLDER LISTS
Section 4.01. Holder Lists: Ownership of Equipment Notes. (a) The Indenture
------------------------------------------
Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of the Holders. If
the Indenture Trustee is not the Registrar, the Registrar shall furnish to the
Indenture Trustee semi-annually not more than ten days after each Record Date,
as of such Record Date, or at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the possession
or control of the Registrar as to the names and addresses of the Holders and the
amounts and Maturities of the Equipment Notes held by such Holders.
(b) Ownership of the Equipment Notes shall be proved by the Register kept
by the Registrar.
-17-
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE INDENTURE ESTATE
--------------------------------
Section 5.01. Basic Rent Distribution. Except as otherwise provided in
-----------------------
Section 5.03 hereof, each installment of Basic Rent, any payment of interest on
overdue installments of Basic Rent and any payment received by the Indenture
Trustee pursuant to Section 8.03(a) hereof shall be distributed by the Indenture
Trustee no later than the time herein provided in the following order of
priority:
first, (i) so much of such installment or payment as shall be required
-----
to pay in full the aggregate amount of principal and interest (as
well as any interest on any overdue principal and, to the extent
permitted by applicable law, on any overdue interest) then due
under all Series A Equipment Notes shall be distributed to the
Holders of Series A Equipment Notes ratably, without priority of
one over the other, in the proportion that the amount of such
payment or payments then due under each Series A Equipment Note
bears to the aggregate amount of the payments then due under all
Series A Equipment Notes;
(ii) after giving effect to paragraph (i) above, so much of such
installment or payment as shall be required to pay in full the
aggregate amount of principal and interest (as well as any
interest on any overdue principal and, to the extent permitted by
applicable law, on any overdue interest) then due under all
Series B Equipment Notes shall be distributed to the Holders of
Series B Equipment Notes ratably, without priority of one over
the other, in the proportion that the amount of such payment or
payments then due under each Series B Equipment Note bears to the
aggregate amount of the payments then due under all Series B
Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, so much of
such installment or payment as shall be required to pay in full
the aggregate amount of principal and interest (as well as any
interest on any overdue principal and, to the extent permitted by
applicable law, on any overdue interest) then due under all
Series C Equipment Notes shall be distributed to the Holders of
Series C Equipment Notes ratably, without priority of one over
the other, in the proportion that the amount of such payment or
payments then due under each Series C Equipment Note bears to the
aggregate amount of the payments then due under all Series C
Equipment Notes; and
second, the balance if any of such installment or payment remaining
------
thereafter shall be distributed to the Owner Trustee or as
otherwise directed in writing by the Owner Trustee for
distribution pursuant to the Trust Agreement; provided, however,
-------- -------
that if an Event of Default shall have occurred and be
continuing, then such balance shall not be distributed as
provided in this clause "second" but shall be held by the
------
Indenture Trustee as part of the Indenture Estate and invested in
accordance with
-18-
Section 5.08 hereof until whichever of the following shall first
occur: (i) all Events of Default shall have been cured or waived,
in which event such balance shall be distributed as provided in
this clause "second", (ii) Section 5.03 hereof shall be
------
applicable, in which event such balance shall be distributed in
accordance with the provisions of such Section 5.03, or (iii) the
120th day after the receipt of such payment in which case such
payment shall be distributed as provided in this clause "second"
------
as if no Event of Default shall have occurred and be continuing.
Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as
-----------------------------------------
otherwise provided in Section 5.03 hereof, any payment received by the Indenture
Trustee as the result of or in connection with an Event of Loss with respect to
the Aircraft (and with respect to which the Lessee has not made the replacement
election in Section 8(a)(i) of the Lease) or as the result of, or in connection
with any event under the Lease giving rise to, a prepayment pursuant to Section
6.02 hereof, shall be promptly distributed by the Indenture Trustee in the
following order of priority:
first, to reimburse the Indenture Trustee and the Holders for any costs
-----
or expenses reasonably incurred in connection with such
prepayment and (b) then to pay any other similar amounts then due
to the other Indenture Indemnitees;
second, (i) to pay the amounts specified in paragraph (i) of clause
------
"third" of Section 5.03 hereof then due and payable in respect
-----
of the Series A Equipment Notes;
(ii) after giving effect to paragraph (i) above, to pay the
amounts specified in paragraph (ii) of clause "third" of Section
-----
5.03 hereof then due and payable in respect of the Series B
Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, to pay the
amounts specified in paragraph (iii) of clause "third" of Section
5.03 hereof then due and payable in respect of the Series C
Equipment Notes;
provided, that payments pursuant to this clause "second" shall be
-------- ------
made without the payment of Make-Whole Premium; and
third, as provided in clause "fourth" of Section 5.03 hereof;
----- ------
provided that if a Replacement Airframe shall be substituted for an Airframe
--------
subject to an Event of Loss as provided in Section 8(a)(i) of the Lease and
Section 9.08 hereof, any proceeds which result from such Event of Loss and are
paid to the Indenture Trustee shall be held by the Indenture Trustee as part of
the Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or
5.03 hereof, such proceeds shall be released to the Lessee upon the release of
such damaged Airframe and the replacement thereof as provided herein and in the
Lease.
-19-
(b) Any amounts received directly or indirectly from any governmental
authority, insurer or other party pursuant to any provision of Section 8 or 9 of
the Lease as the result of loss or damage not constituting an Event of Loss with
respect to the Aircraft, or as a result of such loss or damage constituting an
Event of Loss if and to the extent that such amounts would at the time be
required to be paid to the Lessee pursuant to such Section 8 or 9 but for the
fact that a Specified Default exists shall be held by the Indenture Trustee as
security for the obligations of the Lessee under the Lease and the Participation
Agreement and shall be invested in accordance with the terms of Section 5.08
hereof and at such time as the conditions for payment to the Lessee specified in
such Section 8 or 9, as the case may be, shall be fulfilled and no Specified
Default exists, such amount, and the proceeds of any investment thereof, shall,
to the extent not theretofore applied, be paid to the Lessee to the extent
provided in the Lease.
Section 5.03. Payment After Indenture Event of Default, etc. Except as
---------------------------------------------
otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all
payments (other than Excepted Payments) received and all amounts held or
realized by the Indenture Trustee after an Indenture Event of Default shall have
occurred and be continuing and the Equipment Notes shall have become due and
payable as provided in Section 7.02(b) or (c) hereof, shall be promptly
distributed by the Indenture Trustee in the following order of priority:
first, so much of such payments or amounts as shall be required to pay
-----
or reimburse (i) the Indenture Trustee for any tax (except to the
extent resulting from a failure of the Indenture Trustee to
withhold pursuant to Section 5.09 hereof), expense, charge or
other loss (including, without limitation, all amounts to be
expended at the expense of, or charged upon the tolls, rents,
revenues, issues, products and profits of, the property included
in the Indenture Estate pursuant to Section 7.03(b) hereof)
incurred by the Indenture Trustee (to the extent not previously
reimbursed), the expenses of any sale, taking or other
proceeding, attorneys' fees and expenses, court costs, and any
other expenditures incurred or expenditures or advances made by
the Indenture Trustee or the Holders in the protection, exercise
or enforcement of any right, power or remedy or any damages
sustained by the Indenture Trustee or the Holders, liquidated or
otherwise, upon such Indenture Event of Default, shall be applied
by the Indenture Trustee as between itself and the Holders in
reimbursement of such expenses and (ii) all similar amounts
payable to the other Indenture Indemnitees hereunder and under
the Participation Agreement; and in the case the aggregate amount
to be so distributed is insufficient to pay as set forth in this
clause "first", then ratably, without priority of one over the
-----
other, in proportion to the amounts owed each hereunder;
second, so much of such payments or amounts remaining as shall be
------
required to reimburse the then existing or prior Holders for
payments made pursuant to Section 9.03(d) hereof (to the extent
not previously reimbursed) shall be distributed to such then
existing or prior Holders ratably, without priority of one over
the other, in accordance
-20-
with the amount of the payment or payments made by each such then
existing or prior Holder pursuant to said Section 9.03(d) hereof;
third, (i) so much of such payments or amounts remaining as shall be
-----
required to pay in full the aggregate unpaid principal amount of
all Series A Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon and all other Secured Obligations
(other than Make-Whole Premium) in respect of the Series A
Equipment Notes to the date of distribution, shall be distributed
to the Holders of Series A Equipment Notes, and in case the
aggregate amount so to be distributed shall be insufficient to
pay in full as aforesaid, then ratably, without priority of one
over the other, in the proportion that the aggregate unpaid
principal amount of all Series A Equipment Notes held by each
Holder plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (other than Make-Whole Premium) to the
date of distribution, bears to the aggregate unpaid principal
amount of all Series A Equipment Notes held by all such Holders
plus the accrued but unpaid interest and other amounts due
thereon (other than Make-Whole Premium) to the date of
distribution;
(ii) after giving effect to paragraph (i) above, so much of such
payments or amounts remaining as shall be required to pay in full
the aggregate unpaid principal amount of all Series B Equipment
Notes, and the accrued but unpaid interest and other amounts due
thereon and all other Secured Obligations (other than Make-Whole
Premium) in respect of the Series B Equipment Notes to the date
of distribution, shall be distributed to the Holders of Series B
Equipment Notes, and in case the aggregate amount so to be
distributed shall be insufficient to pay in full as aforesaid,
then ratably, without priority of one over the other, in the
proportion that the aggregate unpaid principal amount of all
Series B Equipment Notes held by each Holder plus the accrued but
unpaid interest and other amounts due hereunder or thereunder
(other than Make-Whole Premium) to the date of distribution,
bears to the aggregate unpaid principal amount of all Series B
Equipment Notes held by all such Holders plus the accrued but
unpaid interest and other amounts due thereon (other than Make-
Whole Premium) to the date of distribution; and
(iii) after giving effect to paragraph (ii) above, so much of
such payments or amounts remaining as shall be required to pay in
full the aggregate unpaid principal amount of all Series C
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other than
Make- Whole Premium) in respect of the Series C Equipment Notes
to the date of distribution, shall be distributed to the Holders
of Series C Equipment Notes, and in case the aggregate amount so
to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other,
in the proportion that the aggregate unpaid principal amount of
all Series C Equipment Notes held by each Holder plus the accrued
but unpaid interest and other amounts due hereunder or
-21-
thereunder (other than Make-Whole Premium) to the date of
distribution, bears to the aggregate unpaid principal amount of
all Series C Equipment Notes held by all such Holders plus the
accrued but unpaid interest and other amounts due thereon (other
than Make-Whole Premium) to the date of distribution;
(it being understood that amounts payable under this clause
"third" shall not in any event include Make-Whole Premium); and
-----
fourth, the balance, if any of such payments or amounts remaining
------
thereafter shall be distributed to the Owner Trustee for
distribution pursuant to the Trust Agreement.
Section 5.04. Certain Payments. (a) Any payments received by the Indenture
----------------
Trustee which are to be held or applied according to any provision in any other
Indenture Document shall be held or applied thereunder in accordance therewith,
except to the extent this Indenture expressly provides for such payments to be
held or applied in a different manner.
(b) Notwithstanding anything to the contrary contained in this Article V,
the Indenture Trustee will distribute, promptly upon receipt, any indemnity or
other payment received by it from the Owner Trustee or the Lessee in respect of
(i) the Indenture Trustee in its individual capacity, (ii) the Subordination
Agent, (iii) each Liquidity Provider, (iv) the Pass-Through Trustee, and (v) any
other Indenture Indemnitee, in each case whether pursuant to Article 6 or 7 of
the Participation Agreement or as Supplemental Rent, directly to the Person
(which may include the Indenture Trustee) entitled thereto. Any payment received
by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04
shall be distributed to the Subordination Agent to be distributed in accordance
with the terms of the Intercreditor Agreement.
(c) Notwithstanding anything to the contrary contained herein, any sums
received by the Indenture Trustee which constitute Excepted Payments shall be
distributed promptly upon receipt by the Indenture Trustee directly to the
Person or Persons entitled thereto.
(d) Notwithstanding any provision of this Indenture to the contrary, any
amounts held by Indenture Trustee pursuant to the terms of the Lease shall be
held by the Indenture Trustee as security for the obligations of Lessee under
the Indenture Documents and, if and when required by the Lease, paid and/or
applied in accordance with the applicable provisions of the Lease.
Section 5.05. Other Payments. Any payments received by the Indenture
--------------
Trustee for which no provision as to the application thereof is made elsewhere
in this Indenture or in any other Indenture Document or the Equipment Notes
shall be distributed by the Indenture Trustee (a) to the extent received or
realized at any time prior to the payment in full of all Secured Obligations to
the Holders, in the order of priority specified in Section 5.01 hereof, and (b)
to the extent received or realized at any time after payment in full of all
Secured Obligations to the Holders, in the following order of priority:
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first, in the manner provided in clause "first" of Section 5.03
----- -----
hereof, and
second, in the manner provided in clause "fourth" of Section 5.03
------ ------
hereof.
Further, and except as otherwise provided in Sections 5.02, 5.03 and 5.04
hereof, all payments received and amounts realized by the Indenture Trustee
under the Lease or otherwise with respect to the Aircraft (including, without
limitation, all amounts realized upon the sale or release of the Aircraft after
the termination of the Lease with respect thereto), to the extent received or
realized at any time after payment in full of all Secured Obligations, shall be
distributed by the Indenture Trustee in the order of priority specified in
clause (b) of the immediately preceding sentence of this Section 5.05.
Section 5.06. Payments to Owner Trustee. Any amounts distributed hereunder
-------------------------
by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee
by wire transfer of immediately available funds of the type received by the
Indenture Trustee at such office and to such account or accounts of such entity
or entities as shall be designated by notice from the Owner Trustee to the
Indenture Trustee from time to time. The Owner Trustee hereby notifies the
Indenture Trustee that unless and until the Indenture Trustee receives notice to
the contrary from the Owner Trustee, all amounts to be distributed to the Owner
Trustee hereunder for distribution pursuant to or in accordance with the Trust
Agreement shall be distributed by wire transfer of immediately available funds
of the type received by the Indenture Trustee to the account designated on
Schedule II to the Participation Agreement or such other account as the Owner
Participant may specify from time to time by notice to the Indenture Trustee as
may be specified pursuant to Section 4.02 of the Trust Agreement.
Section 5.07. Application of Payments. Each payment of principal of and
-----------------------
interest or other amounts due on each Equipment Note shall, except as otherwise
provided herein, be applied,
first, to the payment of interest on such Equipment Note due and payable
-----
to the date of such payment, as provided in such Equipment Note,
as well as any interest on overdue principal and Make-Whole
Premium, if any, and, to the extent permitted by law, interest
and other amounts due thereunder,
second, the payment of any other amount (other than the principal of such
------
Equipment Note), including any Make-Whole Premium, due hereunder
to the Holder of such Equipment Note or under such Equipment
Note; and
third, to the payment of the principal of such Equipment Note if then
-----
due hereunder or under such Equipment Note.
Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts held
-----------------------------------------------
by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to any
provision of any Indenture Document providing for investment by the Indenture
Trustee of sums pursuant to Section 15 of the
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Lease or this Section 5.08 shall be invested by the Indenture Trustee from time
to time in securities selected by (i) so long as no Event of Default shall have
occurred and be continuing, the Lessee (and in the absence of written direction
by the Lessee, the Indenture Trustee shall invest such monies in direct
obligations of the United States of America) or (ii) so long as an Event of
Default shall have occurred and be continuing, the Indenture Trustee and in each
case shall be of the type meeting the criteria for Permitted Investments. Unless
otherwise expressly provided in this Indenture, any income realized as a result
of any such investment, net of the Indenture Trustee's reasonable fees and
expenses in making such investment, shall be held and applied by the Indenture
Trustee in the same manner as the principal amount of such investment is to be
applied and any losses, net of earnings and such reasonable fees and expenses,
shall be charged against the principal amount invested. The Lessee shall be
responsible for and will promptly pay to the Indenture Trustee or the Owner
Trustee, as the case may be, on demand, the amount of any loss realized as the
result of any such investment (together with any fees, commissions and other
costs and expenses, if any, incurred by the Indenture Trustee or the Owner
Trustee in connection with such investment), such amount to be disposed of in
accordance with the terms hereof or the Lease, as the case may be. The Indenture
Trustee shall not be liable for any loss resulting from any investment made by
it or any investment sold by it under this Indenture in accordance with
instructions from the Lessee other than by reason of its willful misconduct or
gross negligence, and any such investment may be sold (without regard to its
maturity) by the Indenture Trustee without instructions whenever the Indenture
Trustee reasonably believes such sale is necessary to make a distribution
required by this Indenture.
Unless otherwise confirmed in writing, an account statement delivered by
the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be
deemed written confirmation by the Owner Trustee that the investment
transactions identified therein accurately reflect the investment directions
given to the Indenture Trustee by or on behalf of the Lessee, unless the Lessee
notifies the Indenture Trustee in writing to the contrary within 30 days of the
date of receipt of such statement.
Section 5.09. Withholding Taxes. The Indenture Trustee, as agent for the
-----------------
Owner Trustee, shall exclude and withhold from each payment of principal,
premium, if any, and interest and other amounts due hereunder or under the
Equipment Notes, and any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect of the Equipment Notes, it will withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the Holders,
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to each
Holder appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such Holder may reasonably request from time
to time.
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ARTICLE VI
PREPAYMENT OF EQUIPMENT NOTES
Section 6.01. No Prepayment Except as Specified. Except as provided in
---------------------------------
Sections 6.02 and 8.02 hereof, the Equipment Notes may not be prepaid.
Section 6.02. Prepayment of Equipment Notes. (a) The Outstanding
-----------------------------
Equipment Notes shall be prepaid in full and not in part:
(i) If an Event of Loss occurs with respect to the Airframe or with
respect to the Airframe and the Engines or engines then installed on the
Airframe (unless pursuant to Section 8(a)(i) of the Lease and Section 9.08
hereof replacement equipment is substituted for the Airframe and Engines,
if any, subject to such Event of Loss);
(ii) If the Lessee, pursuant to Section 13(b) of the Lease, gives
notice of purchase of the Aircraft (and Section 2.11 hereof is not
applicable in connection with such purchase);
(iii) If the Owner Participant, or the Owner Trustee on behalf of the
Owner Participant, gives notice of prepayment to the Indenture Trustee
pursuant to Section 8.02 hereof;
(iv) If the Lessee, pursuant to Section 14(a) of the Lease, gives
notice of a voluntary termination for obsolescence or surplus, but subject
to Section 6.02(c) below;
(v) Pursuant to Section 13.01 of the Participation Agreement in
connection with a refinancing of the Equipment Notes, but subject to
Section 6.02(c) below; or
(vi) At the option of the Owner Trustee, with the prior written
consent of the Lessee and the Owner Participant, upon not less than 25
days' prior written notice.
(b) In the event of a prepayment of the Equipment Notes pursuant to
Sections 6.02(a)(ii), (iv) or (v) above, the Owner Trustee, a Responsible
Officer of which having received notice from the Lessee in accordance with and
subject to the terms of Section 13(b) or 14(a) of the Lease or Article 13 of the
Participation Agreement, as the case may be, shall give written notice to the
Indenture Trustee and to the Holders of all of the Equipment Notes specifying
the Business Day on which the Equipment Notes shall be prepaid. In the case of a
prepayment of the Equipment Notes pursuant to Section 6.02(a)(i) above, the
Equipment Notes shall be prepaid in full on the Termination Date specified in
Section 8(a)(ii) of the Lease. In the case of a prepayment of the Equipment
Notes pursuant to Section 6.02(a)(ii) above, the Equipment Notes shall be paid
in full on the EBO Date. In the case of a prepayment of the Equipment Notes
pursuant to Section 6.02(a)(iii) above, the Equipment Notes shall be prepaid in
full on the date so designated in the notice referred to in Section 8.02 hereof.
In the case of a prepayment of the Equipment Notes pursuant to Section
6.02(a)(iv) above, the Equipment Notes shall be prepaid in full on the
Termination Date specified in Section 14(a) of the Lease. In the case of a
prepayment of the Equipment Notes pursuant to Section
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6.02(a)(v) above, the Equipment Notes shall be prepaid on the effective date of
the Refinancing. In the case of a prepayment of the Equipment Notes pursuant to
Section 6.02(a)(vi) above, the Equipment Notes shall be prepaid on the date
designated in the notice referred to therein. The day on which the Equipment
Notes are to be prepaid pursuant to this Section 6.02(b) is herein referred to
as the "Prepayment Date".
---------------
On or prior to the Prepayment Date, immediately available funds shall be
deposited with the Indenture Trustee in an amount in respect of the Equipment
Notes equal to:
(1) if such prepayment is made pursuant to Section 6.02(a)(i) or (iii) (if
clause (i), but not clause (ii) or clause (iii) of the first sentence of Section
8.02(a) of the Indenture is applicable and such prepayment is made when an Event
of Default has occurred and been continuing for 180 days or more, or if clause
(ii) or clause (iii) of the first sentence of Section 8.02(a) hereof is
applicable), the sum of (A) the aggregate principal amount of such Equipment
Notes then Outstanding, (B) accrued interest on the Equipment Notes to the
Prepayment Date and (C) all other aggregate sums due the Indenture Trustee
hereunder or under the Participation Agreement or the Lease, but excluding any
Make-Whole Premium or other premium or penalty, or
(2) if such prepayment is made pursuant to Section 6.02(a)(ii) or (iii) (if
clause (i), but not clause (ii) or clause (iii) of the first sentence of Section
8.02(a) of the Indenture is applicable and such prepayment is made when an Event
of Default has occurred and been continuing for less than 180 days) 6.02(a)(iv),
6.02(a)(v) or 6.02(a)(vi) above, the sum of the amounts specified in clauses
(A), (B) and (C) of the preceding clause (1) plus any Make-Whole Premium payable
in respect of all Equipment Notes
(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").
----------------
(c) Notwithstanding the foregoing provisions of this Section 6.02, if (x) a
prepayment notice has been given in respect of Section 6.02(a)(iv) and no
termination of the Lease actually occurs or (y) a prepayment notice has been
given in respect of Section 6.02(a)(v) and no refinancing shall occur pursuant
to Article 13 of the Participation Agreement, any notice of prepayment given
pursuant to Section 6.02(b) in respect thereof shall be deemed revoked.
Section 6.03. Notice of Prepayment to Holders. In order to effect any
-------------------------------
prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give
prompt notice by first class mail of prepayment to each Holder. Any notice of
prepayment given by the Owner Trustee shall be irrevocable except (x) as
provided in Section 6.02(c) or (y) in the case of a notice given pursuant to
Section 6.02(a)(vi), which notice may be revoked by the Owner Trustee at any
time on or before the third Business Day preceding the Prepayment Date by prompt
notice to the Holders.
All notices of prepayment shall state: (1) the Prepayment Date, (2) the
applicable basis for determining the Prepayment Price, (3) that on the
Prepayment Date, subject to the provisions hereof,
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the Prepayment Price will become due and payable and interest on the Equipment
Notes shall cease to accrue on and after such Prepayment Date, and (4) the place
or places where such Equipment Notes are to be surrendered for payment.
Section 6.04. Deposit of Prepayment Price. On the Prepayment Date, the
---------------------------
Owner Trustee shall, to the extent an amount equal to the Prepayment Price shall
not then be held in cash by the Indenture Trustee in immediately available funds
and deposited for the purpose, pay to the Indenture Trustee an amount equal to
the difference between (a) the amount then so held and (b) the Prepayment Price.
If there shall so be on deposit and/or deposited the applicable Prepayment Price
on or prior to a Prepayment Date, interest shall cease to accrue in respect of
all the Outstanding Equipment Notes on and after such Prepayment Date.
Section 6.05. Equipment Notes Payable on Prepayment Date. On the Prepayment
------------------------------------------
Date, the Outstanding Equipment Notes shall (except (A) if the Owner Trustee has
requested the Indenture Trustee to revoke such notice of prepayment in
accordance with Section 6.03 hereof or such notice is deemed to be revoked
pursuant to Section 6.02(c) hereof or (B) as otherwise provided in the Lease)
become due and payable and from and after such Prepayment Date (unless there
shall be a default in the payment of the Prepayment Price) such Equipment Notes
shall cease to bear interest. Upon surrender by any Holder of its Equipment Note
for prepayment in accordance with said notice, such Holder shall be paid the
principal amount of its Equipment Note then outstanding, accrued interest
thereon to the Prepayment Date, all other sums due to such Holder hereunder
plus, if a Make-Whole Premium is payable pursuant to Section 6.02(b) hereof, the
Make-Whole Premium in respect of such Equipment Note.
If any Equipment Note called for prepayment shall not be so paid upon
timely surrender thereof for prepayment, the principal shall, until paid,
continue to bear interest from the Prepayment Date at the interest rate
applicable to such Equipment Note.
ARTICLE VII
INDENTURE EVENTS OF DEFAULT; REMEDIES
OF INDENTURE TRUSTEE AND HOLDERS
Section 7.01. Indenture Event of Default. "Indenture Event of Default"
-------------------------- --------------------------
means any of the following events (whatever the reason for such Indenture Event
of Default and whether it shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) any Event of Default specified in Section 16 of the Lease (other
than an Event of Default arising solely as the result of the failure to
make an Excepted Payment unless the
-27-
Owner Participant shall notify the Indenture Trustee in writing that such
failure shall constitute an Indenture Event of Default); or
(ii) the failure of the Owner Trustee other than by reason of a
Default or an Event of Default (i) to pay principal, interest or Make-Whole
Premium, if any, on any Equipment Note when due, and such failure shall
have continued unremedied for ten Business Days after the date when due or
(ii) to pay any other amounts hereunder or under the Equipment Notes when
due and such failure shall have continued unremedied for a period of 30
days after the Owner Trustee and the Owner Participant shall receive
written demand therefor from the Indenture Trustee or by any Holder; or
(iii) (A) any representation or warranty made by the Owner Trustee,
the Owner Participant or any Owner Participant Guarantor to the Indenture
Trustee or any Holder herein or in the Participation Agreement or its Owner
Participant Guaranty or in any certificate the Owner Trustee, the Owner
Participant or any Owner Participant Guarantor furnished to the Indenture
Trustee or any Holder in connection herewith or therewith or pursuant
hereto or thereto shall prove to have been false or incorrect in any
material respect when made and was and remains in any respect materially
adverse to the interests of the Holders and such misrepresentation shall
not have been corrected within 30 days following notice thereof identified
as a "Notice of Indenture Event of Default" being given to the Owner
------------------------------------
Trustee and the Owner Participant by the Indenture Trustee or by a Majority
in Interest of Holders, unless such misrepresentation is capable of being
corrected, and Owner Trustee or Owner Participant shall, after the delivery
of such notice, be diligently proceeding to correct such misrepresentation
and shall in fact correct such misrepresentation within 60 days after
delivery of such notice; or
(B) any (x) covenant made by the Owner Trustee in the fifth
paragraph following the Habendum Clause hereof or in Section 5.02(b) of the
Participation Agreement shall be breached in any material respect and any such
breach shall not be cured within 10 Business Days after the Owner Participant
has received notice thereof from any Holder or the Indenture Trustee (for
purposes of Section 7.02(b) of the Participation Agreement, it being agreed that
such breach may be cured by replacement of the Owner Trustee), or (y) any other
covenant made by the Owner Trustee, by the Owner Participant or by any Owner
Participant Guarantor to the Indenture Trustee or any Holder in any Operative
Agreement shall be breached in any material respect and such breach shall remain
unremedied for a period of 30 days after there has been given to the Owner
Trustee and the Owner Participant by Holders holding not less than a Majority in
Interest of Holders a written notice identified as a "Notice of Indenture Event
of Default" specifying such breach and requiring it to be remedied unless such
failure is curable and the Owner Trustee or the Owner Participant shall, after
the delivery of such notice, be diligently proceeding to correct such failure
and shall in fact correct such failure 60 days after delivery of such notice; or
(iv) the Owner Trustee, the Lessor's Estate, the Owner Participant or
any Owner Participant Guarantor shall file any petition or answer seeking
for itself any reorganization,
-28-
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future bankruptcy, insolvency or similar
statute, law or regulation;
(v) an order for relief shall be entered in respect of the Owner
Trustee, the Owner Participant or any Owner Participant Guarantor or the
Lessor's Estate by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter in
effect; or the Owner Trustee, the Owner Participant or any Owner
Participant Guarantor or the Lessor's Estate shall file any answer
admitting or not contesting the material allegations of a petition filed
against the Owner Trustee, the Owner Participant or any Owner Participant
Guarantor or the Lessor's Estate in any proceeding referred to in clause
(vi) below or seek or consent or acquiesce in the appointment of any
trustee, custodian, receiver or liquidator of the Owner Trustee, the Owner
Participant or any Owner Participant Guarantor or the Lessor's Estate, as
the case may be, or of all or any substantial part of its properties; or
(vi) without the consent or acquiescence of the Owner Trustee, the
Owner Participant or any Owner Participant Guarantor or the Lessor's
Estate, as the case may be, an order shall be entered constituting an order
for relief or approving a petition for relief or reorganization or any
other petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief under any
present or future bankruptcy, insolvency or similar statute, law or
regulation, or if any such petition shall be filed against the Owner
Trustee, the Owner Participant or any Owner Participant Guarantor or the
Lessor's Estate, as the case may be, and such petition shall not be
dismissed within 60 days, or if, without the consent or acquiescence of the
Owner Trustee, the Owner Participant or any Owner Participant Guarantor or
the Lessor's Estate, as the case may be, an order shall be entered
appointing a trustee, custodian, receiver or liquidator of the Owner
Trustee, the Owner Participant or any Owner Participant Guarantor or the
Lessor's Estate, as the case may be, or of all or any substantial part of
the properties of the Owner Trustee, the Owner Participant or any Owner
Participant Guarantor or the Lessor's Estate, as the case may be, and such
order shall not be dismissed within 60 days.
Section 7.02. Remedies. (a) If an Indenture Event of Default shall have
--------
occurred and be continuing and so long as the same shall be continuing
unremedied, then and in every such case, the Indenture Trustee may, and when
required by the provisions of Article IX or Section 7.02(c) hereof shall, (i)
exercise any or all of the rights and powers and pursue any and all of the
remedies pursuant to this Article VII, and (ii) in the event such Indenture
Event of Default is an Indenture Event of Default referred to in clause (i) of
Section 7.01 hereof, exercise any and all of the remedies pursuant to Section 17
of the Lease; provided that without the consent of the Owner Trustee and the
--------
Owner Participant such exercise of remedies shall not occur until after the
latest date on which the Owner Trustee may cure the related Event of Default
pursuant to Section 8.03 hereof. The Indenture Trustee may (subject to the
provisions of the next succeeding paragraph) take possession of all or any part
of the properties covered or intended to be covered by the Lien and security
interest created hereby or pursuant hereto and may exclude the Owner
Participant, the Owner Trustee, the Lessee and any
-29-
transferee of the Lessee (subject to Section 15.05 hereof), and all Persons
claiming under any of them wholly or partly therefrom. In addition, the
Indenture Trustee may (subject to the provisions of the next succeeding
paragraph) exercise any other right or remedy in lieu of or in addition to the
foregoing that may be available to it under applicable law, or proceed by
appropriate court action to enforce the terms hereof, of the Lease, or both, or
to rescind the Lease. Without limiting any of the foregoing, it is understood
and agreed that the Indenture Trustee may exercise any right of sale of the
Aircraft available to it, even though it shall not have taken possession of the
Aircraft and shall not have possession thereof at the time of such sale.
Anything in this Indenture to the contrary notwithstanding, the Indenture
Trustee shall not be entitled to exercise any remedy hereunder as a result of an
Indenture Event of Default which arises solely by reason of one or more events
or circumstances which constitute a Default or an Event of Default unless the
Indenture Trustee as security assignee of the Owner Trustee shall have declared
the Lease to be in default and shall have exercised or concurrently be
exercising one or more of the dispossessory remedies provided for in Section 17
of the Lease with respect to the Aircraft; provided, however, that such
-------- -------
requirement to exercise one or more of such remedies under the Lease shall not
apply in circumstances where the Indenture Trustee is, and has been, for a
continuous period in excess of the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (such 60-day period being the "Section 1110 Period"),
involuntarily stayed or prohibited by applicable law or court order from
exercising such remedies under the Lease (a "Continuous Stay Period"); provided
--------
further, however, that the requirement to exercise one or more of such remedies
------- -------
under the Lease shall nonetheless be applicable during a Continuous Stay Period
subsequent to the expiration of the Section 1110 Period to the extent that the
continuation of such Continuous Stay Period subsequent to the expiration of the
Section 1110 Period (A) results from an agreement by the Lessee or the trustee
or the debtor-in-possession in such proceeding during the Section 1110 Period
with the approval of the relevant court to perform the Lease in accordance with
Section 1110(a)(2)(A) of the Bankruptcy Code and continues to perform as
required by Section 1110(a)(2)(A-B) of the Bankruptcy Code or (B) is an
extension of the Section 1110 Period with the consent of the Indenture Trustee
pursuant to Section 1110(b) of the Bankruptcy Code or (C) is the consequence of
the Indenture Trustee's own failure to give any requisite notice to any person.
In the event that the applicability of Section 1110 of the Bankruptcy Code to
the Aircraft is being contested by Lessee in judicial proceedings, both of the
Indenture Trustee and the Owner Trustee shall have the right to participate in
such proceedings; provided that any such participation by the Owner Trustee
shall not affect in any way any rights or remedy of the Indenture Trustee
hereunder.
(b) If an Indenture Event of Default under clause (i) (attributable to an
Event of Default under Section 16(f), (g) and (h) of the Lease), (iv), (v) or
(vi) of Section 7.01 hereof shall occur and be continuing, the unpaid principal
of all Outstanding Equipment Notes, together with interest accrued but unpaid
thereon and all other amounts due thereunder, but without Make-Whole Premium,
shall immediately become due and payable, without presentment, demand, protest
or notice, all of which are hereby waived.
-30-
(c) If any Indenture Event of Default not described in the preceding
paragraph (b) shall have occurred and be continuing, then and in every such
case, the Indenture Trustee may on its own accord or at the direction of a
Majority in Interest of Holders, at any time, by written notice to the Owner
Trustee and the Owner Participant, declare the principal of all the Equipment
Notes to be due and payable, whereupon the unpaid principal amount of all
Outstanding Equipment Notes, together with accrued interest thereon and all
other amounts due thereunder, but without Make-Whole Premium, shall immediately
become due and payable without presentment, demand, protest or other notice, all
of which are hereby waived. At any time after such declaration and prior to the
sale or disposition of the Indenture Estate, however, a Majority in Interest of
Holders, by notice to the Indenture Trustee and the Owner Trustee, may rescind
such declaration, whether made by the Indenture Trustee on its own accord or as
directed, if (x) there has been paid or deposited with the Indenture Trustee a
sum sufficient to pay all overdue installments of interest on all Equipment
Notes (together, to the extent permitted by law, with interest on such overdue
installments of interest), the principal on any Equipment Notes that would have
become due otherwise than by such declaration of acceleration, all sums paid or
advanced by the Indenture Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its agents and
counsel, or (y) all Indenture Events of Default (other than the nonpayment of
principal that has become due solely because of such acceleration) have been
either cured or waived as provided in Section 7.11 hereof. No such rescission
shall affect any subsequent default or impair any right consequent thereon.
(d) Each Holder shall be entitled at any sale to credit against any
purchase price bid at such sale by such Holder all or any part of the unpaid
obligations owing to such Holder secured by the Lien of this Indenture (but only
to the extent that an amount equal to such purchase price would have been paid
to such Holder pursuant to Article V hereof if such purchase price were paid in
cash and the foregoing provisions of this subsection (d) were not given effect).
(e) In the event of any sale of the Indenture Estate, or any part thereof,
pursuant to any judgment or decree of any court or otherwise in connection with
the enforcement of any of the term of this Indenture, the unpaid principal
amount of all Equipment Notes then outstanding, together with accrued interest
thereon (without Make-Whole Premium), and other amounts due thereunder, shall
immediately become due and payable without presentment, demand, protest or
notice, all of which are hereby waived.
(f) Notwithstanding anything contained herein, so long as the Pass Through
Trustee under any Pass Through Trust Agreement (or its designee) is a Holder,
the Indenture Trustee will not be authorized or empowered to acquire title to
the Indenture Estate or take any action with respect to the Indenture Estate so
acquired by it if such acquisition or action would cause any Trust to fail to
qualify as a "grantor trust" for federal income tax purposes.
(g) Notwithstanding any other provision of this Indenture, the Indenture
Trustee may not exercise any right or remedy under this Section 7.02 (other than
those specified in Section 7.02(b) or 7.02(c)) (or otherwise foreclose the lien
created by this Indenture or dispossess the Owner Trustee
-31-
of its rights in the Indenture Estate) in respect of an Indenture Event of
Default resulting from or arising out of a Default or Event of Default prior to
the Enforcement Date (as defined in Section 7.11 hereof) in respect of such
Indenture Event of Default.
Section 7.03. Return of Aircraft, etc. (a) Subject to Section 7.02 hereof,
-----------------------
if an Indenture Event of Default shall have occurred and be continuing, at the
request of the Indenture Trustee, the Owner Trustee shall promptly execute and
deliver to the Indenture Trustee such documents as the Indenture Trustee may
reasonably deem necessary or advisable to enable the Indenture Trustee or an
agent or representative designated by the Indenture Trustee, at such time or
times and place or places as the Indenture Trustee may specify, to obtain
possession of all or any part of the Indenture Estate to which the Indenture
Trustee shall at the time be entitled under this Indenture. Subject to the
foregoing, if the Owner Trustee shall for any reason fail to execute and deliver
such documents after such request by the Indenture Trustee, the Indenture
Trustee may pursue all or part of such Indenture Estate wherever it may be found
and enter any of the premises of the Lessee or the Owner Trustee wherever such
Indenture Estate may be or be supposed to be and search for such Indenture
Estate and take possession of and remove such Indenture Estate. All expenses of
pursuing, searching for and taking such Indenture Estate shall, until paid, be
secured by the Lien of this Indenture.
(b) Upon every such taking of possession, the Indenture Trustee may, from
time to time, at the expense of the Indenture Estate, make all such expenditures
for maintenance, use, operation, storage, insurance, leasing, control,
management, disposition, modification, alterations and repairs to and of such
Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each
case subject to Section 7.02 hereof, the Indenture Trustee shall have the right
to maintain, use, operate, store, insure, lease, dispose of, modify, alter,
control or manage the Indenture Estate and to carry on the business and to
exercise all rights and powers of the Owner Participant and the Owner Trustee
relating to the Indenture Estate, as the Indenture Trustee may reasonably deem
best, including the right to enter into any and all such agreements with respect
to the maintenance, insurance, use, operation, storage, leasing, control,
management, modification, alteration or disposition of all or any part of the
Indenture Estate as the Indenture Trustee may determine. Further, the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), revenues, issues, income, products and profits of the
Indenture Estate and every part thereof other than Excepted Payments, without
prejudice, however, to the right of the Indenture Trustee under any provision of
this Indenture to collect and receive all cash held by, or required to be
deposited with, the Indenture Trustee under this Indenture (other than Excepted
Payments). Such tolls, rents (including Rent), revenues, issues, income,
products and profits shall be applied to pay the expenses of the use, operation,
storage, insurance, leasing, control, management, modification, alteration or
disposition of the Indenture Estate, and of all maintenance and repairs, and of
conducting the business thereof, and to make all payments which the Indenture
Trustee may be required or may reasonably elect to make for any taxes,
assessments, insurance or other proper charges upon the Indenture Estate
(including the employment of engineers and accountants to examine, inspect and
make reports upon the properties and books and records of the Owner Trustee and
the Lessee), and all other payments which the Indenture Trustee may be required
or authorized to make under any provision of this Indenture, as well as just and
reasonable compensation for the services of the Indenture Trustee and
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of all persons properly engaged and employed for such purposes by the Indenture
Trustee; provided, that any excess amounts shall be promptly distributed in
--------
accordance with Section 5.03 hereof.
(c) Subject to Section 7.02 hereof, if an Indenture Event of Default shall
have occurred and be continuing and the Indenture Trustee shall be entitled to
exercise remedies hereunder, and subject to Article VIII hereof, the Indenture
Trustee, either with or without taking possession, and either before or after
taking possession, and without instituting any legal proceedings whatsoever, may
sell, assign, transfer and deliver the whole or, from time to time, to the
extent permitted by law, any part of the Indenture Estate, or interest therein,
at any private sale or public auction to the highest bidder, with or without
demand, advertisement or notice, except that in respect of any private sale 30
days' prior written notice by registered mail to the Owner Trustee and the Owner
Participant will be provided, for cash or, with the consent of the Owner Trustee
and the Owner Participant, credit or for other property, for immediate or future
delivery, and for such price or prices and on such terms as the Indenture
Trustee in exercising reasonable commercial discretion may determine; provided,
--------
that any such action shall be at the time lawful and that all mandatory legal
requirements shall be complied with. Any notice required pursuant to the terms
hereof in the case of a public sale, shall state the time and place fixed for
such sale. Any such public sale shall be held at such time or times within
ordinary business hours as the Indenture Trustee shall fix in the notice of such
sale. At any such sale, the Indenture Estate may be sold in one lot as an
entirety or in separate lots. The Indenture Trustee shall not be obligated to
make any sale pursuant to such notice. The Indenture Trustee may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for such
sale, and any such sale may be made at any time or place to which the same may
be so adjourned without further notice or publication. The Indenture Trustee may
exercise such right of sale without possession or production of the Equipment
Notes or proof of ownership thereof, and as representative of the Holders may
exercise such right without notice to the Holders or without including the
Holders as parties to any suit or proceedings relating to the foreclosure of any
part of the Indenture Estate. The Owner Trustee shall execute any and all such
bills of sale, assignments and other documents, and perform and do all other
acts and things reasonably requested by the Indenture Trustee in order to permit
consummation of any sale of the Indenture Estate in accordance with this Section
7.03(c) and to effectuate the transfer or conveyance referred to in the first
sentence of this Section 7.03(c). Notwithstanding any other provision of this
Indenture, the Indenture Trustee shall not sell the Indenture Estate or any part
thereof unless the Equipment Notes shall have been accelerated.
(d) To the extent permitted by Applicable Law, and subject to Section 7.02
hereof, the Indenture Trustee or any Holder may be a purchaser of the Indenture
Estate or any part thereof or any interest therein at any sale thereof, whether
pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may
apply against the purchase price therefor the amount then due hereunder or under
any of the Equipment Notes secured hereby and any Holder may apply against the
purchase price therefor the amount then due to it hereunder, under any other
Indenture Document or under the Equipment Notes held by such Holder to the
extent of such portion of the purchase price as it would have received had it
been entitled to share any distribution thereof. The Indenture Trustee or any
Holder or nominee thereof shall, upon any such purchase, acquire good title to
the property so
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purchased, free of the Lien of this Indenture and, to the extent permitted by
applicable law, free of all rights of redemption in the Owner Trustee or the
Owner Participant in respect of the property so purchased.
(e) The Indenture Trustee shall, as a matter of right, be entitled to the
appointment of a receiver (who may be the Indenture Trustee or any successor or
nominee) for all or any part of the Indenture Estate, whether such receivership
be incidental to a proposed sale of the Indenture Estate or the taking of
possession thereof or otherwise, and the Owner Trustee hereby consents to the
appointment of such receiver and will not oppose any such appointment. Any
receiver appointed for all or any part of the Indenture Estate shall be entitled
to exercise all of the rights and powers of the Indenture Trustee with respect
to the Indenture Estate.
(f) Subject to the provisions of this Indenture, to the extent permitted
by Applicable Law, upon the occurrence and during the continuation of an
Indenture Event of Default the Owner Trustee irrevocably appoints the Indenture
Trustee the true and lawful attorney-in-fact of the Owner Trustee (which
appointment is coupled with an interest) in its name and stead and on its
behalf, for the purpose of effectuating any sale, assignment, transfer or
delivery for the enforcement of the Lien of this Indenture, whether pursuant to
foreclosure or power of sale, assignments and other instruments as may be
necessary or appropriate, with full power substitution, the Owner Trustee hereby
ratifying and confirming all that such attorney or any substitute shall do by
virtue hereof in accordance with applicable law. Nevertheless, if so requested
by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee shall
--------------------------------
fail to pay any amount payable hereunder or under the Equipment Notes, the
Indenture Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Owner Trustee and collect in the manner
provided by law out of the property of the Owner Trustee wherever situated, the
moneys adjudged or decreed to be payable; provided, that any sale of any portion
--------
of the Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.
In case there shall be pending proceedings relative to the Owner Trustee
under the Bankruptcy Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Owner Trustee or its
property, or in case of any other comparable judicial proceedings relative to
the Owner Trustee, or to the creditors or property of the Owner Trustee, the
Indenture Trustee, irrespective of whether the principal of the Equipment Notes
shall then be due and payable as therein or herein expressed or by
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declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal, interest and other amounts owing and unpaid in respect of the
Equipment Notes or hereunder, and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee (including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of the Indenture
Trustee and each predecessor Indenture Trustee, except as a result of
negligence or bad faith) and of the Holders allowed in any judicial
proceedings relative to the Owner Trustee or to the creditors or property
of the Owner Trustee,
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
proceedings or person performing similar functions in comparable
proceedings, and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Holders and of the Indenture Trustee on their
behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Holders to make payments to the Indenture
Trustee, and, in the event that the Indenture Trustee shall consent to the
making of payments directly to the Holders, to pay to the Holders such amounts
as shall be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other reasonable expenses and liabilities
incurred, by the Indenture Trustee and each predecessor Indenture Trustee except
as a result of negligence or willful misconduct.
Nothing contained herein shall be deemed to authorize the Indenture Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Equipment Notes or the rights of any Holder thereof, or to
authorize the Indenture Trustee to vote in respect of the claim of any Holder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and rights to assert claims under this Indenture, or
under any of the Equipment Notes, may be enforced by the Indenture Trustee
without the possession of such Equipment Notes. Any trial or other proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
reasonable expenses, disbursements and compensation of the Indenture Trustee,
each
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predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders, as provided herein.
In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party) the Indenture Trustee shall be
held to represent all the Holders of the Equipment Notes, and it shall not be
necessary to make any Holders parties to such proceedings.
Section 7.05. Remedies Cumulative. Each and every right, power and remedy
-------------------
given to the Indenture Trustee in this Indenture shall be cumulative and shall
be in addition to every other right, power and remedy specifically given herein
or now or hereafter existing at law, in equity or by statute, and each and every
right, power and remedy whether specifically given herein or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Indenture Trustee or the Holders, and the exercise or
the beginning of the exercise of any power or remedy shall not be construed to
be a waiver of the right to exercise at the same time or later any other right,
power or remedy. No delay or omission by the Indenture Trustee or of any Holder
in the exercise of any right, remedy or power or in the pursuance of any remedy
shall impair any such right, power or remedy or be construed to be a waiver of
any default on the part of the Owner Trustee or the Lessee or to be an
acquiescence in any such default.
Section 7.06. Suits for Enforcement. If an Indenture Event of Default has
---------------------
occurred, has not been waived and is continuing, the Indenture Trustee may in
its discretion and subject to its rights of appropriate indemnification under
Sections 7.09 and 9.03 and Article XI hereof proceed to protect and enforce its
rights and rights of the Holders by such appropriate judicial proceedings as the
Indenture Trustee shall deem most effectual to protect and enforce any of such
rights, either at law or in equity or in bankruptcy or otherwise, whether for
the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture or to
enforce any other legal or equitable right vested in the Indenture Trustee or
the Holders by this Indenture or by law; provided that, any sale of any portion
-------- ----
of the Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.
Section 7.07. Discontinuance of Proceedings. In case the Indenture Trustee
-----------------------------
or any Holder shall have instituted any proceeding to enforce any right, power
or remedy under this Indenture by foreclosure, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Indenture Trustee or such Holder, then the
Owner Trustee, the Indenture Trustee, any Owner Participant, the Holders and the
Lessee shall, subject to any binding determination in such proceeding, be
restored to their former positions and rights under this Indenture with respect
to the Indenture Estate, and all rights, remedies and powers of the Indenture
Trustee and the Holders shall continue as if no such proceeding had been
instituted.
Section 7.08. Unconditional Right of Holders to Payments on Equipment
-------------------------------------------------------
Notes. Notwithstanding any other provision in this Indenture and any provision
-----
of any Equipment Note, the right of any Holder to receive payment of the
principal of and interest and Make-Whole Premium,
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if any, on such Equipment Note on or after the respective due dates and in the
manner expressed in such Equipment Note or to institute suit for the enforcement
of any such payment on or after such respective dates as provided herein, shall
not be impaired or affected without the consent of such Holder.
Section 7.09. Control by Holders. The Majority in Interest of Holders shall
------------------
have the right to direct the Indenture Trustee as to the time, method, and place
of conducting any proceeding for any remedy available to the Indenture Trustee
under this Indenture, or exercising any trust or power conferred on the
Indenture Trustee by this Indenture; provided that such direction shall not be
--------
otherwise than in accordance with law and the provisions of this Indenture and
the Indenture Trustee shall have received, to the extent provided in Sections
7.06 and 9.03 and Article XI hereof, such reasonable indemnification as it may
require against the costs, expenses and liabilities to be incurred by the
Indenture Trustee; and provided further that (subject to the provisions of
--------
Section 9.02 hereof) the Indenture Trustee shall have the right to decline to
follow any such direction if the Indenture Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Indenture Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or Responsible Officers
of the Indenture Trustee shall determine that the action or proceedings so
directed would involve the Indenture Trustee in personal liability or if the
Indenture Trustee in good faith shall so determine that the actions or
forbearance specified in or pursuant to such direction shall be unduly
prejudicial to the interests of Holders not joining in the giving of said
direction, it being understood that (subject to Section 9.02 hereof) the
Indenture Trustee shall have no duty to ascertain whether or not such actions or
forbearance are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Indenture Trustee
in its discretion to take any action deemed proper by the Indenture Trustee and
which is not inconsistent with the direction by the Majority in Interest of
Holders.
Section 7.10. Waiver of Past Indenture Default. Upon written instructions
--------------------------------
from the Majority in Interest of Holders, the Indenture Trustee shall waive any
past Indenture Default and its consequences and upon any such waiver such
Indenture Default shall cease to exist and any Indenture Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other Indenture
Default or impair any right consequent thereon; provided, however, that in the
-------- -------
absence of written instructions from all Holders and each Liquidity Provider,
the Indenture Trustee shall not waive any Indenture Default (a) in the payment
of the principal of or Make-Whole Premium, if any, or interest on, or other
amounts due under, any Equipment Note then Outstanding, or (b) in respect of a
covenant or provision of this Indenture which, under Article XIII hereof, cannot
be modified or amended without the consent of each Holder.
Section 7.11. Notice of Indenture Default. The Indenture Trustee shall
---------------------------
transmit to the Owner Trustee, the Holders, the Liquidity Provider and the Owner
Participant notice of any Indenture Event of Default actually known to a
Responsible Officer of the Indenture Trustee or any
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Indenture Event of Default or Indenture Default arising under Section 7.01(i)
(arising out of a Lease Event of Default under Section 16(a) of the Lease) or
7.01(ii), such notice to be transmitted by mail to the Holders, the Liquidity
Provider, the Owner Trustee and any Owner Participant promptly after the
occurrence thereof, unless any such Indenture Default or Indenture Event of
Default shall have been cured before the giving of such notice; provided that,
-------------
except in the case of default in the payment of the principal of or interest on
or any other amount due under any of the Equipment Notes, the Indenture Trustee
shall be protected in withholding such notice to the Holders if and so long as
the board of directors, the executive committee, or a trust committee of
directors or trustees and/or Responsible Officers of the Indenture Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders. In the case of any Indenture Event of Default relating to or
arising out of a Default or an Event of Default, the Indenture Trustee agrees to
give the Holders, the Owner Trustee and the Owner Participant not less than ten
Business Days prior notice of the date (the "Enforcement Date") on which the
Indenture Trustee may commence the exercise of any remedy made under Section
7.02 (other than those specified in Section 7.02(b) or 7.02(c)).
ARTICLE VIII
RIGHTS OF THE OWNER TRUSTEE
AND THE OWNER PARTICIPANT
Section 8.01. Certain Rights of Owner Trustee and Owner Participant. (a)
-----------------------------------------------------
Except as provided in paragraph (a) immediately following the Granting Clause
hereof and in Section 13.01 hereof, without the consent of a Majority in
Interest of Holders, the Owner Trustee may not modify, amend or supplement any
of the Indenture Documents, or give any consent, waiver, authorization or
approval thereunder, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions thereof or of modifying in any
manner the rights of the respective parties thereunder; provided, however, that
-------- -------
the actions specified in subsection (b) of this Section 8.01 may be taken
without the consent of the Indenture Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this Section 8.01, the
Owner Trustee, at any time and from time to time, without the consent of the
Indenture Trustee or of any Holder, may:
(1) so long as no Indenture Event of Default shall have occurred and be
continuing, modify, amend or supplement the Lease, or give any consent, waiver,
authorization or approval with respect thereto, except that without compliance
with subsection (a) of this Section 8.01 the Owner Trustee shall not modify,
amend or supplement, or give any waiver for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of the respective parties thereunder, with
respect to the following provisions of the Lease as in effect on the date
hereof: Sections 2, 3(c) (except to the extent such Section relates to amounts
payable (whether directly or pursuant to this Indenture) to Persons other than
Holders,
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each Liquidity Provider, the Subordination Agent and the Indenture Trustee in
its individual capacity), 3(e) (except insofar as it relates to the address or
account information of the Owner Trustee or the Indenture Trustee), 3(f), 3(g),
4, 6 (except in order to increase the Lessee's liabilities or enhance the
Lessor's or the Owner Participant's rights thereunder), 8 (except that
additional requirements may be imposed on the Lessee), 9 (except for Section
9(f) and except that additional insurance requirements may be imposed on the
Lessee), 10, 11(b) (except to impose additional requirements on the Lessee)
14(a) (except that further restrictions may be imposed on the Lessee), 16
(except to impose additional or more stringent Events of Default), 17 (except to
impose additional remedies), 20(b) and 23(e) and any definition of terms used in
the Lease, to the extent that any modification of such definition would result
in a modification of the Lease not permitted pursuant to this subsection (b);
provided that the Owner Trustee may take any such action without the consent of
--------
the Indenture Trustee or any Holder to the extent such action relates to the
payment of amounts constituting, or the Owner Trustee's, the Owner Participant's
or the Lessee's rights or obligations with respect to, Excepted Payments;
(2) modify, amend or supplement the Trust Agreement and any other
Indenture Document (other than the Lease and the Participation Agreement), or
give any consent, waiver, authorization or approval with respect thereto, in
each case only to the extent any such action shall not materially adversely
impact the interests of the Holders;
(3) modify, amend or supplement the Participation Agreement, or give any
consent, waiver, authorization or approval with respect thereto, except that
without compliance with subsection (a) of this Section 8.01 the Owner Trustee
shall not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding provisions to or changing in
any manner or eliminating any of the provisions thereof or of modifying in any
manner the rights of the respective parties thereunder, with respect to the
following provisions of the Participation Agreement as in effect on the date
hereof: Article 4 and Section 8.01(b) (insofar as such Article 4 and Section
8.01(b) relate to the Indenture Trustee, the Pass-Through Trustee and the
Holders), Articles 5, 6 and 7 and Sections 13.01 and 15.08 (insofar as such
Articles and Sections relate to the Indenture Trustee; it being understood that
only the Indenture Trustee's consent in respect thereof need be obtained) and
any definition of terms used in the Participation Agreement, to the extent that
any modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b); and
(4) modify, amend or supplement any of the Indenture Documents in order to
cure any ambiguity, to correct or supplement any provisions thereof which may be
defective or inconsistent with any other provision thereof or of any provision
of this Indenture, or to make any other provision with respect to matters or
questions arising thereunder or under this Indenture which shall not be
inconsistent with the provisions of this Indenture, provided the making of any
such other provision shall not adversely affect the interests of the Holders.
(c) No modification, amendment, supplement, consent, waiver, authorization
or approval with respect to the Lease or the Participation Agreement, whether
effected pursuant to subsection
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(a) or pursuant to subsection (b) of this Section 8.01 and anything in such
subsections or elsewhere in this Indenture to the contrary notwithstanding,
shall, without the consent of the Holder of each Outstanding Equipment Note
affected thereby, and each Liquidity Provider,
(1) modify, amend or supplement the Lease in such a way as to (a) extend
the time of payment of Basic Rent or Termination Value or Supplemental Rent
payable to the Holders or any Liquidity Provider or any other amounts payable
for the account of the Holders or any Liquidity Provider (subject in any event
to Section 3(f) of the Lease) upon the occurrence of an Event of Loss or
Termination Value and any other amounts payable for the account of the Holders
(subject in any event to Section 3(f) of the Lease) upon termination of the
Lease with respect to the Aircraft payable under, or as provided in, the Lease
as in effect on the Delivery Date, or (b) reduce the amount of any installment
of Basic Rent or Supplemental Rent so that the same is less than the payment of
principal of, and interest on the Equipment Notes and Make-Whole Premium, if
any, and amounts due to each Liquidity Provider, as the case may be, to be made
from such installment of Basic Rent or Supplemental Rent, or (c) reduce the
aggregate amount of Termination Value, or any other amounts payable under, or as
provided in, the Lease as in effect on the Delivery Date, upon the occurrence of
an Event of Loss so that the sum of the same is, as of the applicable
Termination Date, less than the accrued interest on and the principal of the
Equipment Notes at the time Outstanding or (d) reduce the aggregate amount of
Termination Value and any other amounts payable under, or as provided in, the
Lease as in effect on the Delivery Date, upon termination of the Lease with
respect to the Aircraft so that the sum of the same is, as of the applicable
Termination Date, less than the accrued interest on, principal of and Make-Whole
Premium, if any, of Equipment Notes at the time Outstanding, or
(2) modify, amend or supplement the Lease in such a way as to, or consent
to any assignment of the Lease or give any consent, waiver, authorization or
approval which would, release the Lessee from its absolute and unconditional
obligations in respect of payment of Basic Rent or Supplemental Rent, or
Termination Value and any other amounts payable for the account of the Holders
(subject in any event to Section 3(f) of the Lease) upon the occurrence of an
Event of Loss, or Termination Value and any other amounts payable for the
account of the Holders (subject in any event to Section 3(f) of the Lease) with
respect to the Aircraft, payable under, or as provided in, the Lease as in
effect on the Delivery Date, except as provided in the Lease as in effect on the
Delivery Date.
(d) At all times so long as this Indenture is in effect and notwithstanding
that an Indenture Event of Default has occurred and is continuing, the consent
of the Owner Trustee (at the direction of the Owner Participant) shall be
required in order (i) to amend, modify or supplement the Lease or any other
Operative Agreement to which the Owner Trustee is a party or to waive compliance
by the Lessee or any other party with any of its obligations thereunder and (ii)
to grant any consent requested under the Lease or any other Operative Agreement
to which the Owner Trustee is a party.
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Notwithstanding the foregoing, but subject always to Section 15.05 hereof, the
Indenture Trustee shall at all times have the right, to the exclusion of the
Owner Trustee and the Owner Participant, to (A) declare the Lease to be in
default under Section 17 (other than with respect to Excepted Payments) thereof
and (B) subject only to the provisions of this Indenture, exercise the remedies
set forth in Section 17 of the Lease (other than in connection with Excepted
Payments).
Nothing in this Indenture shall be deemed to prohibit the Owner Participant
or the Owner Trustee from making demand on the Lessee for, or from commencing an
action at law to obtain the payment of, or from receiving payment of, any
Excepted Payment; provided, however, that if the Owner Trustee is proceeding
under the Lease, the Owner Trustee shall proceed pursuant to Section 17(e), and
only Section 17(e), of the Lease.
Section 8.02. Owner Participant's Right to Prepay or Purchase the Equipment
-------------------------------------------------------------
Notes. (a) If (i) an Event of Default shall have occurred and be continuing,
-----
(ii) the Indenture Trustee shall have taken action, or notified the Owner
Trustee and the Owner Participant that it intends to take action, to foreclose
the Lien of this Indenture or otherwise commence the exercise of any significant
remedy under Section 7.02 of this Indenture or Section 17 of the Lease or (iii)
the Equipment Notes shall have become due and payable pursuant to Section
7.02(b) or (c) hereof, the Owner Participant (or the Owner Trustee on behalf of
the Owner Participant) may (but shall be under no obligation to) do either of
the following:
(1) direct the Owner Trustee to cause the prepayment of all, but not less
than all, of the Equipment Notes then Outstanding by notifying the Indenture
Trustee of such election, which notice in order to be effective shall state that
it is irrevocable and shall designate a Prepayment Date which shall be a
Business Day which shall be not less than 15 days after the date of such notice
on which the Owner Trustee shall, in the manner provided for in Section 6.04
hereof, deposit the sum of amounts contemplated by paragraph "first" under
-----
Section 5.03 and the aggregate Prepayment Price (determined in accordance with
Section 6.02(b) hereof) of all such Equipment Notes with the Indenture Trustee.
If such payment by the Owner Trustee to the Indenture Trustee is made, the
Equipment Notes shall cease to accrue interest from and after the Prepayment
Date, and after distribution of such payment to the Holders, the Indenture
Trustee shall release the Indenture Estate from the Lien of this Indenture; or
(2) purchase all, but not less than all, of the Outstanding Equipment Notes
by notifying the Indenture Trustee of such election, which notice in order to be
effective shall state that it is irrevocable and shall designate a date which
shall be a Business Day which shall be not less than 15 days after the date of
such notice on which the Owner Trustee shall pay to the Indenture Trustee an
amount equal to the aggregate unpaid principal amount of all Outstanding
Equipment Notes, together with accrued interest on such amount to the date of
purchase, plus all other sums due any Holder or the Indenture Trustee hereunder
or under the Participation Agreement or the Lease, but without any Make-Whole
Premium (provided that the Make-Whole Premium shall be included if the purchase
is made pursuant to clause (a)(i) above (but not pursuant to clause (a)(ii) or
(a)(iii) above) when the Event of Default shall have occurred and been
continuing for less than 180 days). Upon receipt by
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the Indenture Trustee of such amount, each Holder will be deemed, whether or not
Equipment Notes shall have been delivered to the Indenture Trustee on such date,
to have thereupon sold, assigned, transferred and conveyed (and shall promptly
take such actions as the Owner Participant shall reasonably request to evidence
such sale, assignment, transfer and conveyance) to the Owner Participant
(without recourse or warranty of any kind except for its own acts), all of the
right, title and interest of such Holder in and to the Indenture Estate and this
Indenture and all Equipment Notes held by such Holder and the former Holders
shall not be entitled to receive any interest on the principal amount of such
Equipment Notes after the purchase date, and the Owner Participant shall be
deemed to have assumed (and shall promptly take such actions as any Holder shall
reasonably request to evidence such assumption) all of such Holder's obligations
under the Participation Agreement and this Indenture arising subsequent to such
sale. If the Owner Trustee shall so request, such Holder will comply with all
the provisions of Section 2.06 of this Indenture to enable new Equipment Notes
to be issued to the Owner Participant in such authorized denominations as the
Owner Participant shall request. All charges and expenses required pursuant to
Section 2.06 hereof in connection with the issuance of any such new Equipment
Notes shall be borne by the Owner Participant.
(b) From and after the deposit by the Owner Trustee of the applicable
Prepayment Price or purchase price with the Indenture Trustee pursuant to
Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all
rights and remedies of the Indenture Trustee under Article VII hereof as well as
all rights and remedies of the Lessor under the Lease.
Section 8.03. Certain Rights of Owner Participant. (a) If (A) there shall
-----------------------------------
occur an Event of Default under the Lease as a result of the Lessee's failure to
make any payment of an installment of Basic Rent, and (B) the Owner Trustee
shall have paid or caused to be paid on or prior to the date which is 15
Business Days after the Owner Participant's receipt of written notice of such
Event of Default all principal and interest on the Equipment Notes then due (as
well as any interest on overdue principal and (to the extent permitted by
applicable law) interest), but not including any principal or interest becoming
due on account of such Event of Default, then the failure of the Lessee to make
the payment of such installment of Basic Rent or of interest on account of such
installment's being overdue shall not constitute or result in an Indenture Event
of Default under this Indenture and any declaration based solely on the same
shall be deemed to be automatically rescinded. Nothing contained in the
preceding sentence shall be deemed to entitle the Owner Trustee to exercise any
rights and powers or pursue any remedies pursuant to Section 17 of the Lease or
otherwise except as set forth in this Indenture, and except that the Owner
Trustee or the Owner Participant may attempt to recover any amount paid by it or
them under this Indenture by demanding of the Lessee payment of such amount or
by an appropriate court action for the payment of such amount and/or to recover
damages for the breach of the Lease. Upon curing any such Event of Default
pursuant to this Section 8.03, the Owner Trustee or the Owner Participant, as
the case may be, shall be subrogated on an unsecured basis to all the rights of
the Indenture Trustee under the Lease in respect of the payment giving rise to
such Event of Default, and any right to any interest in respect of the same, and
shall be entitled to any payment of Basic Rent (or interest thereon) actually
made by the Lessee in respect of such cured payment upon receipt by the
Indenture Trustee; provided that no such
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amount shall be paid to the Owner Trustee or the Owner Participant until all
amounts then due and payable to each Holder hereunder and thereunder shall have
been paid in full and no Indenture Event of Default shall have occurred and be
continuing and the Owner Trustee will not be entitled to recover any such
payments, except pursuant to the foregoing right of subrogation, by demand or
suit for damages. Notwithstanding anything in this Indenture or the Lease to the
contrary, the Owner Participant and the Owner Trustee collectively, shall not be
entitled to cure more than six Events of Default (no more than three of which
may be consecutive) occasioned by defaults in the payment of Basic Rent.
(b) If (A) there shall occur an Event of Default under the Lease for any
reason other than the Lessee's failure to make any payment of an installment of
Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken such
action necessary to cure and shall have cured such Event of Default prior to the
date which is 15 Business Days after the Owner Participant's receipt of the
written notice of such Event of Default, then the failure of the Lessee to
perform such covenant, condition or agreement, the observance or performance of
which was accomplished by the Owner Trustee hereunder shall not constitute or
result in an Indenture Event of Default under this Indenture and any declaration
based solely on the same shall be deemed to be automatically rescinded. Nothing
contained in the preceding sentence shall be deemed to entitle the Owner Trustee
or the Owner Participant to exercise any rights and powers or pursue any
remedies pursuant to Section 17 of the Lease or otherwise except as set forth in
this Indenture, and except that the Owner Trustee or the Owner Participant may
attempt to recover any amount paid by it or them in effecting such cure by
demanding of the Lessee payment of such amount, plus any interest due, or by
commencing an action at law or in equity against the Lessee for the payment of
such amount or by an appropriate court action for the payment of such amount
and/or to recover damages for the breach of the Lease. Upon curing any such
Event of Default pursuant to this Section 8.03(b), the Owner Trustee or the
Owner Participant, as the case may be, shall be subrogated to all the rights of
the Indenture Trustee under the Lease in respect of the payment, agreement or
covenant giving rise to such Event of Default, and any right to any interest in
respect of the same, and shall be entitled to any payment or other performance
upon receipt by the Indenture Trustee; provided that no such amount shall be
paid to the Owner Trustee or the Owner Participant until all amounts then due
and payable to each Holder hereunder and thereunder shall have been paid in full
and no Indenture Event of Default shall have occurred and be continuing.
ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
Section 9.01. Acceptance of Trusts. The Indenture Trustee in its individual
--------------------
capacity hereby accepts the trusts imposed upon it by this Indenture, and
covenants and agrees to perform the same as expressed herein and agrees to
receive and disburse all moneys constituting part of the Indenture Estate in
accordance with the terms hereof.
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Section 9.02. Duties Before, and During, Existence of Indenture Event of
----------------------------------------------------------
Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture
-------
Event of Default and after the curing or waiving of all Indenture Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. So long as an Indenture
Event of Default has occurred and has not been cured or waived, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own gross negligence (or any simple
negligence in the handling of funds) or its own willful misconduct, except that:
(i) prior to the occurrence of an Indenture Event of Default and
after the curing or waiving of all Indenture Events of Default which may
have occurred:
(x) the duties and obligations of the Indenture Trustee shall be
determined solely by the express provisions of this Indenture, and the
Indenture Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read in to this Indenture
against the Indenture Trustee; and
(y) in the absence of bad faith on the part of the Indenture
Trustee, the Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
any statements, certificates or opinions furnished to the Indenture Trustee
and conforming to the requirements of this Indenture; but in the case of
any such statements, certificate or opinions which by any provision hereof
are specifically required to be furnished to the Indenture Trustee, the
Indenture Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Indenture Trustee, unless it shall be proved that the
Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action taken or not taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in aggregate principal
amount of Outstanding Equipment Notes relating to the time, method and
place of conducting any proceeding for any remedy available to the
Indenture Trustee, or exercising any trust or power conferred upon the
Indenture Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any
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of its duties or in the exercise of any of its rights or powers, if the
Indenture Trustee shall have determined in good faith that the repayment of such
funds or adequate indemnity against such liability is not reasonably assured to
it.
The Indenture Trustee agrees that it will execute and the Owner Trustee
agrees that it will, at the expense of the Lessee, file or cause to be filed
such continuation statements with respect to financing statements relating to
the security interest created hereunder in the Indenture Estate as may be
specified from time to time in written instructions of the Holders of not less
than 25% in aggregate principal amount of Equipment Notes (which instructions
may, by their terms, be operative only at a future date and which shall be
accompanied by the execution form of such continuation statement so to be
filed); provided that, notwithstanding the foregoing, the Indenture Trustee may
execute and file or cause to be filed any financing statement which it from time
to time deems appropriate.
(b) [Reserved].
(c) The Indenture Trustee agrees that it will, in its individual capacity
and at its own cost and expense (but without any right of indemnity in respect
of any such cost or expense under Article XI hereof or under any other Operative
Agreement) promptly take such action as may be necessary duly to discharge all
Indenture Trustee's Liens on any part of the Indenture Estate.
(d) [Reserved]
(e) The Indenture Trustee will furnish to each Holder promptly upon receipt
thereof, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to the
Indenture Trustee, to the extent that the same shall not have been otherwise
furnished to such Holder pursuant to this Indenture or to the extent the
Indenture Trustee does not reasonably believe that the same shall have been
furnished by the Lessee directly to such Holder.
Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section
---------------------------------------
9.02 hereof:
(a) the Indenture Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Owner Trustee mentioned
herein shall be sufficiently evidenced by an Officer's Certificate (unless other
evidence in respect thereof be herein specifically prescribed) upon which the
Indenture Trustee may rely to prove or establish a matter set forth therein;
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(c) the Indenture Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Indenture Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred therein or thereby;
(e) the Indenture Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Indenture Event of Default hereunder
and after the curing or waiving of all Indenture Events of Default, the
Indenture Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, appraisal, bond, debenture,
note, coupon, security, or other paper or document unless requested in writing
to do so by the Majority in Interest of Holders; provided that, if the payment
within a reasonable time to the Indenture Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture, the
Indenture Trustee may require reasonable indemnity against such costs, expenses
or liabilities as a condition to proceeding; the reasonable expenses of every
such examination shall be paid by the Owner Trustee or, if paid by the Indenture
Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon
demand; and
(g) the Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys not regularly in its employ and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
Section 9.04. Indenture Trustee Not Responsible for Recitals,
----------------------------------------------
Equipment Notes, or Proceeds. The Indenture Trustee assumes no responsibility
----------------------------
for the correctness of the recitals contained herein and in the Equipment Notes,
except the Indenture Trustee's certificates of authentication. The Indenture
Trustee makes no representation as to the validity or sufficiency of this
Indenture or of the Equipment Notes. The Indenture Trustee shall not be
accountable for the use or application by the Owner Trustee of any of the
Equipment Notes or of the proceeds thereof.
Section 9.05. Indenture Trustee and Agents May Hold Equipment Notes;
-----------------------------------------------------
Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in
----------------
its individual or any other capacity
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may become the owner or pledgee of Equipment Notes with the same rights it would
have if it were not the Indenture Trustee or such agent and may otherwise deal
with the Owner Trustee and receive, collect, hold and retain collections from
the Owner Trustee with the same rights it would have if it were not the
Indenture Trustee or such agent.
Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections
--------------------------------
5.08 and 14.04 hereof, all moneys received by the Indenture Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received, but need not be segregated from other funds except to the
extent required by mandatory provisions of law. Neither the Owner Trustee nor,
subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof
shall be under any liability for interest on any moneys received by it
hereunder.
Section 9.07. Right of Indenture Trustee to Rely on Officer's
-----------------------------------------------
Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the
----------------
administration of the trusts of this Indenture the Indenture Trustee shall deem
it necessary or desirable that a matter be proved or established prior to taking
or suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be specifically prescribed herein) may, in the
absence of bad faith on the part of the Indenture Trustee, be deemed to be
conclusively proved and established by an Officer's Certificate delivered to the
Indenture Trustee, and such certificate, in the absence of bad faith on the part
of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any
action taken, suffered or omitted by it under the provisions of this Indenture
upon the faith thereof.
Section 9.08. Replacement Airframes and Replacement Engines. At any
---------------------------------------------
time and from time to time any Airframe or Engine may, or is required to, be
replaced under Section 8(a) or 7(e) of the Lease by a Replacement Airframe or
Replacement Engine, as the case may be, shall be replaced in accordance with the
provisions of this Section 9.08 and the provisions of such Sections of the
Lease, the Owner Trustee shall, from time to time, direct the Indenture Trustee
to execute and deliver to or as directed in writing by the Owner Trustee an
appropriate instrument releasing such Airframe and/or Engine as appropriate from
the Lien of this Indenture and the Indenture Trustee shall execute and deliver
such instrument as aforesaid without recourse or warranty, but only upon receipt
by or deposit with the Indenture Trustee of the following:
(1) A written request from the Owner Trustee requesting such release
and specifically describing the Airframe and/or Engine(s) to be so released.
(2) A certificate signed by a duly authorized officer of the Lessee
stating the following:
A. With respect to the replacement of any Airframe:
(i) a description of the Airframe subject to the Event of Loss
including the manufacturer, model, FAA registration number (or other
applicable registration information) and manufacturer's serial number;
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(ii) a description of the Replacement Airframe, including the
manufacturer, model, FAA registration number (or other applicable
registration information) and manufacturer's serial number;
(iii) that on the date of the supplement to this Indenture relating
to the Replacement Airframe the Owner Trustee will be the legal owner of
and have good title to such Replacement Airframe free and clear of all
Liens except Permitted Liens, that such Replacement Airframe will on such
date be in at least as good operating condition and repair as required by
the terms of the Lease, and that such Replacement Airframe has been or,
substantially concurrently with such replacement, will be duly registered
in the name of the Owner Trustee under the Transportation Code or under the
law then applicable to the registration of the Airframe subject to the
Event of Loss and that an airworthiness certificate has been duly issued
under the Transportation Code (or such other applicable law) with respect
to such Replacement Airframe and that such registration and certificate is,
or will be, in full force and effect, and that the Lessee will have the
full right and authority to use such Replacement Airframe;
(iv) that the insurance required by Section 9 of the Lease is in
full force and effect with respect to such Replacement Airframe ;
(v) that the Replacement Airframe is of the same or an improved
make or model as the Airframe requested to be released from this Indenture;
(vi) that the value of the Replacement Airframe as of the date of
such certificate is not less than the value of the Airframe requested to be
released (assuming such Airframe was in the condition and repair required
to be maintained under the Lease);
(vii) that no Event of Default exists or would result from the making
and granting of the request for release and the addition of a Replacement
Airframe;
(viii) that the release of the Airframe subject to the Event of Loss
will not impair the security of this Indenture in contravention of any of
the provisions of this Indenture;
(ix) that upon such replacement, the Lien of this Indenture will
apply to the Replacement Airframe and such Lien will be a first priority
security interest in favor of the Indenture Trustee; and
(x) that each of the conditions specified in Section 8(d) of the
Lease with respect to such Replacement Airframe has been satisfied.
B. With respect to the replacement of any Engine:
(i) a description of the Engine subject to the Event of Loss
including the manufacturer's serial number;
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(ii) a description of the Replacement Engine including the
manufacturer's name, the engine model and serial number;
(iii) that on the date of the supplement to this Indenture relating to
the Replacement Engine the Owner Trustee will be the legal owner of such
Replacement Engine free and clear of all Liens except Permitted Liens, and
that such Replacement Engine will on such date be in at least as good
operating condition and repair as required by the terms of the Lease and
will otherwise conform to the requirements set forth in the definition of
"Replacement Engine";
(iv) that the value of the Replacement Engine as of the date of such
certificate is not less than the value of the Engine to be released
(without regard to the number of hours or cycles remaining until the next
scheduled maintenance visit, and assuming such Engine was in the condition
and repair required to be maintained under the Lease);
(v) that the release of the Engine subject to the Event of Loss will
not impair the security of this Indenture in contravention of any of the
provisions of this Indenture;
(vi) that upon such replacement, the Lien of this Indenture will
apply to the Replacement Engine and such Lien will be a first priority
security interest in favor of the Indenture Trustee; and
(vii) that each of the conditions specified in Section 7(e) of the
Lease with respect to such Replacement Engine has been satisfied.
(3) The appropriate instruments (i) transferring to the Owner Trustee
title to the Replacement Airframe or Replacement Engine to be received as
consideration for the Airframe or Engine to be released and (ii) assigning to
the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if
any, generally available with respect to such Replacement Airframe or
Replacement Engine, and a supplement to this Indenture subjecting such
Replacement Airframe or Replacement Engine to the Trust Agreement and to the
Lien of this Indenture.
(4) A certificate from a firm of independent aircraft appraisers of
national standing reasonably satisfactory to the Indenture Trustee and the Owner
Trustee confirming the accuracy of the information set forth in clause (2)A(vi)
of this Section 9.08.
(5) The opinions of counsel to the Lessee (which may be Lessee's General
Counsel), or (with respect to those matters set forth in clause (ii) below
relating to the filing of documents pursuant to the Transportation Code) of the
Lessee's special aviation counsel, or (in either case) other counsel reasonably
satisfactory to the Indenture Trustee, stating that:
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(i) the certificates, opinions and other instruments and/or property
which have been or are therewith delivered to and deposited with the
Indenture Trustee conform to the requirements of this Indenture and the
Lease and, upon the basis of such application, the property so sold or
disposed of may be properly released from the Lien of this Indenture and
all conditions precedent herein provided for relating to such release have
been complied with; and
(ii) the Replacement Airframe or Replacement Engine has been validly
subjected to the Lien of this Indenture and covered by the Lease, the
instruments subjecting such Replacement Airframe or Replacement Engine to
the Lease and to the Lien of this Indenture, as the case may be, have been
duly filed for recordation pursuant to the Transportation Code or any other
law then applicable to the registration of the Aircraft, and no further
action, filing or recording of any document is necessary or advisable in
order to establish and perfect the title of the Owner Trustee to and the
Lien of this Indenture on such Replacement Airframe or Replacement Engine
and, with respect to a Replacement Airframe, the Indenture Trustee would be
entitled to the benefits of Section 1110 of the Bankruptcy Code with
respect to such Replacement Airframe, provided, that such opinion need not
be to the effect specified in the foregoing clause to the extent that the
benefits of such Section 1110 would not have been, by reason of a change in
law or governmental interpretation thereof after the date hereof, available
to the Indenture Trustee with respect to the Aircraft immediately prior to
such substitution had such Event of Loss not occurred.
Section 9.09. Indenture Supplement for Replacements. In the event of the
-------------------------------------
substitution of a Replacement Airframe or a Replacement Engine as contemplated
by Section 8(a) or 7(e) of the Lease, as the case may be, the Owner Trustee and
the Indenture Trustee agree for the benefit of the Holders and the Lessee,
subject to fulfillment of the conditions precedent and compliance by the Lessee
with its obligations set forth in Section 8(a) or 7(e) of the Lease, as the case
may be, to execute and deliver a supplement to this Indenture as contemplated by
Section 9.08(3) hereof and, provided no Event of Default shall have occurred and
be continuing, execute and deliver to the Lessee an appropriate instrument
releasing the Airframe or Engine being replaced from the Lien of this Indenture.
Section 9.10. Effect of Replacement. In the event of the substitution of a
---------------------
Replacement Airframe or a Replacement Engine as contemplated by Section 8(a) or
7(e) of the Lease, as the case may be, and Section 9.08 hereof, all provisions
of this Indenture relating to the Airframe or Engine or Engines being replaced
shall be applicable to such Replacement Airframe or Replacement Engine or
Engines with the same force and effect as if such Replacement Airframe or
Replacement Engine or Engines were the same Airframe or engine or engines, as
the case may be, as the Airframe or Engine or Engines being replaced but for any
Event of Loss with respect to the Airframe or Engine or Engines being replaced.
Section 9.11. Compensation. The Owner Trustee covenants and agrees to pay,
------------
and the Indenture Trustee shall be entitled to receive, reasonable compensation
and payment or
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reimbursement for its reasonable advances, expenses and disbursements (including
the reasonable compensation and expenses and disbursements of its counsel,
agents and other persons not regularly in its employ) in connection with its
services rendered hereunder or in any way relating to or arising out of the
administration of the Indenture Estate and shall have a priority claim on the
Indenture Estate for the payment of such compensation, advances, expenses and
disbursements to the extent that such compensation, advances, expenses and
disbursements shall not be paid by the Lessee, and shall have the right to use
or apply any moneys held by it hereunder in the Indenture Estate toward such
payments; provided that, so long as the Lease is in effect, the Indenture
Trustee shall not make any claim for payment under this Section 9.11 against the
Owner Trustee or use or apply such moneys without first making demand on the
Lessee for payment of such claim. The Indenture Trustee agrees that it shall
have no right against any Holder (except as provided in Section 9.03(d) above),
Trust Company, or the Owner Participant for any fee as compensation for its
services as trustee under this Indenture.
ARTICLE X
CONCERNING THE HOLDERS
Section 10.01. Evidence of Action Taken by Holders. (a) Any request,
-----------------------------------
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee and, if
expressly required herein, to the Owner Trustee. Proof of execution of any
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof)
conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in
the manner provided in this Article.
(b) For the purpose of determining the Holders entitled to vote or consent
to any direction, waiver or other action of such Holders under Section 7.10 or
7.11 hereof, the Lessee may set a record date for such vote or consent by
specifying such record date in an Officer's Certificate delivered to the
Indenture Trustee. Such record date shall be a date not more than 15 days prior
to the first solicitation of such vote or consent.
Section 10.02. Proof of Execution of Instruments and of Holding of
---------------------------------------------------
Equipment Notes. Subject to Sections 9.02 and 9.03 hereof, the execution of any
---------------
instrument by a Holder or his agent or proxy may be proved in accordance with
such reasonable rules and regulations as may be prescribed by the Indenture
Trustee. The holding of Equipment Notes shall be proved by the Register or by a
certificate of the Registrar.
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Section 10.03. Holders to Be Treated as Owners. Prior to due presentment
-------------------------------
for registration of transfer of any Equipment Note, the Owner Trustee, the
Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the
Paying Agent, if any, the Registrar and the Lessee shall deem and treat the
Person in whose name such Equipment shall be registered upon the Register as the
absolute owner of such Equipment Note (whether or not such Equipment Note shall
be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the principal
of and, subject to the provisions of this Indenture, interest on such Equipment
Note and for all other purposes; and neither the Owner Trustee nor the Indenture
Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the
Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any
notice to the contrary. All such payments so made to any such person, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Equipment Note.
Section 10.04. Equipment Notes Owned by Owner Trustee or Lessee Deemed Not
-----------------------------------------------------------
Outstanding. In determining whether the Holders of the requisite aggregate
-----------
principal amount of Equipment Notes have concurred in any direction, consent or
waiver under this Indenture, Equipment Notes which are owned by the Owner
Trustee, any Owner Participant, the Lessee or any Affiliate thereof shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination; provided that for the purpose of determining whether the
Indenture Trustee shall be protected in relying on any such direction, consent
or waiver, only if a Responsible Officer of the Indenture Trustee has actual
knowledge that certain Equipment Notes are so owned by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Owner Trustee, such Owner Participant, Trust Company or the
Lessee shall such Equipment Notes be so disregarded; and provided further that
if all Equipment Notes which would be deemed Outstanding in the absence of the
foregoing provision are owned by the Owner Trustee, Trust Company or any Owner
Participant or by any Affiliate thereof, then such Equipment Notes shall be
deemed Outstanding for the purpose of any such determination. Equipment Notes so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Equipment Notes and that the
pledgee is not the Owner Trustee, the Owner Participant, Trust Company or the
Lessee or any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Owner Trustee, the Owner
Participant, Trust Company or the Lessee. In case of a dispute as to such right,
the advice of counsel shall be full protection in respect of any decision made
by the Indenture Trustee in accordance with such advice, unless the Lessee, the
Owner Trustee, Trust Company, or the Owner Participant are actually named in the
Register. Upon request of the Indenture Trustee, the Owner Trustee, the Owner
Participant, Trust Company and the Lessee shall furnish to the Indenture Trustee
promptly an Officer's Certificate listing and identifying all Equipment Notes,
if any, known by the Owner Trustee, the Owner Participant, Trust Company or the
Lessee to be owned or held by or for the account of any of the above-described
persons; and, subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee
shall be entitled to accept such Officer's Certificate as conclusive evidence of
the facts set forth therein and of the fact that all Equipment Notes not listed
therein are outstanding for the purpose of any such determination.
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Section 10.05. ERISA. Any Person, other than the Subordination Agent and
-----
any Pass-Through Trustee, who is acquiring the Equipment Notes will be deemed
to represent and warrant that (i) no assets of an employee benefit plan subject
to Title I of ERISA or an individual retirement account or plan subject to
Section 4975 of the Code, or any trust established under any such plan or
account, have been used to acquire or hold any of the Equipment Notes, or (ii)
that one or more administrative or statutory exemptions from the prohibited
transaction rules under Section 406 of ERISA and Section 4975 of the Code
applies to its purchase and holding of the Equipment Notes such that its
purchase and holding of the Equipment Notes will not result in a non-exempt
prohibited transaction under Section 406 of ERISA and Section 4975 of the Code.
ARTICLE XI
INDEMNIFICATION OF INDENTURE
TRUSTEE BY OWNER TRUSTEE
The Owner Trustee, not individually but solely in its capacity as Owner
Trustee, hereby agrees, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and does hereby indemnify,
protect, save and keep harmless the Indenture Trustee, in its individual
capacity, and its successors, assigns, agents and servants solely from the
Lessor's Estate, with respect to the claims of the Indenture Trustee for payment
or reimbursement under Section 9.11 hereof and from and against any and all
liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes
payable by the Indenture Trustee on or measured by any compensation received by
the Indenture Trustee for its services under this Indenture and any taxes
excluded from the Lessee's indemnity obligation under Section 6.01(b) of the
Participation Agreement), claims, actions, suits, costs, expenses or
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Indenture Trustee (whether or not also agreed to be indemnified against by any
other person under any other document) in any way relating to or arising out of
this Indenture, the Equipment Notes or any Indenture Document or the enforcement
of any of the terms of any thereof, or in any way relating to or arising out of
the manufacture, purchase, acceptance, nonacceptance, rejection, ownership,
delivery, lease, possession, use, operation, condition, sale, return or other
disposition of the Aircraft or any Engine (including, without limitation, latent
and other defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement), or in any way relating to or arising out
of the administration of the Indenture Estate or the action or inaction of the
Indenture Trustee hereunder, except only (a) in the case of willful misconduct
or gross negligence of the Indenture Trustee in the performance of its duties
hereunder, (b) as may result from the inaccuracy of any representation or
warranty of the Indenture Trustee in the Participation Agreement, (c) as
otherwise provided in Section 9.02(c) hereof or (d) as otherwise excluded by the
terms of Article 6 or Article 7 of the Participation Agreement from the Lessee's
general indemnity or general tax indemnity to the Indenture Trustee under said
Article; provided that so long as the Lease is in effect, the Indenture Trustee
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shall not make any claim under this Article
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XI for any claim or expense indemnified by the Lessee under the Participation
Agreement without first making demand on the Lessee for payment of such claim or
expense. The Indenture Trustee shall be entitled to indemnification, from the
Indenture Estate, for any liability, obligation, loss, damage, penalty, claim,
action, suit, cost, expense or disbursement indemnified against pursuant to this
Article XI to the extent not reimbursed by the Lessee or others, but without
releasing any of them from their respective agreements of reimbursement; and to
secure the same the Indenture Trustee shall have a prior Lien on the Indenture
Estate. The indemnities contained in this Article XI shall survive the
termination of this Indenture and the resignation or removal of the Indenture
Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to
this Article XI, the Owner Trustee shall, so long as no Indenture Event of
Default shall have occurred and be continuing, be subrogated to the rights of
the Indenture Trustee, if any, in respect of the matter as to which the
indemnity was paid.
ARTICLE XII
SUCCESSOR TRUSTEES
Section 12.01. Notice of Successor Owner Trustee. In the case of any
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appointment of a successor to the Owner Trustee pursuant to the Trust Agreement
or any merger, conversion, consolidation or sale of substantially all of the
corporate trust business of the Owner Trustee pursuant to the Trust Agreement,
the successor Owner Trustee shall give prompt written notice thereof to the
Indenture Trustee.
Section 12.02. Resignation and Removal of Indenture Trustee: Appointment of
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Successor. (a) The Indenture Trustee or any successor thereto may resign at any
---------
time without cause by giving at least 30 days' prior written notice to the Owner
Trustee, the Owner Participant, the Lessee and each Holder, such resignation to
be effective upon the acceptance of the trusteeship by a successor Indenture
Trustee. In addition, the Lessee, the Majority in Interest of Holders or the
Owner Trustee (with the consent of the Lessee and the Majority in Interest of
Holders) may at any time remove the Indenture Trustee without cause by an
instrument in writing delivered to the Lessee, the Owner Trustee, the Owner
Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly
notify each Holder thereof of such action in writing, such removal to be
effective upon the acceptance of the trusteeship by a successor Indenture
Trustee. In the case of the resignation or removal of the Indenture Trustee, the
Majority in Interest of Holders (based on the recommendation of the Lessee) or
the Owner Trustee (with the consent of the Lessee and the Majority in Interest
of Holders), may appoint a successor Indenture Trustee by an instrument signed
by such Holders. If a successor Indenture Trustee shall not have been appointed
within 30 days after such notice of resignation or removal, the Indenture
Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may
apply to any court of competent jurisdiction to appoint a successor Indenture
Trustee to act until such time, if any, as a successor shall have been appointed
as provided above. The successor Indenture Trustee so appointed by such court
shall immediately and without further act be superseded by any successor
Indenture Trustee appointed as provided above.
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(b) In case at any time any of the following shall occur:
(i) the Indenture Trustee shall cease to be eligible in accordance
with the provisions of Section 12.03 hereof and shall fail to resign after
written request therefor by the Owner Trustee or by any Holder; or
(ii) the Indenture Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Indenture Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Indenture Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation;
then the Owner Trustee may remove the Indenture Trustee and, with the consent of
the Lessee, appoint a successor trustee by written instrument, in duplicate,
executed by a Responsible Officer of the Owner Trustee, one copy of which
instrument shall be delivered to the Indenture Trustee so removed and one copy
to the successor trustee, or, subject to the provisions of Section 7.13 hereof,
any Holder who has been a bona fide Holder for at least six months may, on
behalf of himself and all others similarly situated Holders, petition any court
of competent jurisdiction for the removal of the Indenture Trustee and the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Indenture Trustee and
appoint a successor trustee, which removal and appointment shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.04 hereof. The successor Indenture Trustee so appointed by such court
shall immediately and without further act be superseded by any successor
Indenture Trustee appointed as provided above within one year from the date of
appointment by such court.
Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There
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shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a
bank or trust company organized and doing business under the laws of the United
States of America or any state or the District of Columbia having a combined
capital and surplus of at least $75,000,000 or (y) a bank or trust company whose
obligations hereunder are fully guaranteed by a direct or indirect parent
thereof having a combined capital and surplus of at least $75,000,000 and (ii) a
Person authorized under applicable law to exercise corporate trust powers and
subject to supervision of examination by Federal, state or District of Columbia
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Indenture Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Indenture Trustee shall resign
immediately in the manner and with the effect specified in Section 12.02 hereof.
Section 12.04. Acceptance of Appointment by Successor Trustee. Any
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successor trustee appointed as provided in Section 12.02 hereof shall execute
and deliver to the Owner Trustee, the
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Lessee, and to its predecessor trustee an instrument accepting such appointment
hereunder, in form and substance reasonably satisfactory to the Owner Trustee,
and thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Owner Trustee or of the
successor trustee, upon payment of its charges then unpaid, the trustee ceasing
to act shall, subject to Section 14.04 hereof, pay over to the successor trustee
all moneys at the time held by it hereunder and shall execute and deliver an
instrument transferring to such successor trustee all such rights, powers,
duties and obligations. Upon request of any such successor trustee, the Owner
Trustee shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim
upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Article XI hereof.
No successor trustee shall accept appointment as provided in this Section
12.04 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 12.03 hereof.
Upon acceptance of appointment by a successor trustee as provided in this
Section 12.04, the successor trustee shall mail notice thereof by first-class
mail to the Holders at their last addresses as they shall appear in the
Register, and shall mail a copy of such notice to the Lessee and the Owner
Trustee. If the acceptance of appointment is substantially contemporaneous with
the resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 12.02 hereof.
Section 12.05. Merger, Consolidation or Succession to Business of Indenture
------------------------------------------------------------
Trustee. Any corporation into which the Indenture Trustee may be merged or
-------
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to the corporate trust business
of the Indenture Trustee, shall be the successor to the Indenture Trustee
hereunder, provided that, anything herein to the contrary notwithstanding, such
corporation shall be eligible under the provisions of Section 12.03 hereof,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
In case at the time such successor to the Indenture Trustee shall succeed
to the trusts created by this Indenture any of the Equipment Notes shall have
been authenticated but not delivered, any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor Indenture
Trustee and deliver such Equipment Notes so authenticated; and, in case at that
time any of the Equipment Notes shall not have been authenticated, any successor
to the Indenture Trustee may authenticate such Equipment Notes either in the
name of any predecessor hereunder or in the name of the successor Indenture
Trustee; and in all such cases such certificate shall have the full force which
it is anywhere in the Equipment Notes or in this Indenture provided
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that the certificate of the Indenture Trustee shall have; provided, that the
right to adopt the certificate of authentication of any predecessor Indenture
Trustee or to authenticate Equipment Notes in the name of any predecessor
Indenture Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
Section 12.06. Appointment of Separate Trustees. (a) At any time or times,
--------------------------------
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Indenture Estate may at the time be located or in which any
action of the Indenture Trustee may be required to be performed or taken, the
Indenture Trustee, by an instrument in writing signed by it, may appoint one or
more individuals or corporations to act as a separate trustee or separate
trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any
part of the Indenture Estate, to the full extent that local law makes it
necessary for such separate trustee or separate trustees or co-trustee acting
jointly with the Indenture Trustee to act.
(b) The Indenture Trustee and, at the request of the Indenture Trustee,
the Owner Trustee, shall execute, acknowledge and deliver all such instruments
as may be required by the legal requirements of any jurisdiction or by any such
separate trustee or separate trustees or co-trustee for the purpose of more
fully confirming such title, rights or duties to such separate trustee or
separate trustees or co-trustee. Upon the acceptance in writing of such
appointment by any such separate trustee or separate trustees or co-trustee, it,
he or they shall be vested with such title to the Indenture Estate or any part
thereof, and with such rights, powers, duties and obligations, as shall be
specified in the instrument of appointment, and such rights, powers, duties and
obligations shall be conferred or imposed upon and exercised or performed by the
Indenture Trustee, or the Indenture Trustee and such separate trustee or
separate trustees or co-trustee jointly with the Indenture Trustee subject to
all the terms of this Indenture, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall be
exercised and performed by such separate trustee or separate trustees or co-
trustee, as the case may be. Any separate trustee or separate trustees or co-
trustee may, at any time by an instrument in writing, constitute the Indenture
Trustee its or his attorney-in-fact and agent with full power and authority to
do all acts and things and to exercise all discretion on its or his behalf and
in its or his name. In case any such separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, the title to the Indenture
Estate and all assets, property, rights, powers, duties and obligations and
duties of such separate trustee or co-trustee shall, so far as permitted by law,
vest in and be exercised by the Indenture Trustee, without the appointment of a
successor to such separate trustee or co-trustee unless and until a successor is
appointed.
(c) All provisions of this Indenture which are for the benefit of the
Indenture Trustee (including without limitation Article XI hereof) shall extend
to and apply to each separate trustee or co-trustee appointed pursuant to the
foregoing provisions of this Section 12.06.
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(d) Every additional trustee and separate trustee hereunder shall, to the
extent permitted by law, be appointed and act and the Indenture Trustee shall
act, subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon the
Indenture Trustee in respect of the receipt, custody, investment and
payment of moneys shall be exercised solely by the Indenture Trustee;
(ii) all other rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed and
exercised or performed by the Indenture Trustee and such additional trustee
or trustees and separate trustee or trustees jointly except to the extent
that under any law of any jurisdiction in which any particular act or acts
are to be performed, the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Indenture Estate in any such jurisdiction) shall be exercised and performed
by such additional trustee or trustees or separate trustee or trustees;
(iii) no power hereby given to, or exercisable by, any such additional
trustee or separate trustee shall be exercised hereunder by such additional
trustee or separate trustee except jointly with, or with the consent of,
the Indenture Trustee; and
(iv) no trustee hereunder shall be liable either personally or in its
capacity as such trustee, by reason of any act or omission of any other
trustee hereunder.
If at any time the Indenture Trustee shall deem it no longer necessary or
prudent in order to conform to any such law, the Indenture Trustee shall execute
and deliver an indenture supplemental hereto and all other instruments and
agreements necessary or proper to remove any additional trustee or separate
trustee.
(e) Any request, approval or consent in writing by the Indenture Trustee
to any additional trustee or separate trustee shall be sufficient warrant to
such additional trustee or separate trustee, as the case may be, to take such
action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 12.06, the powers
of any additional trustee or separate trustee shall not exceed those of the
Indenture Trustee hereunder.
ARTICLE XIII
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
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Section 13.01. Supplemental Indentures Without Consent of Holders. The
--------------------------------------------------
Owner Trustee (when authorized by the Owner Participant) and the Indenture
Trustee, without consent of the Holders, may enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge any property or assets
to the Indenture Trustee as security for the Equipment Notes;
(b) to evidence the succession of another corporation to the Owner Trustee
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Owner Trustee herein and in the
Equipment Notes;
(c) to add to the covenants of the Owner Trustee such further covenants,
restrictions, conditions or provisions as it and the Indenture Trustee shall
consider to be for the protection of the Holders, and to make the occurrence, or
the occurrence and continuance, of a default in any such additional covenants,
restrictions, conditions or provisions an Indenture Event of Default permitting
the enforcement of all or any of the several remedies provided herein; provided,
that in respect of any such additional covenant, restriction, condition or
provision such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such an Indenture Event of Default or may limit the remedies available to the
Indenture Trustee upon such an Indenture Event of Default or may limit the right
of not less than the Majority in Interest of Holders to waive such an Indenture
Event of Default;
(d) to surrender any right or power conferred herein upon the Owner
Trustee or the Owner Participant;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture; or to make such other provisions in regard to matters or questions
arising under this Indenture or under any supplemental indenture as the Owner
Trustee may deem necessary or desirable and which shall not adversely affect the
interests of the Holders;
(f) to correct or amplify the description of any property at any time
subject to the Lien of this Indenture or better to assure, convey and confirm
unto the Indenture Trustee any property subject or required to be subject to the
Lien of this Indenture or to subject any Replacement Airframe or Replacement
Engine to the Lien of this Indenture in accordance with the provisions hereof or
with the Lease or to release from the Lien of this Indenture property that has
been substituted on or removed from the Aircraft as contemplated in Section 3.07
hereof; provided that supplements to this Indenture entered into for the purpose
of subjecting any Replacement Airframe or Replacement Engine to the Lien of this
Indenture need only be executed by the Owner Trustee;
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(g) to provide for the issuance under this Indenture of Equipment Notes in
coupon form (including Equipment Notes registrable as to principal only) and to
provide for exchangeability of such Equipment Notes with Equipment Notes issued
hereunder in fully registered form, and to make all appropriate changes for such
purpose;
(h) to effect the re-registration of the Aircraft pursuant to Section
4.02(b) of the Participation Agreement; and
(i) to add, eliminate or change any provision hereunder so long as such
action shall not adversely affect the interests of the Holders.
The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture, to make any further appropriate agreements and
stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Indenture Trustee shall not be obligated to enter into any such supplemental
indenture which adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any such supplemental indenture may be executed without the consent of the
Holders notwithstanding any of the provisions of Section 13.02 hereof.
Section 13.02. Supplemental Indentures With Consent of Holders. With the
-----------------------------------------------
consent (evidenced as provided in Article X) of the Majority in Interest of
Holders, the Owner Trustee (when authorized by the Owner Participant) and the
Indenture Trustee may, from time to time and at any time, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders; provided, however, that, without the consent of each
and every Holder and each Liquidity Provider, no such amendment of or supplement
to this Indenture or any indenture supplemental hereto, or modification of the
terms of, or consent under, any thereof, shall (a) modify any of the provisions
of Section 7.11 hereof or this Section 13.02, (b) reduce the amount or extend
the time of payment of any amount owing or payable under any Equipment Note or
reduce the interest payable on any Equipment Note, or alter or modify the
provisions of Article V hereof with respect to the order of priorities in which
distributions thereunder shall be made as among Holders of different Series of
Equipment Notes or as between the Holder and the Owner Trustee or the Owner
Participant or with respect to the amount or time of payment of any such
distribution, or alter or modify the circumstances under which a Make-Whole
Premium shall be payable, or alter the currency in which any amount payable
under any Equipment Note is to be paid, or impair the right of any Holder to
commence legal proceedings to enforce a right to receive payment hereunder or
(c) create or permit the creation of any Lien on the Indenture Estate or any
part thereof prior to or pari passu with the Lien of this Indenture, except as
expressly permitted herein, or deprive any Holder of the benefit of the Lien of
this Indenture on the Indenture Estate, except as provided in Section 7.02
hereof or in connection with the exercise
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of remedies under Article VII. This Section 13.02 shall not apply to any
indenture or indentures supplemental hereto permitted by, and complying with the
terms of, Section 13.06 hereof.
Upon the request of the Owner Trustee (at the direction of the Owner
Participant) and upon the filing with the Indenture Trustee of evidence of the
consent of Holders and other documents, if any, required by Section 10.01, the
Indenture Trustee shall join with the Owner Trustee in the execution of such
supplemental indenture unless such supplemental indenture affects the Indenture
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Indenture Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
13.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Owner Trustee and the Indenture Trustee
of any supplemental indenture pursuant to the provisions of this Section, the
Indenture Trustee shall mail a notice thereof by first-class mail to the Holders
at their addresses as they shall appear on the registry books of the Registrar,
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Indenture Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
Section 13.03. Effect of Supplemental Indenture. Upon the execution of any
--------------------------------
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith and the
respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and
the Holders shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 13.04. Documents to Be Given to Indenture Trustee. The Indenture
------------------------------------------
Trustee, subject to the provisions of Sections 9.02 and 9.03, may receive an
Officer's Certificate and an Opinion of Counsel as conclusive evidence that any
such supplemental indenture complies with the applicable provisions of this
Indenture.
Section 13.05. Notation on Equipment Notes in Respect of Supplemental
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Indentures. Equipment Notes authenticated and delivered after the execution of
----------
any supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Indenture Trustee as to any matter provided for
by such supplemental indenture. If the Owner Trustee or the Indenture Trustee
shall so determine, new Equipment Notes so modified as to conform, in the
opinion of the Owner Trustee and the Indenture Trustee, to any modification of
this Indenture
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contained in any such supplemental indenture may be prepared by the Owner
Trustee, authenticated by the Indenture Trustee and delivered in exchange for
the Outstanding Equipment Notes.
Section 13.06. No Request Necessary for Lease Supplement or Indenture
------------------------------------------------------
Supplement. Notwithstanding anything contained in Section 13.02 hereof, no
----------
written request or consent of the Indenture Trustee or any Holder pursuant to
Section 13.02 hereof shall be required to enable the Owner Trustee to enter into
any supplement to the Lease with the Lessee in accordance with the terms and
conditions of the Lease to subject a Replacement Airframe or Replacement Engine
thereto or to enter into any supplement or amendment to the Lease with the
Lessee in accordance with Section 3(d) of the Lease or to execute and deliver
any supplement to this Indenture (including the Indenture Supplement) pursuant
to the terms hereof.
Section 13.07. Notices to Liquidity Providers. Any request made to any
------------------------------
Holder for consent to any amendment, supplement or waiver pursuant to Section
7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture
Trustee to each Liquidity Provider.
ARTICLE XIV
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 14.01. Satisfaction and Discharge of Indenture: Termination of
-------------------------------------------------------
Indenture. If at any time after (a) the Owner Trustee shall have paid or caused
---------
to be paid the principal of and interest on all the Equipment Notes outstanding
hereunder, as and when the same shall have become due and payable and provided
that there shall be no Secured Obligations due to the Indenture Indemnitees, or
(b) the Owner Trustee shall have delivered to the Indenture Trustee for
cancellation all Equipment Notes theretofore authenticated (other than any
Equipment Notes which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.07 hereof), then this
Indenture shall cease to be of further effect, and the Indenture Trustee, on
demand of the Owner Trustee and at the cost and expense of the Owner Trustee,
shall execute proper instruments acknowledging such satisfaction of and
discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify
the Indenture Trustee for any costs or expenses thereafter reasonably and
properly incurred and to compensate the Indenture Trustee for any services
thereafter reasonably and properly rendered by the Indenture Trustee in
connection with this Indenture or the Equipment Notes.
Upon (or at any time after) payment in full to the Indenture Trustee, as
trust funds, of the principal of and interest on and Make-Whole Premium, if any,
and all other amounts due hereunder and under all Equipment Notes and of any
Secured Obligations owed to the Indenture Indemnitees, and provided that there
shall then be no other amounts due to the Indenture Trustee hereunder or under
the Participation Agreement or otherwise secured hereby, the Owner Trustee shall
direct the Indenture Trustee to execute and deliver to or as directed in writing
by the Owner Trustee an appropriate instrument releasing the Aircraft from the
Lien of this Indenture and releasing the
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Indenture Documents from the assignment thereof hereunder, and the Indenture
Trustee shall execute and deliver such instrument as aforesaid and, at the Owner
Trustee's expense, will execute and deliver such other instruments or documents
as may be reasonably requested by the Owner Trustee to give effect to such
release; provided, however, that this Indenture and the trusts created hereby
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shall terminate earlier and this Indenture shall be of no further force or
effect upon any sale or other final disposition by the Indenture Trustee of all
property forming a part of the Indenture Estate and the final distribution by
the Indenture Trustee of all moneys or other property or proceeds constituting
part of the Indenture Estate in accordance with the terms hereof. Except as
aforesaid otherwise provided, this Indenture and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.
Section 14.02. Application by Indenture Trustee of Funds Deposited for
-------------------------------------------------------
Payment of Equipment Notes. Subject to Section 14.04 hereof, all moneys
--------------------------
deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be
held in trust and applied by it to the prompt payment, either directly or
through any Paying Agent, to the Holders of the particular Equipment Notes for
the payment or prepayment of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal,
interest and Make-Whole Premium, if any, but such money need not be segregated
from other funds except to the extent required by law.
Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the
----------------------------------------
satisfaction and discharge of this Indenture all moneys then held by any Paying
Agent under the provisions of this Indenture shall, upon demand of the Owner
Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee and
---------------------------------------------------------
Paying Agent. Any moneys deposited with or paid to the Indenture Trustee or any
------------
Paying Agent for the payment of the principal of or interest or Make-Whole
Premium on any Equipment Note and not applied but remaining unclaimed for two
years and eleven months after the date upon which such principal, interest or
Make-Whole Premium shall have become due and payable, shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no
longer be in effect, to the Owner Participant) by the Indenture Trustee or such
Paying Agent and the Holder of such Equipment Note, as a general unsecured
creditor, shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, thereafter look only to the
Owner Trustee (or the Owner Participant) for any payment which such Holder may
be entitled to collect, and all liability of the Indenture Trustee, or any
Paying Agent with respect to such moneys shall thereupon cease.
-63-
ARTICLE XV
MISCELLANEOUS
Section 15.01. Capacity in Which Acting. Each of Trust Company (or its
------------------------
permitted successors or assigns) and Allfirst acts hereunder not in its
individual capacity but solely as trustee except as expressly provided herein
and in the other Operative Agreements, and, in the case of Trust Company (or its
permitted successors or assigns), in the Trust Agreement.
Section 15.02. No Legal Title to Indenture Estate in Holders. No Holder
---------------------------------------------
shall have legal title to any part of the Indenture Estate. No transfer, by
operation of law or otherwise, of any Equipment Note or other right, title and
interest of any Holder in and to the Indenture Estate or hereunder shall operate
to terminate this Indenture or entitle such Holder or any successor or
transferee of such Holder to an accounting or to the transfer to it of legal
title to any part of the Indenture Estate.
Section 15.03. Sale of Indenture Estate by Indenture Trustee is Binding.
--------------------------------------------------------
Any sale or other conveyance of all or any part of the Indenture Estate by the
Indenture Trustee made pursuant to the terms of this Indenture or of the Lease
shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant
and shall be effective to transfer or convey all right, title and interest of
the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders
therein and thereto. No purchaser or other grantee shall be required to inquire
as to the authorization, necessity, expediency or regularity of such sale or
conveyance or as to the application of any sale or other proceeds with respect
thereto by the Indenture Trustee.
Section 15.04. Indenture Benefits Trustees, Participants, Lessee, and
------------------------------------------------------
Liquidity Providers Only. Nothing in this Indenture, whether express or implied,
------------------------
shall be construed to give to any person other than Trust Company, the Owner
Trustee, the Lessee, Allfirst, the Indenture Trustee, the Owner Participant,
each Liquidity Provider and the Holders any legal or equitable right, remedy or
claim under or in respect of this Indenture. Upon termination of this Indenture
pursuant to Article XIV hereof, the Indenture Trustee in connection with the
satisfaction of the Indenture shall return to the Owner Trustee all property
(and related documents and instruments) constituting or evidencing the Indenture
Estate.
Section 15.05. No Action Contrary to Lessee's Rights Under the Lease.
-----------------------------------------------------
Notwithstanding any of the provisions of this Indenture or the Trust Agreement
to the contrary, so long as no Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee will take any
action that interferes with the peaceful and quiet possession and enjoyment of
the Aircraft by the Lessee or any Permitted Sublessee.
Section 15.06. Notices. Unless otherwise expressly specified or permitted
-------
by the terms hereof, all notices, requests, demands, authorizations, directions,
consents, waivers or documents provided or permitted by this Indenture to be
made, given, furnished or filed shall be in writing, and shall be given and
become effective in the manner set forth in Section 12.01 of the Participation
Agreement. Any party hereto may change the address to which notices to such
party will be sent by giving notice of such change to the other parties to this
Indenture.
-64-
Section 15.07. Officer's Certificates and Opinions of Counsel. Upon any
----------------------------------------------
application or demand by the Lessee or the Owner Trustee to the Indenture
Trustee to take any action under any of the provisions of this Indenture, the
Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture
Trustee upon request (a) an Officer's Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and that the proposed action is in conformity with the
requirements of this Indenture, and (b) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
Any certificate, statement or opinion of an officer of the Lessee or the
Trust Company may be based, insofar as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such officer
knows that the certificate or opinion or representations with respect to the
matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous. Any certificate, statement or opinion of counsel may be
based, insofar as it relates to factual matters information with respect to
which is in the possession of the Lessee or Trust Company, upon the certificate,
statement or opinion of or representations by an officer or officers of the
Lessee or Trust Company, as the case may be, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Lessee or Trust
Company or of counsel thereto may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an accountant or
firm of accountants employed by the Lessee or the Owner Trustee, as the case may
be, unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with the Indenture Trustee shall contain a statement that such firm is
independent.
Section 15.08. Severability. Any provision of this Indenture 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15.09. No Oral Modifications or Continuing Waivers. No terms or
-------------------------------------------
provisions of this Indenture or the Equipment Notes may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party or other person against whom enforcement of the
-65-
change, waiver, discharge or termination is sought; and any waiver of the terms
hereof or of any Equipment Note shall be effective only in the specific instance
and for the specific purpose given.
Section 15.10. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, each of the
parties hereto and the successors and permitted assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by any Holder shall bind the successors and assigns of such Holder. This
Indenture and the Indenture Estate shall not be affected by any amendment or
supplement to the Trust Agreement or by any other action taken under or in
respect of the Trust Agreement, except that each reference in this Indenture to
the Trust Agreement shall mean the Trust Agreement as amended and supplemented
from time to time to the extent permitted hereby and thereby.
Section 15.11. Headings. The headings of the various Articles and Sections
--------
herein and in the table of contents hereto are for the convenience of reference
only and shall not define or limit any of the terms or provisions hereof.
Section 15.12. Normal Commercial Relations. Anything contained in this
---------------------------
Indenture to the contrary notwithstanding, the Owner Participant, the Indenture
Trustee and any Holder, or any bank or other affiliate of any such party, may
conduct any banking or other financial transactions, and have banking or other
commercial relationships, with the Lessee fully to the same extent as if this
Indenture were not in effect, including without limitation the making of loans
or other extensions of credit to the Lessee for any purpose whatsoever, whether
related to any of the transactions contemplated hereby or otherwise.
Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH
--------------------------
EQUIPMENT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. This Indenture may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 15.14. Lessee's Right of Quiet Enjoyment. Notwithstanding any of
---------------------------------
the provisions of this Indenture to the contrary, so long as no Event of Default
has occurred and is continuing unremedied, the Indenture Trustee will comply
with Section 4(b) of the Lease to the same extent as if it were the Lessor under
the Lease. Each Holder, by its acceptance thereof, consents in all respects to
the terms of the Lease and agrees to the provisions of this Section 15.14. The
Indenture Trustee acknowledges that any right it may have to possess, use,
operate, store, lease, control, manage, sell, dispose of or otherwise deal with
the Aircraft or any other property in which Lessee has any interest pursuant to
the Lease is derivative of the rights of the Owner Trustee under the Lease and
subject to the agreement of the Owner Trustee under Section 4(b) of the Lease as
referred to in the second preceding sentence herein.
* * *
-66-
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture and
Security Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
First Union Trust Company, National
Association,
not in its individual capacity, except
as specifically set forth herein but
solely as Owner Trustee
By:_____________________________
Name:
Title:
ALLFIRST BANK, as Indenture Trustee
By:_____________________________
Name:
Title:
-67-
Annex A
Principal Amount of Equipment Notes
-----------------------------------
Series Principal Amount Interest Rate
------ ---------------- -------------
A
B
C
Annex B
Amortization Schedule
---------------------
Payment Date Series A Series B Series C
------------
Equipment Notes Equipment Notes Equipment Notes
--------------- --------------- ---------------
Exhibit A to
Trust Indenture and
Security Agreement
Indenture Supplement No. __ [N3__ML]
This Indenture Supplement No. __ [N3__ML] dated ____________, 200_, of
First Union Trust Company, National Association, a national banking association,
not in its individual capacity but solely as owner trustee (herein called the
"Owner Trustee") under the Trust Agreement [N3__ML] dated as of
-------------
________________, (the "Trust Agreement") between First Union Trust Company,
---------------
National Association, and the Owner Participant named therein,
WITNESSETH:
WHEREAS, the Indenture provides for the execution and delivery of this
Indenture Supplement which shall particularly describe the Aircraft included in
the property covered by the Indenture.
WHEREAS, the Trust Indenture and Security Agreement [N3__ML] dated as of
__________ (the "Indenture") between the Owner Trustee and Allfirst Bank, as
---------
Indenture Trustee (herein called the "Indenture Trustee") provides for the
-----------------
execution and delivery of an Indenture Supplement substantially in the form of
this Indenture Supplement No. __, which Supplement shall particularly describe
the Aircraft included in the Indenture Estate, and shall specifically mortgage
such Aircraft to the Indenture Trustee.
WHEREAS, the Indenture relates to the Aircraft and the Engines described in
the following paragraph and a counterpart of the Indenture is attached to and
made a part of this Indenture Supplement No. __, and this Indenture Supplement
No. __, together with such attachment, is being filed for recordation on or
promptly after the date of this Indenture Supplement No. __ with the Federal
Aviation Administration as one document.
NOW, THEREFORE, to secure the prompt payment of the principal of and Make-
Whole Premium, if any, and interest on, and all other amounts due with respect
to, all Outstanding Equipment Notes under the Indenture and all other amounts
due hereunder and the performance and observance by the Owner Trustee of all the
agreements, covenants and provisions for the benefit of the Holders and
contained in the Indenture, the Participation Agreement and the Equipment Notes,
and the prompt payment of any and all amounts from time to time owing under the
Participation Agreement by the Owner Trustee or the Lessee to the Holders and
the Indenture Indemnitees (provided that, with respect to amounts owed to the
Liquidity Providers which relate to amounts due
under the Liquidity Facilities, the amounts secured by the Indenture shall only
include such amounts to the extent due and owing pursuant to the final paragraph
of Section 2.04 of the Indenture) and for the uses and purposes and subject to
the terms and provisions of the Indenture and the Equipment Notes, and in
consideration of the premises and of the covenants contained in the Indenture,
and of the purchase of the Equipment Notes by the Holders, and of the sum of $1
paid to the Owner Trustee by the Indenture Trustee at or before the delivery of
the Indenture, the receipt of which is hereby acknowledged, the Owner Trustee
has granted, bargained, assigned, transferred, conveyed, mortgaged, pledged,
granted a security interest in, and confirmed, and does hereby grant, bargain,
assign, transfer, convey, mortgage, pledge, grant a security interest in, and
confirm, unto the Indenture Trustee, its successors and assigns, in trust for
the equal and ratable security and benefit of the Holders, in the trust created
by the Indenture, and subject to all of the terms, conditions, provisions and
limitations set forth in the Indenture, a first priority security interest in
and mortgage lien on all estate, right, title and interest of the Owner Trustee
in, to and under the following described property:
AIRFRAME
One Airframe identified as follows:
FAA Manufacturer's
Registration Serial
Manufacturer Model Number Number
------------ ----- ------------- --------------
The Boeing Company 737-700 N3__ML ______________
together with all appliances, equipment, instruments and accessories (including,
without limitation, radio and radar) from time to time belonging thereto, owned
by the Owner Trustee and installed in or appurtenant to said aircraft.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated takeoff
horsepower or the equivalent thereof, identified as follows:
Manufacturer's
Serial
Manufacturer Model Number
------------ ----- --------------
CFM International, Inc. CFM-56-7B20 ______________
______________
-2-
together with all equipment and accessories belonging thereto, by whomsoever
manufactured, owned by the Owner Trustee and installed in or appurtenant to such
aircraft engines.
Together with all substitutions, replacements and renewals of the property
described above, and all property owned by the Owner Trustee which shall
hereafter become physically attached to or incorporated in the property
described above, whether the same are now owned by the Owner Trustee or shall
hereafter be acquired by it.
As further security for the obligations referred to above and secured by
the Indenture and hereby, the Owner Trustee has granted, bargained, assigned,
transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant,
bargain, assign, transfer, convey, mortgage, pledge and confirm, unto the
Indenture Trustee, its successors and assigns, for the security and benefit of
the Holders, in the trust created by the Indenture, and subject to all of the
terms, conditions, provisions and limitations set forth in the Indenture, all of
the estate, right, title and interest of the Owner Trustee in, to and under the
Lease Supplement (other than Excepted Payments, if any) covering the property
described above.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the benefit and security of
the Holders for the uses and purposes and subject to the terms and provisions
set forth in the Indenture.
This Indenture Supplement shall be construed as supplemental to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
This Indenture Supplement is being delivered in the State of New York.
-3-
IN WITNESS WHEREOF, the Owner Trustee has caused this Indenture Supplement
No. __ to be duly executed as of the date first written above by one of its
officers thereunto duly authorized.
First Union Trust Company, National
Association, not in its individual
capacity, except as specifically set
forth herein, but solely as Owner
Trustee
By:_________________________________
Name:
Title:
-4-
Exhibit B to
Trust Indenture and
Security Agreement
[Form of Equipment Note]
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE.
---
ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER
THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS
IS AVAILABLE.
No. _________ $____________
EQUIPMENT NOTE [N3__ML]
SERIES _____
Interest Rate Maturity
------------- --------
___% ____________, 2___
First Union Trust Company, National Association, a national banking
association, not in its individual capacity but solely as Owner Trustee (herein
in such capacity called the "Owner Trustee") under that certain Trust Agreement
-------------
[N3__ML] dated as of __________, between the Owner Participant named therein and
it (herein as such Trust Agreement may be amended or supplemented from time to
time called the "Trust Agreement"), hereby promises to pay to Allfirst Bank, a
---------------
Maryland state-chartered commercial bank, as Subordination Agent, or its
registered assigns, the principal sum of ______________________ ________________
Dollars, together with interest on the principal outstanding from time to time,
semiannually on each April 1 and October 1, on such principal sum at the rate
per annum set forth above; provided that, such interest rate shall be increased
-------------
by 0.5% per annum, as provided in Section 2(d) and the penultimate paragraph of
Section 3 of the Registration Rights Agreement. The principal amount of this
Equipment Note shall be payable in installments on the dates and in the amounts
set forth in Schedule I hereto. Notwithstanding the foregoing, the final payment
made on this Equipment Note shall be in an amount sufficient to discharge in the
full the unpaid principal amount and all accrued and unpaid interest on, and any
other amounts due under, this Equipment Note. Notwithstanding anything to
the contrary contained herein, if any date on which a payment under this
Equipment Note becomes due and payable is not a Business Day, then such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day and if such payment is made on such next succeeding
Business Day, no interest shall accrue on the amount of such payment during such
extension.
This Equipment Note shall bear interest at the Past Due Rate on any
principal hereof and on any other amount payable hereunder or under the
Indenture which shall not be paid in full when due (whether at stated maturity,
by acceleration, by mandatory prepayment or otherwise), for the period from and
including the date thereof to but excluding the date the same is paid in full,
payable from time to time on demand of the Indenture Trustee.
Principal and interest and other amounts due hereunder shall be payable
at the office or agency of Allfirst Bank, a Maryland state-chartered commercial
bank, as Indenture Trustee (the "Indenture Trustee") maintained for such purpose
-----------------
in immediately available funds prior to 12:00 noon. (New York time) on the due
date thereof and the Indenture Trustee shall remit all such amounts received by
it to the Holders at such account or accounts at such financial institution or
institutions as the Holders shall have designated to the Indenture Trustee in
writing, in immediately available funds, such payment to be made if the payment
was received prior to 12:00 noon, New York time by the Indenture Trustee on any
Business Day, by 1 p.m. New York time on such Business Day; otherwise, the
Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New
York time on the next succeeding Business Day; provided that, at the option of
the Indenture Trustee or its Paying Agent, interest may be paid by mailing a
check therefor payable to or upon the written order of the registered holder
entitled thereto at his last address as it appears on the Register. If any
amount payable under this Equipment Note, or under the Indenture, falls due on a
day that is not a Business Day, then such sum shall be payable on the next
succeeding Business Day, without (provided that payment is made on such next
succeeding Business Day) additional interest thereon for the period of such
extension.
First Union Trust Company, National Association and Allfirst Bank are
not acting individually hereunder, but solely as Owner Trustee and Indenture
Trustee, respectively.
Any Person, other than the Subordination Agent and any Pass-Through
Trustee, who is acquiring the Equipment Notes will be deemed to represent and
warrant that (i) no assets of an employee benefit plan subject to Title I of
ERISA or an individual retirement account or plan subject to Section 4975 of the
Code, or any trust established under any such plan or account, have been used to
acquire or hold any of the Equipment Notes, or (ii) that one or more
administrative or statutory exemptions from the prohibited transaction rules
under Section 406 of ERISA and Section 4975 of the Code applies to its purchase
and holding of the Equipment Notes such that its purchase and holding of the
Equipment Notes will not result in a non-exempt prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code.
-2-
This Equipment Note is one of a duly authorized issue of Equipment
Notes issued under the Trust Indenture and Security Agreement [N3__ML] dated as
of ___________ (the "Indenture") between the Owner Trustee and the Indenture
---------
Trustee. Capitalized terms not otherwise defined herein shall have the meanings
given to them in the Indenture. Reference is made to the Indenture and all
supplements and amendments thereto (a copy of which is on file with the
Indenture Trustee at its principal corporate trust office) for a more complete
statement of the terms and provisions thereof, including a statement of the
properties conveyed, pledged and assigned thereby, the nature and extent of the
security, the respective rights of the Owner Trustee, the Owner Participant, the
Lessee, the Indenture Trustee and the Holders, and the terms upon which the
Equipment Notes are, and are to be, executed and delivered, to all of which
terms and conditions in the Indenture each Holder hereof agrees by its
acceptance of this Equipment Note.
This Equipment Note is subject to prepayment as provided in Section
6.02 of the Indenture but not otherwise. This Equipment Note is also subject to
exchange and to purchase by the Owner Participant or the Owner Trustee as
provided in Section 8.02 of the Indenture but not otherwise. In addition, this
Equipment Note may be accelerated as provided in Section 7.02 of the Indenture.
Except as expressly provided in the Indenture, all payments of
principal, Make-Whole Premium, if any, and interest and other amounts to be made
to the Holder hereof by or at the behest of the Owner Trustee hereunder or under
the Indenture shall be made only from the income and proceeds from the Lessor's
Estate to the extent included in the Indenture Estate and only to the extent
that the Owner Trustee shall have sufficient income or proceeds from the
Lessor's Estate to the extent included in the Indenture Estate to enable the
Indenture Trustee to make such distributions in accordance with the terms of the
Indenture; and each Holder hereof, by its acceptance of this Equipment Note,
agrees that it will (except as aforesaid) look solely to the income and proceeds
from the Indenture Estate to the extent available for distribution to the Holder
hereof as provided above and that neither the Owner Participant, nor the Owner
Trustee, nor First Union Trust Company, National Association, nor the Indenture
Trustee is personally liable to the Holder hereof for any amounts payable or any
liability under this Equipment Note or under the Indenture, except as expressly
provided in the Indenture, in the case of First Union Trust Company, National
Association, the Owner Trustee and the Indenture Trustee.
If, in accordance with and subject to the satisfaction of the
conditions set forth in Section 5.10 of the Participation Agreement, the Lessee
shall assume all of the obligations of the Owner Trustee hereunder, under the
Equipment Notes and all other Operative Agreements, the Owner Participant and
the Owner Trustee shall (except for prior acts) be released and discharged from
any further obligations hereunder and under the Equipment Notes and all other
Operative Agreements (except any obligations that have accrued prior to such
assumption).
The indebtedness evidenced by this Equipment Note is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of the Secured Obligations (as defined in
the Indenture) in respect of [Series A Equipment Notes]/1/, [Series A and Series
B Equipment Notes]/2/ and this Equipment Note is issued subject to such
-3-
provisions. The Holder of this Equipment Note, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the
Indenture Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture, and (c) appoints the Indenture Trustee such Holder's attorney-in-fact
for such purpose.*
This Equipment Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
This Equipment Note shall not be secured by or be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose unless
authenticated by the Indenture Trustee as evidenced by the manual signature of
one of its authorized officers on the certificate below.
_________________________
/1/To be inserted in the case of a Series B Equipment Note.
/2/To be inserted in the case of a Series C Equipment Note.
* To be inserted for each Equipment Note other than any Series A
Equipment Note.
-4-
IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Note to
be duly executed in its corporate name by its officer thereunto duly authorized.
Dated: _________________ First Union Trust Company, National Association,
not in its individual capacity, but
solely as Owner Trustee
By:
_______________________________________
Name:
Title:
-5-
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Equipment Notes referred to in the within mentioned
Indenture.
Dated: _______________ ALLFIRST BANK, as Indenture Trustee
By:________________________________
Name:
Title:
Schedule I to Equipment Note
Principal Amortization
----------------------
Payment Date Principal Amount
------------ ----------------
[Exhibit A-4 to Note Purchase Agreement
Form of Trust Agreement]
================================================================================
TRUST AGREEMENT [N3___ML]
Dated as of ______________, 200__
between
_________________________,
as Owner Participant
and
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
_________________________
Covering One Boeing Model 737-700 Aircraft
Bearing U.S. Registration Number N3__ML
and Manufacturer's Serial Number _____
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE 1. INTERPRETATION................................................ 1
Section 1.01. Definitions.............................................. 1
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) Secured Loan............................................. 2
(b) Delivery Date............................................ 2
Section 2.02. Closing Procedure........................................ 3
ARTICLE 3. CONDITIONS PRECEDENT.......................................... 3
Section 3.01. Conditions Precedent to Obligations of Participants...... 3
(a) Notice................................................... 3
(b) Delivery of Documents.................................... 3
(c) Airworthiness............................................ 5
(d) [Reserved]............................................... 5
(e) Violation of Law......................................... 5
(f) No Event of Default...................................... 5
(g) No Event of Loss......................................... 5
(h) Title.................................................... 5
(i) Certification............................................ 5
(j) Section 1110............................................. 5
(k) Filings.................................................. 6
(l) Financing Statements..................................... 6
(m) No Proceedings........................................... 6
(n) Governmental Action...................................... 6
(o) Note Purchase Agreement.................................. 6
(p) Perfected Security Interest.............................. 6
Section 3.02. Conditions Precedent to Obligations of Company........... 6
(a) Documents................................................ 6
(b) Other Conditions Precedent............................... 7
Section 3.03. Post-Registration Opinion................................ 7
-i-
ARTICLE 4. COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS....................................... 7
Section 4.01. Company Representations and Warranties............................................... 7
Section 4.02. Certain Covenants of Company......................................................... 10
(a) Filings and Recordings............................................................... 10
(b) Registration......................................................................... 10
(c) [Reserved]........................................................................... 11
(d) Corporate Existence.................................................................. 12
(e) Merger and Consolidation............................................................. 12
(f) Change of Location................................................................... 13
(g) Notice of Lease...................................................................... 13
Section 4.03. Survival of Representations and Warranties........................................... 13
ARTICLE 5. OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND
COVENANTS................................................................................. 13
Section 5.01. Representations, Warranties and Covenants of the Indenture Trustee................... 13
(a) Representations and Warranties....................................................... 13
(b) Indenture Trustee's Liens............................................................ 14
(c) Indemnity for Indenture Trustee's Liens.............................................. 14
Section 5.02. Indenture Trustee's Notice of Default................................................ 14
Section 5.03. Releases from Indenture.............................................................. 14
Section 5.04. The Company's Right of Quiet Enjoyment............................................... 15
Section 5.05. Pass-Through Trustee's Representations and Warranties................................ 15
Section 5.06. Survival of Representations, Warranties and Covenants................................ 16
Section 5.07. Subordination Agent's Representations, Warranties and Covenants...................... 16
(a) Representations and Warranties....................................................... 16
(b) Covenants............................................................................ 17
ARTICLE 6. [RESERVED]................................................................................ 18
ARTICLE 7. GENERAL INDEMNITY ........................................................................ 18
Section 7.01. Generally............................................................................ 18
(a) Indemnity............................................................................ 18
(b) Exceptions........................................................................... 19
Section 7.02. Notice and Payment................................................................... 20
Section 7.03. Defense of Claims.................................................................... 20
Section 7.04. Insured Claims....................................................................... 21
Section 7.05. Subrogation.......................................................................... 21
Section 7.06. Survival of Obligations.............................................................. 21
Section 7.07. Effect of Other Indemnities.......................................................... 21
Section 7.08. Waiver of Certain Claims............................................................. 21
-ii-
ARTICLE 8. TRANSACTION COSTS...........................................................................22
Section 8.01. Transaction Costs and Other Costs......................................................22
(a) Transaction Costs......................................................................22
(b) Continuing Expenses....................................................................22
(c) Amendments and Supplements.............................................................22
ARTICLE 9. [RESERVED] .................................................................................23
ARTICLE 10. LIABILITIES AND INTERESTS OF HOLDERS........................................................23
Section 10.01. Interest of Holders of Equipment Notes.................................................23
ARTICLE 11. OTHER DOCUMENTS.............................................................................23
Section 11.01. Consent of Company to Other Documents..................................................23
Section 11.02. Pass-Through Trustee's and Subordination Agent's Acknowledgment........................23
ARTICLE 12. NOTICES.....................................................................................23
Section 12.01. Notices................................................................................23
ARTICLE 13. SALE-LEASEBACK TRANSACTION..................................................................24
Section 13.01. Sale-Leaseback Transaction. ..........................................................24
ARTICLE 14. [RESERVED]..................................................................................26
ARTICLE 15. MISCELLANEOUS ..............................................................................26
Section 15.01. Counterparts...........................................................................26
Section 15.02. No Oral Modifications..................................................................26
Section 15.03. Captions...............................................................................26
Section 15.04. Successors and Assigns.................................................................26
Section 15.05. Concerning the Indenture Trustee and the Pass-Through Trustee..........................27
Section 15.06. Severability...........................................................................27
Section 15.07. GOVERNING LAW..........................................................................27
Section 15.08. Section 1110 Compliance................................................................28
Section 15.09. Reliance of Liquidity Providers........................................................28
-iii-
Schedule I Loan Amounts
Schedule II Debt Portion
Appendix A Definitions
Exhibit A-1(a) Form of Opinion of General Counsel of Company
Exhibit A-1(b) Form of Opinion of Special North Carolina counsel
Exhibit A-2 Form of Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Exhibit A-3 Form of Opinion of Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, as counsel to Indenture Trustee,
Subornation Agent and Pass-Through Trustee
Exhibit A-4 Form of Opinion of Special Aviation Counsel
Exhibit B Certain Economic Information
-iv-
TRUST AGREEMENT [N3___ML]
This TRUST AGREEMENT [N3___ML], dated as of ________________, 200_
between _________________________, a ________________________ (together with its
successors and permitted assigns, the "Owner Participant"), and FIRST UNION
TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, in its
individual capacity only as expressly stated herein and otherwise not in its
individual capacity but solely as trustee hereunder (herein in such capacity
with its permitted successors and assigns called the "Owner Trustee").
W I T N E S S E T H:
- - - - - - - - - -
ARTICLE I
DEFINITIONS AND TERMS
Section 1.01 Definitions. Unless the context shall otherwise require
-----------
and except as contained in this Section 1.01, the capitalized terms used herein
shall have the respective meanings assigned thereto in the Lease (as hereinafter
defined) for all purposes hereof. All definitions contained in this Section 1.01
shall be equally applicable to both the singular and plural forms of the terms
defined. For all purposes of this Trust Agreement the following terms shall have
the following meanings:
"Excepted Payments" has the meaning given to such term in the
-----------------
Indenture.
"Indenture" means Trust Indenture and Security Agreement [N3___ML],
---------
dated as of ____________, 200_, between the Owner Trustee and the Indenture
Trustee, as the same may be amended, modified, or supplemented from time to
time. The term "Indenture" shall also include each Indenture Supplement entered
into pursuant to the terms of the Indenture.
"First Union" means First Union Trust Company, National Association, a
-----------
national banking association.
"Lease" means Lease Agreement [N3___ML] dated as of _____________,
-----
200_, between the Lessor and the Lessee, as the same may be modified, amended or
supplemented from time to time. The term "Lease" shall also include each Lease
-----
Supplement entered into pursuant to the terms of the Lease.
-1-
"Lessee" means Midway Airlines Corporation, a Delaware corporation,
------
and its successors and permitted assigns, as the lessee under the Lease.
"Owner Participant" means the Person identified as such in the
-----------------
introduction hereto.
"Owner Trustee" means the Person identified as such in the
-------------
introduction hereto.
"Participation Agreement" means Participation Agreement [N3___ML],
-----------------------
dated as of _______________, 200_, among the Lessee, the Owner Participant, the
Lessor, the Indenture Trustee, the Pass Through Trustee and the Subordination
Agent, as the same may be amended, modified or supplemented from time to time.
"Trust Agreement" means this Trust Agreement [N3___ML] dated as of
---------------
________________, 200_ between First Union and the Owner Participant, as the
same may be amended, modified or supplemented from time to time.
"Trust Estate" means all estate, right, title and interest of the
------------
Owner Trustee in and to the Aircraft, and Engines and the Operative Agreements
(other than the Tax Indemnity Agreement) including, without limitation, all
amounts of Rent, insurance proceeds and requisition, indemnity or other payments
of any kind, but specifically excluding any Excepted Payments.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
Section 2.01 Authority to Execute Documents. The Owner Participant
------------------------------
hereby authorizes and directs the Owner Trustee (i) to execute and deliver the
Participation Agreement, the Lease, the Lease Supplement covering the Aircraft,
the Indenture, the Indenture Supplement covering the Aircraft, the Equipment
Notes and any other agreements, instruments or documents, to which the Owner
Trustee is a party in the respective forms thereof in which delivered from time
to time by the Owner Participant to the Owner Trustee for execution and delivery
and (ii) subject to the terms hereof, to exercise its rights (upon instructions
received from the Owner Participant) and perform its duties under the documents
referred to in this Section in accordance with the terms thereof.
Section 2.02 Declaration of Trust. The Owner Trustee hereby declares
--------------------
that it will hold the Trust Estate upon the trusts hereinafter set forth for the
use and benefit of the Owner Participant, subject, however, to the provisions of
and the Lien created under the Indenture.
-2-
[Section 2.03 Limitations on Control, Exceptions, Purpose.
-------------------------------------------
So long as the Owner Participant is not a "citizen of the United States" (a
"United States Citizen") as defined in Section 40102(a)(15) of the Act, the
Owner Participant and Owner Trustee agree to comply with the following terms and
conditions:
(a) Limitations on Control. Notwithstanding any other provision of
----------------------
this Trust Agreement, but subject to paragraph (b) of this Section 2.03,
the Owner Participant will have no rights or powers to direct, influence or
control the Owner Trustee in the performance of the Owner Trustee's duties
under this Trust Agreement in connection with matters involving the
ownership and operation of the Aircraft by the Owner Trustee. In all
matters involving the ownership and operation of the Aircraft by the Owner
Trustee, the Owner Trustee shall have absolute and complete discretion in
connection therewith and shall be free of any kind of influence or control
whatsoever by the Owner Participant, and the Owner Trustee shall exercise
its duties under this Trust Agreement in connection with matters involving
the ownership and operation of the Aircraft by the Owner Trustee as it, in
its discretion, shall deem necessary to protect the interests of the United
States, notwithstanding any countervailing interest of any foreign power
which, or whose citizens, may have a direct or indirect interest in the
Owner Participant and any such action by the Owner Trustee shall not be
considered malfeasance or in breach of any obligation which the Owner
Trustee might otherwise have to the Owner Participant; provided, however,
-------- -------
that subject to the foregoing limitations, the Owner Trustee shall exercise
its discretion in all matters involving the ownership and operation of the
Aircraft by the Owner Trustee with due regard for the interests of the
Owner Participant. In exercising any of its rights and duties under this
Trust Agreement in connection with matters which may arise not relating to
the ownership and operation of the Aircraft, the Owner Trustee shall be
permitted to seek the advice of the Owner Participant before taking, or
refraining from taking, any action with respect thereto. The Owner Trustee
shall notify the Owner Participant of its exercise of rights and duties
under this Trust Agreement in connection with matters involving the
ownership and operation of the Aircraft by the Owner Trustee.
(b) Certain Exceptions. Subject to the requirements of the preceding
------------------
paragraph (a), the Owner Trustee agrees that it will not, without the prior
written consent of the Owner Participant, (i) sell, mortgage, pledge or
otherwise dispose of the Aircraft or other assets held in the Trust Estate
relating thereto except as otherwise expressly provided for herein, or (ii)
amend the Lease, any Permitted Sublease or other Operative Agreements or
give any consents thereunder.
(c) Purpose. The purpose of this Section 2.03 is to give the Owner
-------
Trustee the power to manage and control the Aircraft with respect to
matters involving the ownership
-3-
and operation of the Aircraft by the Owner Trustee in the event that the
Owner Trustee becomes the owner of the Aircraft or is deemed to be the
owner of the Aircraft pursuant to Applicable Law so as to assure that (i)
the Aircraft shall be controlled with respect to such matters by a United
States Citizen, (ii) the Owner Participant shall have no power to influence
or control the exercise of the Owner Trustee's authority with respect to
such matters and (iii) the Owner Trustee shall be able to give the
affidavit required by Section 47.7(c)(2)(iii) of the Federal Aviation
Regulations, 14 C.F.R. 47.7(c)(2)(iii). Section 2.03 shall be construed in
furtherance of the foregoing purpose.]*
ARTICLE III
ACCEPTANCE AND DELIVERY OF AIRCRAFT; ISSUANCE OF
EQUIPMENT NOTES; LEASE OF AIRCRAFT; REPLACEMENT
Section 3.01 Authorization. (a) The Owner Participant hereby
-------------
authorizes and directs the Owner Trustee to, and the Owner Trustee agrees for
the benefit of the Owner Participant that, on the Delivery Date it will, subject
to due compliance with the terms of Section 3.02 hereof:
(i) authorize a representative or representatives of the Owner
Trustee to accept delivery of the Aircraft pursuant to the
Participation Agreement;
(ii) execute and deliver each of the Operative Agreements to
which the Owner Trustee is to be a party;
(iii) purchase the Aircraft pursuant to the Participation
Agreement;
(iv) pay an amount equal to Lessor's Cost to, or at the
direction of, the Lessee pursuant to the Participation Agreement in
consideration of the sale of the Aircraft to the Owner Trustee
thereunder;
(v) issue to the Loan Participants one or more Equipment Notes
in respect of the Aircraft in the amounts and otherwise as provided in
the Participation Agreement and the Indenture;
(vi) execute and deliver the financing statements contemplated
by Sections 3.01(m) and (n) of the Participation Agreement;
-----------------
* Section 2.03 to be included only if Owner Participant is not a U.S.
citizen.
-4-
(vii) make application to the FAA for registration of the
Aircraft in the name of the Owner Trustee;
(viii) take such other action as may reasonably be required of
the Owner Trustee hereunder or under the Participation Agreement, the
Indenture or the Lease to effectuate the transactions contemplated
thereby; and
(ix) execute and deliver all such other instruments, documents
or certificates and take all such other actions in accordance with the
directions of the Owner Participant, as the Owner Participant may
reasonably deem necessary or advisable in connection with the
transactions contemplated hereby and by the other Operative
Agreements.
(b) The Owner Participant hereby authorizes and directs the Owner
Trustee to, and the Owner Trustee agrees for the benefit of the Owner
Participant that it will:
(i) immediately after the delivery of the Aircraft to the
Owner Trustee, cause the Aircraft to be leased to Lessee under the
Lease; and
(ii) execute and deliver a Lease Supplement and an Indenture
Supplement, in each case covering the Aircraft.
Section 3.02 Conditions Precedent. The right and obligation of the
--------------------
Owner Trustee to take the action required by Section 3.01 hereof shall be
subject to the following conditions precedent:
(a) the Owner Participant shall have made the full amount of its
Commitment with respect to the Aircraft available to the Owner Trustee, in
immediately available funds, in accordance with Section 2.01(c) of the
Participation Agreement; and
(b) the terms and conditions of Section 3.01 of the Participation
Agreement shall have been waived by the Owner Participant or complied with
in a manner satisfactory to the Owner Participant. The Owner Participant
shall, by instructing Owner Trustee to release the full amount of its
Commitment then held by Owner Trustee as provided in Section 2.01 of the
Participation Agreement, be deemed to have found satisfactory to it, or
waived, all such conditions precedent.
Section 3.03 Postponement of Delivery Date. The Owner Trustee, upon
-----------------------------
instructions from the Owner Participant, shall take all action specified in
Section 2.01(e) of the Participation Agreement as action to be taken by the
Owner Trustee.
-5-
Section 3.04 Authorization in Respect of a Replacement Airframe or
-----------------------------------------------------
Replacement Engines. The Owner Trustee agrees for the benefit of the Owner
-------------------
Participant that, upon the receipt by a Responsible Officer of Owner Trustee of
an authorization and direction from the Owner Participant, it will, in the event
of a Replacement Airframe or Replacement Engines, if any, being substituted
pursuant to Section 8(a)(i) of the Lease, or a Replacement Engine being
substituted pursuant to Section 7(e) of the Lease, subject to due compliance
with the terms of Sections 8(d) and 7(e) of the Lease, as the case may be:
(a) to the extent not previously accomplished by a prior
authorization, authorize a representative or representatives of the Owner
Trustee to accept delivery of the Replacement Airframe or Replacement
Engines, if any, or the Replacement Engine;
(b) accept from Lessee or other vendor of the Replacement Airframe or
Replacement Engines, if any, or the Replacement Engine, a ▇▇▇▇ of sale or
bills of sale (if tendered) and the invoice, if any, with respect to the
Replacement Airframe and Replacement Engines, if any, or the Replacement
Engine being furnished pursuant to Section 8(a)(i) or 7(e) of the Lease;
(c) in the case of a Replacement Airframe, make application to the
FAA (or the Aeronautical Authority of any jurisdiction other than the
United States of America in which the Replacement Airframe is then
registered in accordance with the terms of the Lease) for registration in
the name of the Owner Trustee of the Aircraft of which such Replacement
Airframe is a part;
(d) execute and deliver a Lease Supplement and an Indenture
Supplement covering (i) the Aircraft of which such Replacement Airframe is
part of and, (ii) such Replacement Engine, as the case may be;
(e) transfer its interest in (without recourse except as to
obligations in respect of Lessor's Liens) and to the Airframe and Engines
(if any) or the Engine being replaced to or at the direction of Lessee;
(f) request in writing that the Indenture Trustee executes and
delivers to Lessee appropriate instruments to release the Airframe or
Engines (or engines) being replaced from the Lien created under the
Indenture and release the Purchase Agreement Assignment and the Engine
Warranty Assignment (solely with respect to such replaced Airframe or
Engines, if any) from the assignment and pledge under the Indenture; and
(g) take such further action as may be contemplated by Sections 8(d)
or 7(e) of the Lease, as the case may be.
-6-
Section 3.05 Trust Agreement Remaining in Full Force and Effect. In
--------------------------------------------------
the event of the substitution of a Replacement Airframe for the Airframe or the
substitution of a Replacement Engine for any Engine or engine all provisions of
this Trust Agreement relating to such replaced Airframe or Engine or engine
shall be applicable to such Replacement Airframe or Replacement Engine, with the
same force and effect as if such Replacement Airframe or Replacement Engine were
the same airframe, engine or propeller as the Airframe or Engine being replaced
but for the Event of Loss with respect to such Airframe or Engine.
Section 3.06 Authorization in Respect of Return of an Engine. The
-----------------------------------------------
Owner Trustee agrees for the benefit of the Owner Participant that, upon the
receipt of an authorization and direction from the Owner Participant, it will,
in the event of an engine being transferred to the Owner Trustee pursuant to
Section 12(b) of the Lease, subject to due compliance with the terms of such
Section 12(b):
(a) accept from Lessee or other vendor the ▇▇▇▇ of sale contemplated
by such Section 12(b) with respect to such engine being transferred to the
Owner Trustee;
(b) transfer its right, title and interest in (without recourse or
warranty except a warranty against Lessor's Liens) and to an Engine to or
at the direction of Lessee as contemplated by such Section 12(b); and
(c) request in writing that the Indenture Trustee executes and
delivers to Lessee appropriate instruments to release the Engine being
transferred to Lessee pursuant to such Section 12(b) from the Lien of the
Indenture and to release Engine Warranty Assignment (solely with respect to
such Engine) from the assignment and pledge under the Indenture.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
Section 4.01 Distribution of Payments.
------------------------
(a) Payments to the Indenture Trustee. Until the Indenture shall have
---------------------------------
been terminated pursuant to Section 14.01 thereof or until the Aircraft shall
have been released from the Lien created under the Indenture pursuant to the
terms thereof, all Basic Rent, Supplemental Rent, insurance proceeds and
requisition, indemnity or other payments of any kind included in the Trust
Estate (it being understood that Excepted Payments are not part of the Trust
Estate) payable to the Owner Trustee (other than payments received from the
Indenture Trustee) shall be payable directly to the Indenture Trustee (and if
any of the same are received by the Owner Trustee shall upon receipt
-7-
be paid over to the Indenture Trustee without deduction, set-off or adjustment
of any kind) for distribution in accordance with the provisions of Article V of
the Indenture; provided, that any payments received by Owner Trustee from (i)
--------
Lessee with respect to Owner Trustee's fees and disbursements or (ii) Owner
Participant pursuant to Section 7.01 shall not be paid over to Indenture Trustee
but shall be retained by Owner Trustee and applied toward the purpose for which
such payments were made.
(b) Payments to the Owner Trustee; Other Parties. Any payment of the
--------------------------------------------
type required to be paid to the Indenture Trustee referred to in paragraph (a)
of this Section 4.01 received by the Owner Trustee after the Indenture shall
have been terminated, any payment received by the Owner Trustee pursuant to the
provisions of Article V of the Indenture (other than Excepted Payments) and any
other amounts received as part of the Trust Estate and for the application or
distribution of which no provision is made herein, shall be distributed
forthwith upon receipt by the Owner Trustee in the following order of priority:
first, so much of such payment as shall be required to pay or reimburse the
-----
Owner Trustee for any fees or expenses not otherwise paid or reimbursed as to
which the Owner Trustee is entitled to be so paid or reimbursed pursuant to the
provisions hereof or of the Indenture shall be retained by the Owner Trustee;
and second, the balance, if any, shall be paid to the Owner Participant.
------
(c) Excepted Payments. Any Excepted Payments received by the Owner
-----------------
Trustee shall be paid by the Owner Trustee to the Person to whom such Excepted
Payments are payable under the provisions of the Tax Indemnity Agreement, the
Participation Agreement, the Lease or any other Operative Agreement.
(d) Certain Distributions to Owner Participant. All amounts from time
------------------------------------------
to time distributable to Owner Participant pursuant to the Indenture shall, if
paid to Owner Trustee, be distributed by Owner Trustee to Owner Participant in
accordance with the provisions of Article V of the Indenture.
Section 4.02 Method of Payments. The Owner Trustee shall make
------------------
distributions or cause distributions to be made to (i) the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds the amount to be distributed to the account designated in
Schedule II to the Participation Agreement under the heading "Owner Participant"
or such account or accounts of the Owner Participant as it may designate from
time to time by written notice to the Owner Trustee (and the Owner Trustee shall
use reasonable efforts to cause such funds to be transferred by wire transfer on
the same day as received, but in any case not later than the next succeeding
Business Day), and (ii) the Indenture Trustee pursuant to this Article IV by
paying the amount to be distributed to the Indenture Trustee in the manner
specified in the Indenture; provided, however, that the Owner Trustee shall use
-------- -------
its best efforts to invest overnight, for the benefit of the Owner Participant,
in investments that would be permitted by Section 15 of the Lease (but only to
the extent such investments are available and, if such investments are not
available, then in such
-8-
other investments available to the Owner Trustee which, after consultation with
the Owner Participant, the Owner Participant shall direct), all funds not
transferred by the Owner Trustee by wire transfer on the same day as they were
received. Notwithstanding the foregoing but subject always to the provisions of
and Lien created by the Indenture, the Owner Trustee will, if so requested by
the Owner Participant by written notice, pay any and all amounts payable by the
Owner Trustee hereunder to the Owner Participant either (i) by crediting, or
causing the Indenture Trustee to credit, such amount or amounts to an account or
accounts maintained by the Owner Participant as it may designate from time to
time by written notice to the Owner Trustee, in immediately available funds, or
(ii) by mailing, or causing the Indenture Trustee to mail, an official bank
check or checks in such amount or amounts payable to the Owner Participant at
such address as the Owner Participant shall have designated in writing to the
Owner Trustee.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
Section 5.01 Notice of Event of Default. If the Owner Trustee shall
--------------------------
have knowledge of a Default or an Event of Default or an Indenture Default or
Indenture Event of Default, the Owner Trustee shall give to the Owner
Participant and the Lessee prompt telephonic or telecopied notice thereof
followed by prompt confirmation thereof by certified mail, postage prepaid.
Subject to the terms of Section 5.03, the Owner Trustee shall take such action
or shall refrain from taking such action, not inconsistent with the provisions
of the Operative Agreements, with respect to such Default, Event of Default,
Indenture Default or Indenture Event of Default as the Owner Trustee shall be
directed in writing by the Owner Participant. For all purposes of this Trust
Agreement and the Lease, the Owner Trustee shall not be deemed to have knowledge
of a Default, an Event of Default, an Indenture Default or an Indenture Event of
Default unless notified in writing thereof in the manner and at the address set
forth in Section 11.05 or unless an officer in the Corporate Trust
Administration Department who has responsibility for, or familiarity with, the
transactions contemplated hereunder, under the Participation Agreement and under
the Indenture or any Vice President in the Corporate Trust Administration
Department of the Owner Trustee has actual knowledge thereof.
Section 5.02 Action Upon Instructions. Subject in all respects to the
------------------------
terms of Sections 5.01 and 5.03 and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following actions
as may be specified in such instructions: (i) give such notice or direction or
exercise such right, remedy or power hereunder or under any of the Operative
Agreements to which the Owner Trustee is a party, or in respect of all or any
part of the Trust Estate, as shall be specified in such instructions; (ii) take
such action to preserve or protect the Trust Estate (including the discharge of
any Liens or encumbrances) as may be specified in such instructions;
-9-
(iii) approve as satisfactory to it all matters required by the terms of the
Lease to be satisfactory to the Owner Trustee, it being understood that without
written instructions of the Owner Participant, the Owner Trustee shall not
approve any such matter as satisfactory to it; (iv) after the expiration or
earlier termination of the Lease, convey all of the Owner Trustee's right, title
and interest in and to the Aircraft for such amount, on such terms and to such
purchaser or purchasers as shall be designated in such instructions, or retain,
lease or otherwise dispose of, or from time to time take such action with
respect to, the Aircraft on such terms as shall be set forth in such
instructions or deliver the Aircraft to the Owner Participant in accordance with
such instructions; and (v) take or refrain from taking such other action or
actions as may be specified in such instructions. In the event that the Owner
Trustee is unsure of the application of any provision of this Trust Agreement or
any other agreement relating to the transactions contemplated hereby, the Owner
Trustee may request and rely upon instructions of the Owner Participant.
Section 5.03 Indemnification. The Owner Trustee shall not be required
---------------
to take or refrain from taking any action under Section 5.01 (other than the
giving of notices referred to therein) or 5.02 unless the Owner Trustee shall
have been indemnified by the Owner Participant, in manner and form satisfactory
to the Owner Trustee, against any liability, cost or expense (including
reasonable counsel fees and disbursements) which may be incurred in connection
therewith; and, if the Owner Participant shall have directed the Owner Trustee
to take or refrain from taking any such action, the Owner Participant agrees to
furnish such indemnity as shall be required and in addition to pay the
reasonable fees and charges of the Owner Trustee for the services performed or
to be performed by it pursuant to such direction. The Owner Trustee shall not be
required to take any action under Section 5.01 or 5.02 if the Owner Trustee
shall reasonably determine, or shall have been advised by counsel, that such
action is contrary to the terms of any of the Operative Agreements to which the
Owner Trustee is a party, or is otherwise contrary to Applicable Law.
Section 5.04 No Duties Except as Specified in Trust Agreement or
---------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
------------
control, use, sell, dispose of or otherwise deal with the Aircraft or any other
part of the Trust Estate, or otherwise to take or refrain from taking any action
under, or in connection with any of the Operative Agreements to which the Owner
Trustee is a party, except as expressly required by the terms of any of the
Operative Agreements to which the Owner Trustee is a party, or (to the extent
not inconsistent with the provisions of the Indenture) as expressly provided by
the terms hereof or in written instructions from the Owner Participant received
pursuant to the terms of Section 5.01 or 5.02, and no implied duties or
obligations shall be read into this Trust Agreement or any of the Operative
Agreements to which the Owner Trustee is a party against the Owner Trustee. The
Owner Trustee nevertheless agrees that it will, in its individual capacity and
at its own cost and expense (but without any right of indemnity in respect of
any such cost or expense under Section 7.01) promptly take such action as may be
necessary duly to discharge and satisfy in full (i) all Lessor's Liens
attributable to the Owner Trustee in its individual capacity, (ii) any Liens
(other than Lessor's Liens attributable to it in its individual capacity)
created as a result of its breach of any of its obligations under this Trust
Agreement
-10-
(subject to the limitations on the liability of the Owner Trustee in its
individual capacity set forth in Section 6.01) on any part of the Trust Estate,
or on any properties of the Owner Trustee assigned, pledged or mortgaged as part
of the Trust Estate, which arise from acts of the Owner Trustee in its
individual capacity, except the Lien created under the Indenture, the rights of
Lessee under the Lease and the rights of the Owner Participant hereunder, and
(iii) any other Liens or encumbrances attributable to the Owner Trustee in its
individual capacity on any part of the Trust Estate which result from claims
against the Owner Trustee in its individual capacity unrelated to the ownership
of the Aircraft, the administration of the Trust Estate or the transactions
contemplated by the Operative Agreements.
Section 5.05 No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall have no power or authority to, and the
------------
Owner Trustee agrees that it will not, manage, control, use, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Trust Estate except
(i) as expressly required by the terms of any of the Operative Agreements to
which the Owner Trustee is a party, (ii) as expressly provided by the terms
hereof, or (iii) as expressly provided in written instructions from the Owner
Participant pursuant to Section 5.01 or 5.02, but subject always to the
provisions of the Lien created by the Indenture.
ARTICLE VI
THE OWNER TRUSTEE
Section 6.01 Acceptance of Trusts and Duties. The Owner Trustee in its
-------------------------------
individual capacity accepts the trusts hereby created and agrees to perform the
same but only upon the terms hereof applicable to it. The Owner Trustee in its
individual capacity also agrees to receive and disburse all monies received by
it constituting part of the Trust Estate upon the terms hereof. The Owner
Trustee, in its individual capacity, shall not be answerable or accountable
under any circumstances, except for (i) its own willful misconduct or gross
negligence, (ii) its performance of the terms of the last sentence of Section
5.04, (iii) its failure to use ordinary care in receiving or disbursing funds or
to comply with the first sentence of Section 6.08, (iv) liabilities that may
result from the inaccuracy of any representation or warranty of the Owner
Trustee in its individual capacity (or from the failure by the Owner Trustee in
its individual capacity to perform any covenant made in its individual capacity)
in Section 6.03 or in any of the Operative Agreements to which the Owner Trustee
is a party, (v) taxes, fees or other charges on, based on or measured by any
fees, commissions or other compensation received by the Owner Trustee as
compensation for its services rendered as the Owner Trustee, (vi) its failure
(in its individual capacity or as Owner Trustee) to use ordinary care in
connection with its obligations to invest funds pursuant to Section 15 of the
Lease or Section 4.02 hereof and (vii) for any liability on the part of the
Owner Trustee arising out of its negligence or willful misconduct in connection
with its obligations under Section 5.01, 6.08 or 9.02 hereof or Section 3.05 of
the Indenture; provided, however, that the failure to act or perform in the
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absence of instructions after the Owner Trustee has requested instructions from
the Owner Participant pursuant to the last sentence of Section 5.02 shall not
constitute willful misconduct or gross negligence for purposes of clause (i) of
this Section 6.01.
Section 6.02 Absence of Certain Duties. Except in accordance with
-------------------------
written instructions furnished pursuant to Sections 5.01 and 5.02 and except as
provided in, and without limiting the generality of, Sections 3.01, 5.04 and
5.05 and the last sentence of Section 9.01(b), the Owner Trustee shall have no
duty (i) to see to any registration of the Aircraft or any recording or filing
of the Lease, this Trust Agreement, the Indenture, any financing or continuation
statement or of any supplement to any thereof or to see to the maintenance of
any such registration, rerecording or refiling, except that of Owner Trustee to
comply with the FAA reporting requirements set forth in 14 C.F.R. ss.47.45 and
14 C.F.R. ss.47.51 or any successor provisions, and that the Owner Trustee shall
upon written request furnished by Lessee take such action as may be required of
the Owner Trustee to maintain the registration of the Aircraft in the name of
the Owner Trustee under the Act or, to the extent the Aircraft is registered in
a country other than the United States of America pursuant to Section 4.02 of
the Participation Agreement, other Applicable Law, and to the extent that
information for that purpose is supplied by Lessee pursuant to any of the
Operative Agreements, complete and timely submit any and all reports relating to
the Aircraft which may from time to time be required by the FAA or any
government or governmental authority having jurisdiction, (ii) to see to any
insurance on the Aircraft or to effect or maintain any such insurance, whether
or not Lessee shall be in default with respect thereto, (iii) to see to the
payment or discharge of any tax, assessment or other governmental charge or any
Lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust Estate except as provided by Section 5.04 hereof
or Section 5.03(b) of the Participation Agreement, (iv) to confirm or verify any
financial statements of Lessee or (v) to inspect the Aircraft or the books and
records of Lessee with respect to the Aircraft. Notwithstanding the foregoing,
the Owner Trustee will furnish to Indenture Trustee and Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to Owner Trustee under the Lease or any other Operative Agreement
except to the extent to which a Responsible Officer of Owner Trustee reasonably
believes (and confirms by telephone call with Owner Participant) that duplicates
or copies thereof have already been furnished to Owner Participant by some other
Person.
Section 6.03 No Representations or Warranties as to Certain Matters.
------------------------------------------------------
THE OWNER TRUSTEE IN ITS INDIVIDUAL CAPACITY OR AS THE OWNER TRUSTEE DOES NOT
MAKE AND SHALL NOT BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, ANY
ENGINE THEREOF, ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE)
OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY
ENGINE WHATSOEVER, except that the Owner Trustee in its individual capacity
warrants that on the Delivery Date the Owner
-12-
Trustee shall have received and shall hold whatever title to the Aircraft was
conveyed to it by Lessee free and clear of Lessor's Liens attributable to the
Owner Trustee in its individual capacity, shall be in compliance with the last
sentence of Section 5.04 hereof and that the Aircraft shall during the Lease
Term be free of Lessor's Liens attributable to it in its individual capacity, or
(b) any representation or warranty as to the validity, legality or
enforceability of this Trust Agreement or any other Operative Agreement to which
the Owner Trustee in its individual capacity or as Owner Trustee is a party, or
any other document or instrument, or as to the correctness of any statement
contained in any thereof except to the extent that any such statement is
expressly made herein or therein as a representation by the Owner Trustee in its
individual capacity and except that the Owner Trustee in its individual capacity
hereby represents and warrants that it has all corporate power and authority to
execute, deliver and perform this Trust Agreement and that this Trust Agreement
has been, and (assuming the due authorization, execution and delivery of the
Trust Agreement by the Owner Participant) the other Operative Agreements to
which the Owner Trustee is a party have been (or at the time of execution and
delivery of any such instrument by the Owner Trustee hereunder or pursuant to
the terms of the Participation Agreement that such an instrument will be) duly
executed and delivered by one of its officers who is or will be, as the case may
be, duly authorized to execute and deliver such instruments on behalf of the
Owner Trustee and that this Trust Agreement has been duly authorized, executed
and delivered by the institution acting as the Owner Trustee and constitutes the
legal, valid and binding obligation of such institution enforceable against it
in accordance with its terms, except as such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and by general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
Section 6.04 No Segregation of Monies Required; Investment Thereof.
-----------------------------------------------------
Monies received by the Owner Trustee hereunder need not be segregated in any
manner except to the extent required by Applicable Law, and may be deposited
under such general conditions as may be prescribed by Applicable Law, and shall
be invested as provided in Section 4.02 hereof or Section 15 of the Lease.
Section 6.05 Reliance Upon Certificates, Counsel and Agents. The Owner
----------------------------------------------
Trustee shall incur no liability to anyone in acting in reliance upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it to be
genuine and reasonably believed by it to be signed by the proper party or
parties. Unless other evidence in respect thereof is specifically prescribed
herein, any request, direction, order or demand of the Owner Participant, Lessee
or the Indenture Trustee mentioned herein or in any of the other Operative
Agreements to which the Owner Trustee is a party shall be sufficiently evidenced
by written instruments signed by a person purporting to be an officer of the
Owner Participant, Lessee or the Indenture Trustee, as the case may be. The
Owner Trustee may accept a copy of a resolution of the Board of Directors of
Lessee, the Owner Participant or the Indenture Trustee, as the case may be,
certified by the Secretary or an Assistant Secretary of Lessee, the Owner
Participant or the Indenture Trustee, as the case may be, as duly adopted and in
full force
-13-
and effect, as conclusive evidence that such resolution has been duly adopted by
said Board and that the same is in full force and effect. As to any fact or
matter the manner of ascertainment of which is not specifically described
herein, the Owner Trustee may, absent actual knowledge to the contrary, for all
purposes hereof rely on a certificate signed by an officer of Lessee, the Owner
Participant or the Indenture Trustee, as the case may be, as to such fact or
matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
In the administration of the trusts hereunder, the Owner Trustee may
exercise its powers and perform its duties hereunder directly or through agents
or attorneys and the Owner Trustee shall not be liable for the default or
misconduct of any agents or attorneys selected by it with reasonable care. In
the administration of the trusts hereunder, the Owner Trustee may consult with
counsel, accountants and other skilled persons and the Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such counsel, accountants or other
skilled persons selected by it with reasonable care.
Section 6.06 Not Acting in Individual Capacity. In acting hereunder,
---------------------------------
the Owner Trustee acts solely as trustee and not in its individual capacity
except as otherwise expressly provided herein; and, except as may be otherwise
expressly provided in this Trust Agreement, including without limitation,
Section 6.01, the Lease, the Participation Agreement or the Indenture, all
Persons having any claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof.
Section 6.07 Fees; Compensation. Except as provided in Section 5.03,
------------------
6.08 or 7.01, the Owner Trustee agrees that it shall have no right against the
Owner Participant or the Trust Estate for any fee as compensation for its
services hereunder.
Section 6.08 Tax Returns. The Owner Trustee shall be responsible for
-----------
the keeping of all appropriate books and records relating to the receipt and
disbursement by it of all monies under this Trust Agreement or any agreement
contemplated hereby. The Owner Trustee shall be responsible for causing to be
prepared and filed, at Lessee's expense, all income tax returns required to be
filed with respect to the trust created hereby as requested by the Owner
Participant and shall execute and file such returns as directed by the Owner
Participant.
Section 6.09 Fixed Investment Trust. Notwithstanding anything herein
----------------------
to the contrary, the Owner Trustee shall not be authorized and shall have no
power to "vary the investment" of the Owner Participant within the meaning of
section 301.7701-4(c) of the Treasury Regulations.
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ARTICLE VII
INDEMNIFICATION OF THE OWNER TRUSTEE
BY THE OWNER PARTICIPANT
Section 7.01 The Owner Participant to Indemnify the Owner Trustee. The
----------------------------------------------------
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and does
hereby indemnify, protect, save, defend and hold harmless the Owner Trustee in
its individual capacity, and its successors, assigns (but not security assigns),
directors, officers, representatives, agents, employees and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by the Owner Trustee on or measured by any
compensation received by the Owner Trustee for its services hereunder), claims,
actions, suits, costs, expenses or disbursements (including, without limitation,
reasonable legal fees, but excluding internal costs and expenses such as
salaries and overhead) and expenses of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against the Owner Trustee in its
individual capacity (whether or not also indemnified against by Lessee under the
Lease or under the Participation Agreement or also indemnified against by any
other Person; provided that Owner Participant shall be subrogated to the rights
--------
of Owner Trustee against Lessee or any other indemnitor) in any way relating to
or arising out of this Trust Agreement or any of the other Operative Agreements
or the enforcement of any of the terms of any thereof, or in any way relating to
or arising out of the manufacture, purchase, acceptance, nonacceptance,
rejection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of the Airframe, any Engine or any Part of the
foregoing (including, without limitation, latent and other defects, whether or
not discoverable, and any claim for patent, trademark or copyright
infringement), or in any way relating to or arising out of the administration of
the Trust Estate or the action or inaction of the Owner Trustee hereunder,
except (a) in the case of willful misconduct or gross negligence on the part of
the Owner Trustee either as trustee or in its individual capacity in the
performance or nonperformance of its duties hereunder or under any of the other
Operative Agreements to which it is a party or (b) those resulting from the
inaccuracy of any representation or warranty of the Owner Trustee in its
individual capacity (or from the failure of the Owner Trustee in its individual
capacity to perform any covenant) in Section 6.03, or in any of the Operative
Agreements, or (c) those arising or resulting from any of the matters described
in the last sentence of Section 6.01, or (d) those resulting from its failure to
perform the terms of the last sentence of Section 5.04 hereof or from its
failure to use ordinary care in the receipt and disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 15 of the
Lease or Section 4.02 hereof or in compliance with the first Section of Section
6.08, or (e) any liability on the part of Owner Trustee arising out of its
negligence or willful or negligent misconduct in connection with its obligations
under Section 5.01, 6.08 or 9.02 hereof or Section 3.05 of the Indenture, or (f)
those arising under any circumstances or upon any terms where Lessee would not
have been required to indemnify Owner Trustee, in its individual capacity,
pursuant to Section 6.01 or 7.01 of the Participation Agreement; provided, that
--------
before asserting its right to indemnification,
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if any, pursuant to this Section 7.01, Owner Trustee shall first demand its
corresponding right to indemnification pursuant to Section 6.01 or 7.01 of the
Participation Agreement (but need not exhaust any or all remedies available
thereunder). The indemnities contained in this Section 7.01 extend to the Owner
Trustee only in its individual capacity and shall not be construed as
indemnities of the Indenture Estate or the Trust Estate. The indemnities
contained in this Section 7.01 shall survive the termination of this Trust
Agreement and the resignation or removal of the Owner Trustee. In addition, if
necessary, the Owner Trustee shall be entitled to indemnification from the Trust
Estate, subject however to the provisions of Section 4.01 hereof and the Lien
created under the Indenture, for any liability, obligation, loss, damage,
penalty, tax, claim, action, suit, cost, expense or disbursement indemnified
against pursuant to this Section 7.01 to the extent not reimbursed by Lessee,
the Owner Participant or others, but without releasing any of them from their
respective agreements of reimbursement.
ARTICLE VIII
[RESERVED]
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
Section 9.01 Resignation of the Owner Trustee; Appointment of
------------------------------------------------
Successor. (a) Resignation or Removal. The Owner Trustee or any successor Owner
--------- ----------------------
Trustee (i) shall resign if required to do so pursuant to Section 5.02(b) of the
Participation Agreement and (ii) may resign at any time without cause by giving
at least 60 days prior written notice to the Owner Participant, the Indenture
Trustee and Lessee, such resignation to be effective upon the acceptance of
appointment by the successor Owner Trustee under Section 9.01(b). In addition,
the Owner Participant may at any time remove the Owner Trustee, or revoke the
trusts created by this Trust Agreement, in either case with or without cause by
a notice in writing delivered to the Owner Trustee, the Indenture Trustee and
Lessee. Any such removal shall be effective upon the acceptance of appointment
by the successor Owner Trustee under Section 9.01(b). In the case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint a
successor Owner Trustee by an instrument in writing. If a successor Owner
Trustee shall not have been appointed within 30 days after such notice of
resignation or removal, the Owner Trustee or the Indenture Trustee may apply to
any court of competent jurisdiction to appoint a successor Owner Trustee to act
until such time, if any, as a successor shall have been appointed as above
provided. Any successor Owner Trustee so appointed by such court shall
immediately and without further act be superseded by any successor Owner Trustee
appointed as above provided within one year from the date of the appointment by
such court.
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(b) Execution and Delivery of Documents, etc. Any successor Owner
-----------------------------------------
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee, with a copy to Owner Participant, Lessee and Indenture Trustee, an
instrument accepting such appointment and assuming the obligations of Owner
Trustee, in its individual capacity and as Owner Trustee, under the Operative
Agreements to which Owner Trustee is a party, and thereupon such successor Owner
Trustee, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Owner Trustee
in the trust hereunder with like effect as if originally named the Owner Trustee
herein; but nevertheless, upon the written request of such successor Owner
Trustee, such predecessor Owner Trustee shall execute and deliver an instrument
transferring to such successor Owner Trustee upon the trusts herein expressed,
all the estates, properties, rights, powers and trusts of such predecessor Owner
Trustee, and such predecessor Owner Trustee shall duly assign, transfer, deliver
and pay over to such successor Owner Trustee all monies or other property then
held by such predecessor Owner Trustee upon the trusts herein expressed. Upon
the appointment of any successor Owner Trustee hereunder, the predecessor Owner
Trustee will complete, execute and deliver to the successor Owner Trustee such
documents as are necessary to cause registration of the Aircraft included in the
Trust Estate to be transferred upon the records of the FAA or other governmental
authority having jurisdiction, into the name of the successor Owner Trustee.
(c) Qualification. Any successor Owner Trustee, however appointed,
--------------
shall be a Citizen of the United States, shall be qualified to act as a trustee
in Delaware (if the trust created hereby is to remain in such state) and shall
also be a bank or trust company organized under the laws of the United States of
America or any state thereof having a combined capital and surplus of at least
$100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
and customary terms.
(d) Merger, etc. Any corporation into which the Owner Trustee may be
-----------
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Owner Trustee may be transferred, shall, subject
to the terms of Section 9.01(c), be the Owner Trustee hereunder without further
act; provided that such corporation shall not also be the Indenture Trustee.
Section 9.02 Co-Trustees and Separate Trustees. If at any time or
---------------------------------
times it shall be necessary or prudent in order to conform to any Applicable Law
of any jurisdiction in which all or any part of the Trust Estate is located, or
the Owner Trustee shall be advised by counsel that it is so necessary or prudent
in the interest of the Owner Participant or the Owner Trustee, or the Owner
Trustee shall have been directed to do so by the Owner Participant, the Owner
Trustee and the Owner Participant shall execute and deliver an agreement
supplemental hereto and all other instruments and agreements necessary or proper
to constitute another bank or trust company or one or more Persons (any and all
of which shall be a Citizen of the United States) approved by the Owner
-17-
Trustee and the Owner Participant, either to act as co-trustee or co-trustees,
jointly with the Owner Trustee, or to act as separate trustee or trustees
hereunder (any such co-trustee or separate trustee being herein sometimes
referred to as an "additional trustee"). In the event (i) the Owner Participant
shall not have joined in the execution of such agreements supplemental hereto
within ten days after the receipt of a written request from the Owner Trustee so
to do, or (ii) an Indenture Event of Default not arising from an Event of
Default shall occur and be continuing, the Owner Trustee may act under the
foregoing provisions of this Section 9.02 without the concurrence of the Owner
Participant; and the Owner Participant hereby appoints the Owner Trustee its
agent and attorney-in-fact to act for it under the foregoing provisions of this
Section 9.02 in either of such contingencies.
Every additional trustee hereunder shall, to the extent permitted by
Applicable Law, be appointed and act, and the Owner Trustee and its successors
shall act, subject to the following provisions and conditions:
(a) all powers, duties, obligations and rights conferred upon the
Owner Trustee in respect of the custody, control and management of monies,
the Aircraft or documents authorized to be delivered hereunder or under the
Participation Agreement shall be exercised solely by the corporation
designated as the Owner Trustee in the first paragraph of this Trust
Agreement, or its successors as the Owner Trustee hereunder;
(b) all other rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee and any limitations thereon shall be
conferred or imposed upon and exercised or performed by the corporation
designated as the Owner Trustee in the first paragraph of this Trust
Agreement or its successors as the Owner Trustee, and such additional
trustee or trustees jointly, except to the extent that under any Applicable
Law of any jurisdiction in which any particular act or acts are to be
performed (including the holding of title to the Trust Estate), the Owner
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations shall be exercised
and performed by such additional trustee or trustees;
(c) no power given to, or which it is provided hereby may be
exercised by, any such additional trustee or trustees shall be exercised
hereunder by such additional trustee or trustees, except jointly with, or
with the consent in writing of, the corporation designed as the Owner
Trustee in this Trust Agreement or its successor as the Owner Trustee,
anything herein contained to the contrary notwithstanding;
(d) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder;
(e) the Owner Participant, at any time, by an instrument in writing
may remove any such additional trustee. In the event that the Owner
Participant shall not have joined in
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the execution of any such instrument within ten days after the receipt of a
written request from the Owner Trustee so to do, the Owner Trustee shall
have the power to remove any such additional trustee without the
concurrence of the Owner Participant; and the Owner Participant hereby
appoints the Owner Trustee its agent and attorney-in-fact to act for it in
such connection in such contingency; and
(f) no appointing of, or action by, any additional trustee will
relieve the Owner Trustee of any of its obligations under, or otherwise
affect any of the terms of the Indenture or affect the interests of the
Indenture Trustee or the Holders of the Equipment Notes in the Trust
Estate.
In case any separate trustee under this Section 9.02 shall die, become
incapable of acting, resign or be removed, the title to the Trust Estate and all
rights and duties of such separate trustee shall, so far as permitted by
Applicable Law, vest in and be exercised by Owner Trustee, without the
appointment of a successor to such separate trustee.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT
AND OTHER DOCUMENTS
Section 10.01 Supplements and Amendments. (a) Supplements and
-------------------------- ---------------
Amendments. At any time and from time to time, upon the written request of the
----------
Owner Participant, (i) the Owner Trustee, together with the Owner Participant,
shall, subject to Section 5.11 of the Participation Agreement, execute a
supplement to this Trust Agreement for the purpose of adding provisions to, or
changing or eliminating provisions of, this Trust Agreement (except Section
11.11) as specified in such request, and (ii) the Owner Trustee shall, subject
to compliance with the applicable provisions of Section 13.02 of the Indenture,
enter into such written amendment of or supplement to any other Operative
Agreement to which the Owner Trustee is a party as the Indenture Trustee and
Lessee may agree to and as may be specified in such request, or execute and
deliver such written waiver or modification of or consent under the terms of any
such Operative Agreement as Lessee and the Indenture Trustee may agree to and as
may be specified in such request.
(b) Delivery of Amendments and Supplements to Certain Parties. Until
---------------------------------------------------------
the Indenture shall have been terminated pursuant to Section 10(a) thereof or
the Aircraft shall have been released from the Indenture Estate, a signed copy
of each amendment or supplement to the Trust Agreement shall be delivered by the
Owner Trustee to the Indenture Trustee without in any way affecting the
Indenture or the Equipment Notes and without imposing any duty on the Indenture
Trustee with respect to such amendment or supplement.
-19-
Section 10.02 Discretion as to Execution of Documents. If in the
---------------------------------------
opinion of the Owner Trustee any document required to be executed pursuant to
the terms of Section 10.01 adversely affects any right, duty, immunity or
indemnity in favor of the Owner Trustee hereunder or under any other Operative
Agreement to which the Owner Trustee is a party, the Owner Trustee may in its
discretion decline to execute such document unless Owner Trustee is furnished
with indemnification from Lessee or any other party upon terms and in amounts
reasonably satisfactory to Owner Trustee to protect the Trust Estate and Owner
Trustee against any and all liabilities, costs and expenses arising out of the
execution of such documents.
Section 10.03 Absence of Requirements as to Form. It shall not be
----------------------------------
necessary for any written request furnished pursuant to Section 10.01 to specify
the particular form of the proposed documents to be executed pursuant to such
Section, but it shall be sufficient if such request shall indicate the substance
thereof.
Section 10.04 Distribution of Documents. Promptly after the execution
-------------------------
by the Owner Trustee of any document entered into pursuant to Section 10.01, the
Owner Trustee shall mail, by certified mail, postage prepaid, a conformed copy
thereof to the Owner Participant, but the failure of the Owner Trustee to mail
such conformed copy shall not impair or affect the validity of such document.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Termination of Trust Agreement. This Trust Agreement and
------------------------------
the trusts created hereby shall terminate and this Trust Agreement shall be of
no further force or effect upon the earliest of (a) the later of (x) the
termination of the Indenture pursuant to Section 14.01 thereof and the sale or
other final disposition by the Owner Trustee of all property constituting part
of the Trust Estate and the final distribution by the Owner Trustee of all
monies or other property or proceeds constituting part of the Trust Estate in
accordance with Article IV hereof, provided that at such time Lessee shall have
--------
fully complied with all of the terms of the Participation Agreement and the
Lease, and (y) the expiration or termination of the Lease in accordance with its
terms or (b) 110 years after the earlier execution of this Trust Agreement by
either party hereto, but if this Trust Agreement and the trusts created hereby
shall be or become authorized under applicable law for a period subsequent
thereto (or, without limiting the generality of the foregoing, if legislation
shall become effective providing for the validity of this Trust Agreement and
the trusts created hereby and the effective grant of such rights, privileges and
options for a period in gross) exceeding the period for which this Trust
Agreement and the trusts created hereby are hereinabove stated to extend and be
valid), then such rights, privileges or options shall not terminate as aforesaid
but shall extend to and continue in effect, but only if such non-termination and
extension shall then be valid under
-20-
Applicable Law, until such time as the same shall under Applicable Law cease to
be valid, whereupon all monies or other property or proceeds constituting part
of the Trust Estate shall be distributed in accordance with the terms of Article
IV hereof, otherwise this Trust Agreement and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.
Notwithstanding the foregoing, this Trust Agreement and trust created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Trust Agreement shall be of no further force and effect,
upon the election of the Owner Participant by notice to the Owner Trustee, if
such notice shall be accompanied by the written agreement (in form and substance
satisfactory to the Owner Trustee) of the Owner Participant assuming all
obligations of the Owner Trustee under or contemplated by the Operative
Agreements or incurred by it as trustee hereunder and releasing the Owner
Trustee therefrom; provided, however, that this Trust Agreement and the trust
created hereby may not be terminated and such notice may be given only after the
time the Lien of the Indenture is discharged under Section 14.01 of the
Indenture and after the Lease shall no longer be in effect.
Section 11.02 The Owner Participant Has No Legal Title in Trust
-------------------------------------------------
Estate. The Owner Participant does not have legal title to any part of the Trust
------
Estate. No transfer, by operation of law or otherwise, of any right, title and
interest of the Owner Participant in and to the Trust Estate hereunder shall
operate to terminate this Trust Agreement or the trusts hereunder or entitle any
successors or transferees of the Owner Participant to an accounting or to the
transfer of legal title to any part of the Trust Estate.
Section 11.03 Assignment, Sale, etc., of Aircraft. Any assignment,
-----------------------------------
sale, transfer or other conveyance of the Aircraft, any Engine, any Part or any
interest therein by the Owner Trustee made pursuant to the terms hereof or of
the Lease or the Participation Agreement shall bind the Owner Participant and
shall be effective to transfer or convey all right, title and interest of the
Owner Trustee and the Owner Participant in and to the Aircraft, such Engine,
such Part or interest therein. No purchaser or other grantee shall be required
to inquire as to the authorization, necessity, expediency or regularity of such
assignment, sale, transfer or conveyance or as to the application of any sale or
other proceeds with respect thereto by the Owner Trustee.
Section 11.04 Trust Agreement for Benefit of Certain Parties Only.
---------------------------------------------------
Except for the terms of Section 4.01, Articles V and IX, Sections 10.01, 11.01
and 11.03 hereof, nothing herein, whether express or implied, shall be construed
to give any Person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
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Section 11.05 Notices. Unless otherwise expressly specified or
-------
permitted by the terms hereof, all notices shall be given in the manner set
forth in Section 12.01 of the Participation Agreement.
Section 11.06 Severability. Any provision hereof 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.07 Waivers, etc. No term or provision hereof may be
------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing entered into in compliance with the terms of Article X hereof; and any
waiver of the terms hereof shall be effective only in the specified instance and
for the specific purpose given.
Section 11.08 Counterparts. This Trust Agreement may be executed by
------------
the parties hereto 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 11.09 Binding Effect, etc. All covenants and agreements
-------------------
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and permitted assigns, and the Owner Participant, its
successors and permitted assigns. Any request, notice, direction, consent,
waiver or other instrument or action by the Owner Participant shall bind its
successors and permitted assigns.
Section 11.10. Headings; References. The headings of the various
--------------------
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
SECTION 11.11. GOVERNING LAW. (a) THIS TRUST AGREEMENT SHALL IN ALL
-------------
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF DELAWARE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY 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 TRUST AGREEMENT.
-22-
(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 REFERRED TO IN
SECTION 11.05. EACH PARTY HERETO HEREBY AGREES THAT SERVICE UPON IT IN
ACCORDANCE WITH THIS SECTION 11.11(c) SHALL CONSTITUTE VALID AND EFFECTIVE
PERSONAL SERVICE UPON SUCH PARTY.
(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 TRUST AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR
BY SUCH COURTS.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING
TO THIS TRUST AGREEMENT.
Section 11.12. Administration of Trust. The principal place of
-----------------------
administration of the trust created by this Trust Agreement shall be in the
State of Delaware.
* * *
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
[OWNER PARTICIPANT]
By __________________________
Name:
Title:
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION
By _________________________
Name:
Title:
-24-
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS AND TERMS............................................................................ 1
Section 1.01 Definitions...................................................................................... 1
ARTICLE II AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS; DECLARATION OF TRUST.......................... 2
Section 2.01 Authority to Execute Documents................................................................... 2
Section 2.02 Declaration of Trust............................................................................. 2
[Section 2.03 Limitations on Control, Exceptions, Purpose...................................................... 3
(a) Limitations on Control..................................................................... 3
(b) Certain Exceptions......................................................................... 3
(c) Purpose.................................................................................... 3
ARTICLE III ACCEPTANCE AND DELIVERY OF AIRCRAFT; ISSUANCE OF EQUIPMENT NOTES; LEASE OF AIRCRAFT;
REPLACEMENT..................................................................................... 4
Section 3.01 Authorization................................................................................... 4
Section 3.02 Conditions Precedent............................................................................ 5
Section 3.03 Postponement of Delivery Date................................................................... 5
Section 3.04 Authorization in Respect of a Replacement Airframe or Replacement Engines....................... 5
Section 3.05 Trust Agreement Remaining in Full Force and Effect.............................................. 6
Section 3.06 Authorization in Respect of Return of an Engine................................................. 7
ARTICLE IV RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE........................... 7
Section 4.01 Distribution of Payments........................................................................ 7
Section 4.02 Method of Payments.............................................................................. 8
ARTICLE V DUTIES OF THE OWNER TRUSTEE..................................................................... 9
Section 5.01 Notice of Event of Default...................................................................... 9
Section 5.02 No Action Upon Instructions..................................................................... 9
Section 5.03 Indemnification................................................................................. 10
Section 5.04 No Duties Except as Specified in Trust Agreement or Instructions................................ 10
Section 5.05 No Action Except Under Specified Documents or Instructions...................................... 11
ARTICLE VI THE OWNER TRUSTEE............................................................................... 11
Section 6.01 Acceptance of Trusts and Duties................................................................. 11
Section 6.02 Absence of Certain Duties....................................................................... 11
Section 6.03 No Representations or Warranties as to Certain Matters.......................................... 12
Section 6.04 No Segregation of Monies Required; Investment Thereof........................................... 13
Section 6.05 Reliance Upon Certificates, Counsel and Agents.................................................. 13
Section 6.06 Not Acting in Individual Capacity............................................................... 14
Section 6.07 Fees; Compensation.............................................................................. 14
-i-
PAGE
----
Section 6.08 Tax Returns..................................................................................... 14
Section 6.09 Fixed Investment Trust.......................................................................... 14
ARTICLE VII INDEMNIFICATION OF THE OWNER TRUSTEE BY THE OWNER PARTICIPANT................................... 14
Section 7.01 The Owner Participant to Indemnify the Owner Trustee............................................ 14
ARTICLE VIII [RESERVED]...................................................................................... 16
ARTICLE IX SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES........................................................... 16
Section 9.01 Resignation of the Owner Trustee; Appointment of Successor...................................... 16
Section 9.02 Co-Trustees and Separate Trustees............................................................... 17
ARTICLE X SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER DOCUMENTS............................... 19
Section 10.01 Supplements and Amendments...................................................................... 19
Section 10.02 Discretion as to Execution of Documents......................................................... 19
Section 10.03 Absence of Requirements as to Form.............................................................. 19
Section 10.04 Distribution of Documents....................................................................... 19
ARTICLE XI MISCELLANEOUS................................................................................... 20
Section 11.01 Termination of Trust Agreement.................................................................. 20
Section 11.02 The Owner Participant Has No Legal Title in Trust Estate........................................ 20
Section 11.03 Assignment, Sale, etc........................................................................... 21
Section 11.04 Trust Agreement for Benefit of Certain Parties Only............................................. 21
Section 11.05 Notices......................................................................................... 21
Section 11.06 Severability.................................................................................... 21
Section 11.07 Waivers, etc.................................................................................... 21
Section 11.08 Counterparts.................................................................................... 21
Section 11.09 Binding Effect, etc............................................................................. 21
Section 11.10. Headings; References............................................................................ 22
SECTION 11.11. GOVERNING LAW................................................................................... 22
Section 11.12. Administration of Trust......................................................................... 23
-ii-
[Exhibit C-1 to Note Purchase Agreement
Form of Owned Aircraft Participation Agreement]
================================================================================
PARTICIPATION AGREEMENT [N3__ML]
Dated as of __________ __, 200_
among
MIDWAY AIRLINES CORPORATION,
ALLFIRST BANK,
Indenture Trustee
ALLFIRST BANK,
Pass-Through Trustee
and
ALLFIRST BANK,
Subordination Agent
================================================================================
COVERING ONE BOEING MODEL 737-700 AIRCRAFT
BEARING U.S. REGISTRATION NUMBER N3__ML
AND MANUFACTURER'S SERIAL NUMBER _____
PARTICIPATION AGREEMENT [N3__ML] dated as of __________, 200_ (this
"Agreement") among MIDWAY AIRLINES CORPORATION, a Delaware corporation (herein,
together with its successors and permitted assigns, the "Company"), ALLFIRST
BANK, a Maryland state-chartered commercial bank, as indenture trustee under the
Indenture referred to below (together with its successors and permitted assigns,
the "Indenture Trustee"), ALLFIRST BANK, a Maryland state-chartered commercial
bank, as pass-through trustee of three separate Pass-Through Trusts (together
with its successors and permitted assigns, the "Pass-Through Trustee"), and
ALLFIRST BANK, a Maryland state-chartered commercial bank, as subordination
agent (together with its successors and permitted assigns, the "Subordination
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof; and
WHEREAS, pursuant to the Purchase Agreement the Manufacturer agreed to
manufacture and sell to the Company and the Company agreed to purchase from the
Manufacturer the Aircraft; and
WHEREAS, subject to the terms and conditions of this Agreement the
Loan Participants are willing to make loans to the Company to finance a portion
of the acquisition cost of such Aircraft; and
WHEREAS, the Company and the Indenture Trustee are concurrently
entering into the Indenture for the benefit of the holders of the Equipment
Notes, pursuant to which Indenture the Company shall, subject to the terms and
conditions set forth therein, issue to the Pass-Through Trustee under each of
the Pass-Through Trust Agreements, as a Loan Participant, Equipment Notes
substantially in the form set forth in the Indenture as evidence of the loan to
be made by each such Loan Participant to the Company to finance a portion of the
acquisition cost of such Aircraft, all as more particularly described herein and
in the Indenture;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration and receipt and adequacy of
which is hereby acknowledged, and intending to be legally bound, the parties do
hereby agree as follows:
ARTICLE 1.
INTERPRETATION
Section 1.01. Definitions. Capitalized terms used herein and defined
-----------
in Appendix A shall, except as such definitions may be specifically modified in
the body of this Agreement for
the purposes of a particular section, paragraph or clause, have the meanings
given such terms in Appendix A.
Section 1.02. References. References in this Agreement to sections,
----------
paragraphs, clauses, appendices, schedules and exhibits are to sections,
paragraphs, clauses, appendices, schedules and exhibits in and to this Agreement
unless otherwise specified.
Section 1.03. Headings. The headings of the various sections,
--------
paragraphs and clauses of this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
Section 1.04. Appendices Schedules and Exhibits. The appendices,
---------------------------------
schedules and exhibits are part of this Agreement.
ARTICLE 2.
SALE, LEASING AND SECURED LOAN TRANSACTIONS
Section 2.01. Participation. Subject to all of the terms and
-------------
conditions of this Agreement, the parties agree to participate in the secured
loan transactions with respect to the Aircraft provided for in this Section 2.
(a) Secured Loan. Each Loan Participant agrees to provide
------------
immediately available funds in the amount set forth opposite its name on
Schedule I (each such commitment being referred to as a Loan Participant's
"Commitment") to or on behalf of the Company by paying or causing to be paid
such amount to the Company, at the account specified by the Company on or prior
to the Delivery Date. Such funds shall constitute a loan to the Company to be
evidenced by the Equipment Notes and secured as provided in the Indenture.
(b) Delivery Date. The "Delivery Date" shall be the date fixed by
-------------
the Company in accordance with this Section 2.01(e) for the closing of the loan
transactions with respect to the Aircraft contemplated hereby, except that
following such closing the "Delivery Date" shall mean the date on which such
transactions actually closed. The Company 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 each Loan Participant's Commitment. The Company may
postpone a scheduled Delivery Date from time to time, for any reason by notice
given to the other parties hereto not later than 3:00 p.m. on the date last
scheduled as the Delivery Date, such notice to specify a new Delivery Date. The
making available by the Loan Participants of their Commitment at the closing
shall be deemed a waiver of notice of the Delivery Date by such Loan
Participants respectively and the Indenture Trustee.
-2-
Section 2.02. Closing Procedure.
-----------------
The closing shall take place at 11:00 a.m. New York City local time on
the Delivery Date at the offices of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other time and place as the parties may
agree. The closing shall be preceded by a pre-closing at the same place, the
time for which shall be fixed by the Company, 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.
ARTICLE 3.
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to Obligations of Participants.
---------------------------------------------------
The obligation of each Participant to make the Dollar amount of its respective
Commitment available for payment to the Company on the Delivery Date is subject
to satisfaction or waiver by each such Participant, on or prior to the Delivery
Date, of the conditions precedent set forth below in this Section 3.01;
provided, that it shall not be a condition precedent to the obligation of any
--------
Participant that any document be produced or action taken that is to be produced
or taken by such Participant or by a Person within such Participant's control:
(a) Notice. Such Participant shall have received the notice of the
------
Delivery Date as provided in Section 2.01(b), or shall have waived such notice.
(b) Delivery of Documents. Such Participant shall, except as noted
---------------------
below, have received executed counterparts of the following agreements,
instruments, certificates or documents, and such counterparts (a) shall have
been duly authorized, executed and delivered by the respective party or parties
thereto, (b) shall be reasonably satisfactory in form and substance to such
Participant and (c) shall be in full force and effect:
(i) the Indenture;
(ii) Indenture Supplement No. 1;
(iii) the Equipment Notes dated the Delivery Date; provided that,
-------- ----
only the Subordination Agent shall receive the authenticated Equipment
Notes;
(iv) the broker's report and insurance certificates required by
Section 11 of the Lease;
-3-
(v) (A) a copy of the Certificate of Incorporation and By-Laws of
Company and resolutions of the board of directors of Company, in each case
certified as of the Delivery Date, by the Secretary or an Assistant
Secretary of Company, duly authorizing the execution, delivery and
performance by Company of the Operative Agreements required to be executed
and delivered by Company on or prior to the Delivery Date in accordance
with the provisions hereof and thereof; (B) an incumbency certificate of
Company and Allfirst as to the person or persons authorized to execute and
deliver the relevant Operative Agreements on behalf of such party; and (C)
a copy of the Certificate of Incorporation or Articles of Incorporation and
By-Laws and general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization of
Allfirst, certified as of the Delivery Date by the Secretary or an
Assistant Secretary of Allfirst, which authorize the execution, delivery
and performance by Allfirst, of each of the Operative Agreements to which
it is a party, together with such other documents and evidence with respect
to it as Company or any Participant may reasonably request in order to
establish the consummation of the transactions contemplated by this
Agreement and the taking of all corporate proceedings in connection
therewith;
(vi) an Officer's Certificate of Company, dated as of the Delivery
Date, stating that its representations and warranties set forth in this
Agreement are true and correct as of the Delivery Date (or, to the extent
that any such representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date);
(vii) an Officer's Certificate of Allfirst, dated as of the
Delivery Date, stating that its representations and warranties, in its
individual capacity or as Indenture Trustee, a Pass-Through Trustee or
Subordination Agent, as the case may be, set forth in this Agreement are
true and correct as of the Delivery Date (or, to the extent that any such
representation and warranty expressly relates to an earlier date, true and
correct as of such earlier date);
(viii) the following opinions of counsel, in each case dated the
Delivery Date:
(A) (I) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President and General
Counsel of the Company substantially in the form of Exhibit A-1(a) hereto
and (II) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special North Carolina
counsel to the Company, substantially in the form of Exhibit A-1(b) hereto,
in each case addressed to the Subordination Agent, the Pass-Through
Trustee, each Liquidity Provider and the Indenture Trustee.
-4-
(B) Fulbright & ▇▇▇▇▇▇▇▇, L.L.P. special counsel for the
Company substantially in the form of Exhibit A-2 hereto addressed to the
Indenture Trustee, the Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Company;
(C) Ober, Kaler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation, special counsel for the Indenture Trustee, Pass-Through
Trustee and Subordination Agent in the form of Exhibit A-3 hereto and
addressed to the Indenture Trustee, the Subordination Agent, the Pass-
Through Trustee, each Liquidity Provider and the Company; and
(D) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special aviation counsel,
substantially in the form of Exhibit A-4 hereto and addressed to the
Indenture Trustee, the Subordination Agent, the Pass-Through Trustee, each
Liquidity Provider and the Company.
(c) Airworthiness. Each Participant shall receive a copy of a
-------------
current, valid Standard Certificate of Airworthiness for the Aircraft duly
issued by the FAA.
(d) [Reserved]
(e) Violation of Law. No change shall have occurred after the
----------------
date of this Agreement in any Applicable Law that makes it a violation of law
for (a) Company, any Participant, Subordination Agent, or the Indenture Trustee
to execute, deliver and perform the Operative Agreements to which any of them is
a party or (b) any Participant to make the Dollar amount of its Commitment
available or, to acquire an Equipment Note or to realize the benefits of the
security afforded by the Indenture.
(f) No Event of Default. On the Delivery Date, no event shall
-------------------
have occurred and be continuing, or would result from the sale or mortgage of
the Aircraft, which constitutes an Indenture Default or Indenture Event of
Default.
(g) No Event of Loss. No Event of Loss with respect to the
----------------
Airframe or any Engine shall have occurred and no circumstance, condition, act
or event that, with the giving of notice or lapse of time or both, would give
rise to or constitute an Event of Loss with respect to the Airframe or any
Engine shall have occurred.
(h) Title. The Company shall have good title (subject to filing
-----
and recordation of the FAA ▇▇▇▇ of Sale with the FAA) to the Aircraft, free and
clear of Liens, except Permitted Liens.
-5-
(i) Certification. The Aircraft shall have been duly certificated
-------------
by the FAA as to type and airworthiness as required by the terms of the
Indenture.
(j) Section 1110. The Indenture Trustee 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 Indenture in the
event of a case under Chapter 11 of the Bankruptcy Code in which Company is a
debtor.
(k) Filings. On the Delivery Date (i) application for
-------
registration of the Aircraft in the name of the Company shall have been duly
made with the FAA in compliance with the provisions of the Transportation Code;
and (ii) the Indenture, Indenture Supplement No. 1 and the FAA ▇▇▇▇ of Sale
shall have been duly filed for recordation (or shall be in the process of being
so duly filed for recordation) with the FAA in accordance with the
Transportation Code.
(l) Financing Statements. A Uniform Commercial Code financing
--------------------
statement or statements covering the security interest contemplated by the
Indenture shall have been executed and delivered by the Company as debtor and by
the Indenture Trustee as secured party, and such financing statement or
statements shall have been duly filed in all places necessary or desirable
within the State of North Carolina.
(m) 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.
(n) Governmental Action. All appropriate action required to have
-------------------
been taken prior to the Delivery Date by the FAA, or any governmental or
political agency, subdivision or instrumentality of the United States, in
connection with the transactions contemplated by this Agreement shall have been
taken, and all orders, permits, waivers, authorizations, exemptions and
approvals of such entities required to be in effect on the Delivery Date in
connection with the transactions contemplated by this Agreement shall have been
issued.
(o) Note Purchase Agreement. The conditions precedent to the
-----------------------
obligations of the Loan Participants and the other requirements relating to the
Aircraft and the Equipment Notes set forth in the Note Purchase Agreement shall
have been satisfied.
(p) Perfected Security Interest. On the Delivery Date, after
---------------------------
giving effect to the filing of the documents referenced in Section 3.01(k)(ii)
and the financing statements referenced in Section 3.01(l), the Indenture
Trustee shall have received a duly perfected first priority security interest in
all of Company's right, title and interest in the Aircraft, subject only to
Permitted Liens.
-6-
Section 3.02. Conditions Precedent to Obligations of Company. The
----------------------------------------------
obligation of Company to participate in the loan transaction on the Delivery
Date is subject to the satisfaction or waiver by Company, on or prior to the
Delivery Date, of the conditions precedent set forth below in this Section 3.02.
(a) Documents. Executed originals of the agreements, instruments,
---------
certificates, documents and opinions described in Section 3.01(b) shall have
been received by Company, except as specifically provided therein, and shall be
satisfactory to Company, unless the failure to receive any such agreement,
instrument, certificate or document is the result of any action or inaction by
Company.
(b) Other Conditions Precedent. Each of the conditions set forth in
--------------------------
Sections 3.01(c), (d) (as to all Participants), (e), (f), (h), (i), (j), (k),
(l), and (m) shall have been satisfied or waived by Company, unless the failure
of any such condition to be satisfied is the result of any action or inaction by
Company.
Section 3.03. Post-Registration Opinion. Promptly upon the
-------------------------
registration of the Aircraft and the recordation of the documents referenced in
Section 3.01(l)(ii), Company will direct ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C., special counsel
in Oklahoma City, Oklahoma, to deliver to Company, each Participant and the
Indenture Trustee a favorable opinion or opinions addressed to each of them with
respect to such registration and recordation.
ARTICLE 4.
COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01. Company Representations and Warranties. The Company
--------------------------------------
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 Company represents and warrants as of such earlier date):
(a) the Company is a corporation duly organized and validly existing
and is in good standing under the laws of Delaware, has its principal place of
business and chief executive office (as such terms are used in Article 9 of the
Uniform Commercial Code) in Morrisville, North Carolina at the address set forth
in Section 12.01(a), and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the failure to be
so qualified or in good standing would have a materially adverse effect on its
business or would impair its ability to perform its obligations under the
Company Documents;
(b) the Company 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
Company Documents;
-7-
(c) the Company 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 Company 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 Company or its
ability to perform its obligations under the Company Documents;
(e) the execution, delivery and performance of the Company Documents
by the Company have been duly authorized by all necessary corporate action on
the part of the Company and do not require any stockholder approval, or approval
or consent of any trustee or holder of any indebtedness or obligations of the
Company, and each such Company Documents has been duly executed and delivered
and constitutes the legal, valid and binding obligations of the Company
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 Company of the Company Documents except for such
registrations, applications and recordings referred to in the opinion of ▇▇▇▇▇
and ▇▇▇▇▇▇▇ P.C. delivered pursuant to Sections 3.01(b)(viii)(D) and the filings
referred to in Section 3.01(k)(ii);
(g) neither the execution, delivery or performance by the Company of
the Company 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 or approval under, any law, governmental rule or regulation or the
charter documents, as amended, or bylaws, as amended, of the Company or any
order, writ, injunction or decree of any court or governmental authority against
the Company 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 Company 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 Company or its ability to perform its obligations
under the Company Documents;
-8-
(h) except as disclosed in the Offering Memo, there are no pending
or, to the knowledge of the Company, threatened actions, suits, investigations
or proceedings against or affecting the Company 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 Company's consolidated financial condition, business, or
operations, or (B) would materially adversely affect the ability of the Company
to consummate the transactions contemplated by the Operative Agreements or to
perform its obligations under the Company Documents;
(i) the Company shall not be in default (after any applicable grace
periods) in the performance of any material term or condition of the Purchase
Agreement;
(j) except for (A) the registration in the Company's name of the
Aircraft pursuant to the Transportation Code, (B) the filing with and, where
appropriate, recordation by the FAA pursuant to the Transportation Code of the
Indenture (including Indenture Supplement No. 1), and (C) the filing of the
financing statements referred to in Sections 3.01(l), no further action,
including any filing or recording of any document, is necessary or advisable in
order to perfect the first security interest in and Lien on the Collateral in
favor of the Indenture Trustee;
(k) the Company has received good and marketable title to the
Aircraft, free and clear of all Liens, except Permitted Liens;
(l) assuming the truth of the representations contained in Section
3.12 of the Pass-Through Trust Agreements and compliance with Section 10.05 of
the Indenture, the execution and delivery of this Agreement and the other
Operative Agreements and the consummation of the transactions contemplated
hereby and thereby will not involve any prohibited transaction within the
meaning of Section 406(a) of ERISA, or Section 4975(c)(1)(A) through (D) of the
Code;
(m) all premiums which have become due with respect to the insurance
required to be provided by the Company on or prior to the Delivery Date under
Section 9 of the Lease have been paid by the Company;
(n) no Default or Event of Default exists and no Event of Loss, or
event which with the passage of time would constitute an Event of Loss, exists;
(o) the Aircraft is in such condition so as to enable the
airworthiness certificate of such Aircraft to be in good standing under the
Transportation Code; the Aircraft has been duly certificated by the FAA as to
type and airworthiness; there is in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant to the
Transportation Code;
-9-
(p) neither the Company nor any subsidiary of the Company is an
"investment company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(q) there are no broker's or underwriter's fees payable on behalf of
the Company in connection with the transactions contemplated in the Operative
Agreements, other than those of the Placement Agents and the Company Advisor (as
defined in Section 8.01(a)) referred to in Article 8 hereof; and
(r) the Company represents and warrants that it has authorized no
one to act on its behalf in connection with the offer or sale of any interest in
the Equipment Notes or the Pass-Through Certificates other than the Placement
Agents.
Section 4.02. Certain Covenants of Company. The Company covenants and
----------------------------
agrees as follows:
(a) Filings and Recordings. The Company will cause to be done,
----------------------
executed, acknowledged and delivered, at the Company's cost and expense, all
such further acts, conveyances and assurances as the Indenture Trustee or the
Pass-Through Trustee shall reasonably require for accomplishing the purposes of
the Operative Agreements. Without limiting the generality of this Section
4.02(a), the Company will promptly take, or cause to be taken, at the Company's
cost and expense, such action with respect to the recording, filing, re-
recording and re-filing of the Indenture (including each supplement thereto),
the Lease (including each supplement thereto), and any financing statements or
other instruments as may be reasonably requested by the Indenture Trustee and
appropriate, to maintain the perfection of the first security interest and the
Lien created by the Indenture, as against the Company and any third parties, or
if the Company cannot itself take, or cause to be taken, such action, will
furnish to the Indenture Trustee timely notice of the necessity of such action,
together with such instruments, in execution form, and such other information as
may be required to enable either of them to take such action at the Company's
cost and expense in a timely manner.
(b) Registration. From and after the Delivery Date, the Company
------------
shall cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Company under the Transportation Code, provided,
--------
however, that the Company 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 C to the Indenture; provided that prior to any change in
--------
the country of registry of the Aircraft the following conditions are met:
(i) at the time of re-registration, no Specified Default exists or
would occur as a result of such re-registration;
-10-
(ii) the Company 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 Company shall, at its cost, cause the interest of the
Company as owner of the Aircraft and the Indenture Trustee as mortgagee
thereof to be duly registered or recorded under the laws of such country
and at all times thereafter to remain so duly registered or recorded unless
and until the registration of the Aircraft is changed as provided herein,
and shall, at its cost, cause to be done at all times all other acts
including the filing, recording and delivery of any document or instrument
and the payment of any sum necessary or, by reference to prudent industry
practice in such country, advisable in order to create, preserve and
protect such interest in the Aircraft (including the first priority duly
perfected Lien under the Indenture) as against the Company or any third
parties in such jurisdiction, and the laws of such country would give
effect to the Lien of the Indenture Trustee thereon;
(iv) the obligations of the Company and each other party under
the Operative Agreements (and of the Permitted Lessee, if any, under a
Lease) shall remain or be, as the case may be, legal, valid, binding and
enforceable in such country;
(v) the Company shall ensure that all insurance required by
Section 4.05 of the Indenture shall be in full force and effect prior to,
at the time of, and after such change in registration and the Indenture
Trustee shall receive a certificate of Company'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 Indenture or the
related Lease for the Indenture Trustee to register or qualify to do
business in such country;
(viii) no Liens (except Permitted Liens) shall arise by reason of
such re-registration, and the Indenture shall continue as a first priority
Lien on the collateral thereunder (subject only to Permitted Liens);
(ix) the Indenture Trustee shall not be subjected to any adverse
tax consequences for which the Company is not required to and does not then
indemnify such Person in a manner reasonably satisfactory to such Person as
a result of such re-registration:
(x) any export licenses and certificate of deregistration
required in connection with any repossession or return of the Aircraft will
be readily obtain able in the normal
-11-
course without material delay or material burden on the Indenture Trustee,
it being agreed that the Company shall be responsible be responsible for
the cost thereof; and
(xi) the Indenture Trustee shall have received opinions in scope,
form and substance reasonably satisfactory to them, of counsel, expert in the
laws of such country, to the effect set forth in clauses (iii), (iv) (with
respect to the obligations of the Company under the Indenture), (vii) and (x).
The Company agrees to pay on an After-Tax Basis all reasonable out-of-
pocket costs and expenses (including, without limitation, reasonable counsel
fees and disbursements) of the Indenture Trustee in connection with any re-
registration pursuant to this Section.
(c) [Reserved]
----------
(d) Corporate Existence. The Company shall at all times maintain its
-------------------
corporate existence except as permitted by Section 4.02(e) hereof and all of its
rights, privileges and franchises necessary in the normal conduct of its
business, except for any corporate right, privilege or franchise that it
determines, is no longer necessary or desirable in the conduct of its business.
(e) Merger and Consolidation. So long as the Lien of the Indenture
------------------------
has not been discharged, the Company shall not enter into any merger with or
into or consolidation with, or sell, convey, transfer, lease or otherwise
dispose of in one or a series of transactions all or substantially all of its
assets as an entirety to any Person, unless the surviving corporation or Person
which acquires by purchase, conveyance, transfer or lease all or substantially
all of the assets of the Company as an entirety (i) is a domestic corporation
organized and existing under the laws of the United States or any State of the
United States (ii) is a Citizen of the United States, (iii) is a Section 1110
Person, so long as such status is a condition to the availability of Section
1110, (iv) if not the Company, executes a duly authorized, legal, valid,
binding, and enforceable agreement containing an effective assumption of all of
the Company's, as applicable, obligations hereunder and under the other
Operative Agreements, and each other document contemplated hereby or thereby and
delivers such instrument to the Indenture Trustee, (v) provides an opinion from
counsel (which counsel may be the Company's General Counsel) delivered to the
Indenture Trustee, which opinion shall be reasonably satisfactory to the
Indenture Trustee, and an officer's certificate (which may rely, as to legal
matters, on such legal opinion), each stating that such merger, consolidation,
conveyance, transfer, lease or other disposition and the instrument noted in
clause (iv) above comply with this Section 4.02(e), that such instrument is a
legal, valid and binding obligation of, and is enforceable against, such
survivor or Person, and that all conditions precedent herein provided for
relating to such transaction have been complied with, and (vi) such survivor or
Person makes such filings and recordings with the FAA as may be required
pursuant to part A of subtitle VII or ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code to evidence
such merger or consolidation; provided that, no such merger, consolidation or
-------- ----
conveyance, transfer or lease shall be permitted if, immediately after giving
effect such
-12-
consolidation, merger, purchase, conveyance, transfer, lease or other
disposition, an Event of Default shall have occurred and be continuing.
Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Company and the satisfaction of
the conditions specified in this Section 4.02(e), the successor corporation
formed by such consolidation or into which the Company 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 Company under
this Agreement and the Lease and each other Operative Agreement and any other
document contemplated hereby and thereby to which the Company is a party with
the same effect as if such successor corporation had been named as the Company
herein and therein. No such consolidation or merger, or sale, conveyance,
transfer or lease of all or substantially all of the assets of the Company as an
entirety shall have the effect of releasing the Company or any successor
corporation which shall theretofore have become the Company 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 Company agrees to give prompt written
------------------
notice to the Indenture Trustee of any change in the address of its chief
executive office (as such term is used in Section 9-103(3) of the North Carolina
Uniform Commercial Code) or of any change in its corporate name.
(g) Notice of Lease. In the event that the Company leases the
---------------
Aircraft pursuant to Section 4.01(b)(x) of the Indenture, it shall give notice
of such lease (promptly thereafter) to each of (i) ▇▇▇▇▇'▇ Investor Service, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Rating Division
(facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇) and (ii) Standard & Poor's Ratings Services, a
division of the ▇▇▇▇▇▇-▇▇▇▇ Companies Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇).
Section 4.03. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Company 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.
-13-
ARTICLE 5.
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01. Representations, Warranties and Covenants of the
------------------------------------------------
Indenture Trustee.
-----------------
(a) Representations and Warranties. The Indenture Trustee in its
------------------------------
individual capacity represents on the Delivery Date as follows:
(i) it is a Maryland state-chartered commercial bank duly
organized and validly existing in good standing under the laws of the
State of Maryland and has the corporate power and authority to enter
into and perform its obligations under the Indenture, this Agreement
and the other Operative Agreements to which it is a party and to
authenticate the Equipment Notes to be delivered on the Delivery Date;
(ii) the Indenture and this Agreement and the other Operative
Agreements to which it is or is to be a party, and the authentication
of the Equipment Notes, have been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Maryland law or regulation relating to its
banking or trust powers or contravene or result in any breach of, or
constitute any default under, its articles of incorporation or by-laws;
(iii) each of the Indenture and this Agreement, and the other
Operative Agreements to which it is a party, has been duly executed and
delivered by it and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto, is (or will
be, as the case may be), the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in
accordance with its terms except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws or
equitable principles of general application to or affecting the
enforcement of creditors' rights (regardless of whether enforceability
is considered in a proceeding in equity or at law);
(iv) neither the execution and delivery by it of the Indenture and
this Agreement and the other Operative Agreements to which it is or is
to be a party, nor the performance by it of any of the transactions
contemplated hereby or thereby, requires the consent or approval of,
the giving of notice to, the registration with, or the taking of any
other action in respect of, any Federal or state governmental authority
or agency governing its banking and trust powers; and
(v) it has made a filing with the New York State Banking
Department under Section 131.3 of the New York Banking Law in respect
of the performance of its duties relating to the Indenture.
-14-
(b) Indenture Trustee's Liens. The Indenture Trustee, in its
-------------------------
individual capacity, represents, warrants and covenants that there are no
Indenture Trustee's Liens. The Indenture Trustee, in its individual capacity,
covenants and agrees that it will at its own expense take such action as may be
necessary to duly discharge and satisfy in full, promptly, and in any event
within 30 days, after the same shall first become known to it, any Indenture
Trustee's Liens.
(c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in
---------------------------------------
its individual capacity, agrees to indemnify and hold harmless the Company and
the Pass-Through Trustee from and against any actual out-of-pocket loss, cost,
expense or damage which may be suffered by the Company or the Pass-Through
Trustee as a result of the failure of the Indenture Trustee to discharge and
satisfy any Indenture Trustee's Liens attributable to it in its individual
capacity, as described in Section 5.01(b) hereof.
Section 5.02. Indenture Trustee's Notice of Default. The Indenture
-------------------------------------
Trustee agrees to give the Company notice of any Indenture Default or Indenture
Event of Default promptly upon a Responsible Officer of the Indenture Trustee
having actual knowledge thereof.
Section 5.03. Releases from Indenture. The Indenture Trustee covenants
-----------------------
and agrees, for the benefit of the Company to execute and deliver the
instruments of release from the Lien of the Indenture which it is required to
execute and deliver in accordance with the provisions of Article XIV of the
Indenture.
Section 5.04. The Company's Right of Quiet Enjoyment. Notwithstanding
--------------------------------------
any other provision of any of the Operative Agreements, each other party to this
Agreement agrees, severally and as to its own actions only, that it will not, so
long as no Indenture Event of Default shall have occurred and be continuing,
take or cause to be taken any action contrary to the Company's rights under the
Indenture, including, without limitation, its rights to possession, use and
quiet enjoyment of the Aircraft during the Term.
Section 5.05. Pass-Through Trustee's Representations and Warranties.
-----------------------------------------------------
The Pass-Through Trustee, in its individual capacity, represents and warrants
as of the Delivery Date that:
(i) it is a Maryland state-chartered commercial bank duly
organized and validly existing in good standing under the laws of the State
of Maryland and has full corporate power and authority to enter into and
perform its obligations under the Pass-Through Trust Agreements, the
Intercreditor Agreement and this Agreement and to execute and authenticate
the Pass-Through Certificates to be delivered on the Pass-Through Closing
Date;
(ii) the execution, delivery and performance of this Agreement,
and the Pass-Through Trust Agreements and the performance of its
obligations hereunder and thereunder have been fully authorized by all
necessary corporate action on its part, and neither the execution and
delivery thereof nor its performance of any of the terms and provisions
thereof
-15-
will violate any federal or Maryland law or regulation relating to its
banking or trust powers or contravene or result in any breach of, or
constitute any default under its articles of incorporation, or bylaws or
the provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected; and
(iii) each of this Agreement and the Pass-Through Trust
Agreements has been duly executed and delivered by it (in its individual
and trust capacities) and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto, is or will be, as
the case may be, the legal, valid and binding obligation of the Pass-
Through Trustee (in its individual and trust capacities), enforceable in
accordance with its respective terms except as limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws or equitable
principles of general application to or affecting the enforcement of
creditors' rights generally (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) there are no Taxes payable by the Pass-Through Trustee
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Pass-Through Trustee of this Agreement, any of the Pass-
Through Trust Agreements (other than franchise or other taxes based on or
measured by any fees or compensation received by the Pass-Through Trustee
for services rendered in connection with the transactions contemplated by
the Pass-Through Trust Agreements), and there are no Taxes payable by the
Pass-Through Trustee imposed by the State of Maryland or any political
subdivision thereof in connection with the acquisition, possession or
ownership by the Pass-Through Trustee of any of the Equipment Notes other
than franchise or other taxes based on or measured by any fees or
compensation received by the Pass-Through Trustee for services rendered in
connection with the transactions contemplated by the Pass-Through Trust
Agreements;
Section 5.06. Survival of Representations, Warranties and
-------------------------------------------
Covenants. Representations, warranties and covenants of the Pass-Through Trustee
---------
(in its individual or trust capacity), the Indenture Trustee (in its individual
or trust capacity) and the Subordination Agent (in its individual or trust
capacity) provided for in this Article 5, and their respective obligations under
any and all of them, shall survive the delivery of the Aircraft and the
expiration or other termination of this Agreement and the other Operative
Agreements.
Section 5.07. Subordination Agent's Representations, Warranties
-------------------------------------------------
and Covenants.
-------------
(a) Representations and Warranties. The Subordination Agent
------------------------------
represents and warrants as of the Delivery Date that:
(i) it is a Maryland state-chartered commercial bank duly
organized and validly existing in good standing under the laws of the
State of Maryland and has the corporate
-16-
power and authority to enter into and perform its obligations under
this Agreement, the Liquidity Facilities and the Intercreditor
Agreement;
(ii) the execution, delivery and performance of this
Agreement, each of the Liquidity Facilities and the Intercreditor
Agreement and the performance of its obligations hereunder and
thereunder have been fully authorized by all necessary, corporate
action on its part, and, neither the execution and delivery thereof nor
its performance of any of the terms and provisions thereof will violate
any federal or Maryland law or regulation relating to its banking or
trust powers or contravene or result in any breach of, or constitute
any default under its articles of incorporation, or bylaws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(iii) each of this Agreement, the Liquidity Facilities and
the Intercreditor Agreement has been duly executed and delivered by it
and, assuming that each such agreement is the legal, valid and binding
obligation of each other party thereto, is or will be, as the case may
be, the legal, valid and binding obligation of the Subordination Agent,
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(iv) there are no Taxes payable by the Subordination Agent
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Subordination Agent of this Agreement, any of the
Liquidity Facilities or the Intercreditor Agreement (other than
franchise or other taxes based on or measured by any fees or
compensation received by the Subordination Agent for services rendered
in connection with the transactions contemplated by the Intercreditor
Agreement or any of the Liquidity Facilities), and there are no Taxes
payable by the Subordination Agent imposed by the State of Maryland or
any political subdivision thereof in connection with the acquisition,
possession or ownership by the Subordination Agent of any of the
Equipment Notes other than franchise or other taxes based on or
measured by any fees or compensation received by the Subordination
Agent for services rendered in connection with the transactions
contemplated by the Intercreditor Agreement or any of the Liquidity
Facilities);
(v) to the best of the Subordination Agent's knowledge,
there are no pending or threatened actions or proceedings against the
Subordination Agent before any court or administrative agency which
individually or in the aggregate, if determined adversely to it, would
materially adversely affect the ability of the Subordination Agent to
perform its obligations under this Agreement, the Intercreditor
Agreement or any Liquidity Facility;
-17-
(vi) the Subordination Agent has not directly or indirectly
offered any Equipment Note for sale to any Person or solicited any
offer to acquire any Equipment Notes from any Person, nor has the
Subordination Agent authorized anyone to act on its behalf to offer
directly or indirectly any Equipment Note for sale to any Person, or to
solicit any offer to acquire any Equipment Note from any Person; and
the Subordination Agent is not in default under any Liquidity Facility;
and
(vii) the Subordination Agent is not directly or indirectly
controlling, controlled by or under common control with any Placement
Agent or the Company.
(b) Covenants.
---------
(i) The Subordination Agent agrees not to amend any Liquidity
Facility or the Intercreditor Agreement without the consent of the
Company.
(ii) At any time when directed by the Company, the Subordination
Agent shall replace any Liquidity Provider pursuant to Section 3.6(e)
of the Intercreditor Agreement. Except as otherwise expressly provided
in the Intercreditor Agreement, the Subordination Agent shall not in
any other instance replace any Liquidity Provider in respect of any
Liquidity Facility.
(iii) [Reserved].
ARTICLE 6.
[RESERVED]
--------
ARTICLE 7.
GENERAL INDEMNITY
Section 7.01. Generally.
---------
(a) Indemnity. The Company agrees to indemnify each Indemnitee
---------
against and agrees to protect, defend, save and keep harmless each Indemnitee
against and in respect of, and will pay on an After-Tax Basis, from any and all
liabilities, obligations, losses, damages, 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 (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:
-18-
(i) any Operative Agreement or Pass-Through Document or
any transaction contemplated hereby or thereby;
(ii) the operation, possession, use, non-use, maintenance,
storage, overhaul, delivery, non-delivery, control, 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 Company, any
sublessee or any other Person whatsoever, whether or not such
operation, possession, use, non-use, maintenance, storage, overhaul,
delivery, non-delivery, control, 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, and claims or penalty
relating to any laws, rules or regulations, including, without
limitation, environmental control, noise and pollution laws, rules or
regulation;
(iii) the manufacture, design, sale, return, purchase,
acceptance, rejection, delivery, non-delivery, condition, repair,
modification, servicing, rebuilding, airworthiness, registration,
reregistration, deregistration, ownership, financing, import, export,
performance, non-performance, lease, sublease, transfer,
merchantability, fitness for use, alteration, substitution or
replacement of any Airframe, Engine, or Part or other transfer of use
or possession, or other disposition of the Aircraft, the Airframe, any
Engine or any Part including, without limitation, latent and other
defects, whether or not discoverable, strict tort liability, 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 Company under any of the
Operative Agreements or any Pass-Through Trust Agreement, or the
falsity or inaccuracy of any representation or warranty of the Company
in any of the Operative Agreements or any Pass-Through Trust Agreement;
(v) the enforcement of the terms of the Operative
Agreements; and
(vi) the offer, issuance, sale or delivery of any
Equipment Note or any Pass- Through Certificate.
(b) Exceptions. The indemnity provided for in Section
----------
7.01(a) shall not extend to any Expense of any Indemnitee to the extent it:
(i) is attributable to the willful misconduct or gross
negligence of such Indemnitee (other than gross negligence or willful
misconduct imputed to such person by reason of its interest in the
Aircraft or any transaction documents);
(ii) is a Tax or loss of a Tax benefit;
-19-
(iii) is a cost or expense required to be paid by such
Indemnitee or its permitted transferees (and not by the Company)
pursuant to this Agreement or any other Operative Agreement and for
which the Company is not otherwise obligated to reimburse such
Indemnitee, directly or indirectly pursuant to the terms of this
Agreement or such other Operative Agreement;
(iv) is attributable to the incorrectness or breach such
by any Indemnitee of its representations or warranties, under any of
the Operative Agreements;
(v) is attributable to the failure by any Indemnitee to
perform any of its obligations under any of the Operative Agreements;
(vi) is an Expense arising under or in connection with any
"prohibited transaction", within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code or any similar provision of state law;
(vii) except during the continuation of an Event on
Default, is attributable to any amendment to any of the Operative
Agreements which is not requested by the Company or is not required or
made pursuant to the terms of any of the Operative Agreements;
(viii) is attributable to the exercise by any Indemnitee of
any right to inspect the Aircraft except with respect to any such
inspection conducted while an Event of Default is continuing; and
(ix) constitutes the loss of future profits or losses
attributable to such Indemnitee's overhead.
Section 7.02. Notice and Payment. Each Indemnitee shall give
------------------
prompt written notice to the Company of any liability for which the Company 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, except to the extent that such failure adversely affects any
applicable defense or counterclaim, otherwise increases the amount the Company
would have been liable for in the absence of such failure to provide such notice
or adversely affects the ability of Company's insurers to defend such claim.
Section 7.03. Defense of Claims. The Company or its insurers
-----------------
shall have the right (in each such case at the Company's sole expense) to
investigate, defend (and control the defense of) any such claim for which
indemnification is sought pursuant to this Article 7 and each Indemnitee shall
cooperate with the Company or its insurers with respect thereto, provided that,
-------- ----
without limiting the right of the Company's insurers to assume and control the
defense of, or to compromise, any such claim, the Company shall not be entitled
to assume and control the defense of or compromise any such claim (A) during the
continuance of any Event of Default arising under
-20-
Section 14(a) of the Lease, (B) if an actual or potential material conflict of
interest exists making it advisable (on the basis of prevailing standards of
professional responsibility) for such Indemnitee to be represented by separate
counsel or on the grounds that such proceeding involves the potential imposition
of criminal liability on such Indemnitee or (C) such proceeding will involve any
material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than Permitted Liens) on the Aircraft or the Trust Estate (unless the
Company posts a bond or other security reasonably acceptable in form and
substance to such Indemnitee) or involve any material risk of criminal liability
to such Indemnitee for which it is not indemnified hereunder and, in any such
case, the relevant Indemnitee will, in good faith, undertake the defense of such
claim at the expense of the Company. Subject to the immediately foregoing
sentence, where the Company or the insurers under a policy of insurance
maintained by the Company 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 Company or such
insurers. Subject to the requirement of any policy of insurance applicable to a
claim, an Indemnitee may participate at its own expense at any judicial
proceeding controlled by the Company or its insurers pursuant to the preceding
provisions, to the extent that such party's participation does not, in the
opinion of the independent counsel appointed by the Company or its insurers to
conduct such proceedings, interfere with such control; 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 Company, unless such Indemnitee waives its right to be
indemnified under this Article 7 with respect to such claim. The Company shall
not enter into any settlement or compromise with respect to which the Company
has not agreed to indemnify such Indemnitee to such Indemnitee's satisfaction or
which admits any criminal violation, gross negligence or willful misconduct on
the part of any Indemnitee without the prior written consent of such Indemnitee.
Section 7.04. Insured Claims. Notwithstanding any other
--------------
provision of this Article 7 to the contrary, in the case of any Expense
indemnified by the Company hereunder which is covered by a policy of insurance
maintained by the Company (or Permitted Lessee) pursuant to Section 9 of the
Lease or otherwise, it shall be a condition of such indemnity with respect to
any particular Indemnitee that such Indemnitee shall cooperate with the insurers
in the exercise of their rights to investigate, defend or compromise such claim
as may be required to retain the benefits of such insurance with respect to such
claim.
Section 7.05. Subrogation. To the extent that an Expense
-----------
indemnified by the Company under this Article 7 is in fact paid by the Company
and/or an insurer under a policy of insurance maintained by the Company, the
Company and/or such insurer as the case may be shall be subrogated to the extent
of such payment to the rights and remedies of the Indemnitee on whose behalf
such Expense was paid with respect to the transaction or event giving rise to
such Expense. Should an Indemnitee receive any refund, in whole or in part, with
respect to any Expense paid by the Company hereunder, it shall promptly pay over
the amount refunded, together with any interest
-21-
received with respect to such amount for the period between the indemnification
payment and the receipt of such refund, to the Company.
Section 7.06. Survival of Obligations. The indemnities and
-----------------------
agreements of the Company provided for in this Article 7 shall survive the
expiration or other termination of this Agreement.
Section 7.07. Effect of Other Indemnities. The Company's
---------------------------
obligations under this Article 7 shall be those of a primary obligor whether or
not the Person indemnified shall also be indemnified with respect to the same
matter under the terms of this Agreement, or any other document or instrument,
and the Person seeking indemnification from the Company pursuant to any
provision of this Agreement may proceed directly against the Company without
first seeking to enforce any other right of indemnification.
Section 7.08. Waiver of Certain Claims. The Company hereby
------------------------
waives and releases any Expense now or hereafter existing against any Indemnitee
arising out of death or personal injury to personnel of the Company, loss or
damage to property of the Company, or the loss of use of any property of the
Company, 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.
ARTICLE 8.
TRANSACTION COSTS
Section 8.01. Transaction Costs and Other Costs.
---------------------------------
(a) Transaction Costs. The Company shall pay all fees and
-----------------
expenses of the following persons relating to the offering of the Pass-Through
Certificates contemplated by the Placement Agreement and related to the
transactions contemplated hereby: (i) the reasonable fees and expenses of the
respective counsel for the Company, the Indenture Trustee, the Subordination
Agent, the Pass-Through Trustee, the Paying Agent, each Liquidity Provider and
the Placement Agents (other than those fees, expenses and disbursements payable
by the Placement Agent pursuant to the Placement Agreement); (iii) the
reasonable fees and expenses of special aviation counsel; (iv) any initial fees
and expenses of the Pass-Through Trustee and each Liquidity Provider and the
fees and expenses of the Subordination Agent, the Paying Agent and the Indenture
Trustee; (v) any compensation, commissions and discounts payable to the
Placement Agents pursuant to the Placement Agreement; (vi) the fees and expenses
incurred in connection with printing any offering memorandum for the offering of
the Pass-Through Certificates and; (vii) the fees and expenses of ▇▇▇▇▇'▇ and
S&P; (viii) the fees and expenses of The Seabury Group LLC (the "Company
Advisor");
-22-
(b) Continuing Expenses. The Company agrees to pay (i) the
-------------------
continuing fees, expenses and disbursements (including reasonable counsel fees
and expenses) of the Indenture Trustee, with respect to the administration of
the Indenture Estate; (ii) the continuing fees, expenses and disbursements
(including reasonable counsel fees and expenses) of the Pass-Through Trustee,
the Paying Agent and the Subordination Agent (including, (x) in the case of the
Pass-Through Trustee, (1) any reasonable fees, costs and expenses incurred in
connection with the preparation and filing of tax returns or reports, including
any schedule, if any, required to be filed on any Pass-Through Trust (other than
any such fees, costs or expenses which are incurred in the normal course of the
performance of the Pass-Through Trustee's duties and for which the Pass-Through
Trustee would not otherwise seek reimbursement from the Pass-Through Trust) and
(2) any reasonable fees, costs and expenses incurred and any penalties incurred
by the Pass-Through Trustee or imposed upon a Pass-Through Trust relating to the
failure to file any such tax return unless such failure is the result of the
gross negligence or willful misconduct of the Pass-Through Trustee and (y) in
the case of the Subordination Agent, any reasonable fees and expenses incurred
in connection with the replacement of any Liquidity Provider as provided in the
Intercreditor Agreement); and (iv) the continuing fees, expenses and
disbursements (including reasonable counsel fees and expenses) of the Liquidity
Providers as expressly provided in each Liquidity Facility.
(c) Amendments and Supplements. Without limitation of the
--------------------------
foregoing, the Company agrees to pay, to the Indenture Trustee, the
Subordination Agent, the Liquidity Providers and the Pass-Through Trustee all
costs and expenses (including reasonable legal fees and expenses) incurred by
any of them in connection with any amendment, supplement, waiver or consent
(whether or not entered into) under this Agreement or any other Operative
Agreement or document or instrument delivered pursuant to any of them, which
amendment, supplement, waiver or consent is required by any provision of any
Operative Agreement or is requested by the Company or necessitated by the action
or inaction of the Company.
ARTICLE 9.
[RESERVED]
ARTICLE 10.
LIABILITIES AND INTERESTS OF HOLDERS
Section 10.01. Interest of Holders of Equipment Notes. Each
--------------------------------------
Holder of an Equipment Note shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal and interest on
all Equipment Notes held by such Holder and all other sums payable to such
Holder under this Agreement, under the Indenture and under such Equipment Notes
shall have been paid in full.
-23-
ARTICLE 11.
OTHER DOCUMENTS
Section 11.01. Consent of Company to Other Documents. The
-------------------------------------
Company hereby consents in all respects to the execution and delivery of the
Intercreditor Agreement and the Liquidity Facilities.
Section 11.02. Pass-Through Trustee's and Subordination
----------------------------------------
Agent's Acknowledgment. The Pass-Through Trustee and the Subordination Agent
----------------------
hereby acknowledge and agree to be bound by all of the terms and conditions of
the Indenture.
ARTICLE 12.
NOTICES
Section 12.01. Notices. All notices, demands, declarations
-------
and other communications required by this Agreement shall be in writing and
shall be deemed received (a) if given by telecopier, when transmitted and the
appropriate telephonic confirmation received if transmitted on a Business Day
and during normal business hours of the recipient, and otherwise on the next
Business Day following transmission, or (b) if given by certified mail, return
receipt requested, by courier service, or by any other commercially customary
means, when received or personally delivered, addressed:
(a) if to the Company, to its office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General
Counsel, telephone (▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to such
other address as the Company shall from time to time designate in
writing to the Indenture Trustee;
(b) if to the Indenture Trustee, the Subordination Agent or
the Pass-Through Trustee, to its office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Mail Code 101-591, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Corporate Trust
Department, telephone (▇▇▇) ▇▇▇-▇▇▇▇ facsimile (▇▇▇) ▇▇▇-▇▇▇▇; or to
such other address as the Indenture Trustee or the Pass-Through
Trustee, as the case may be, shall from time to time designate in
writing to the Company; and
(c) if to the Liquidity Provider, to its office at ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ________________,
telephone (212) __________ and facsimile (▇▇▇) ▇▇▇-▇▇▇▇, or to such
other address as a Liquidity Provider shall from time to time designate
in writing to the Company and the Indenture Trustee.
-24-
ARTICLE 13.
SALE-LEASEBACK TRANSACTION
Section 13.01. Sale-Leaseback Transaction. Notwithstanding
--------------------------
anything to the contrary in any Operative Agreement (except the following
paragraph), but subject to Section 1(k) of the Note Purchase Agreement and to
the non-existence of any Event of Default, upon not less than 10 days' prior
written notice to the parties hereto, Company shall have the right, no later
than ___________, 200_ to sell the Aircraft and transfer title to the Aircraft
to an owner trustee for the benefit of an owner participant in a transaction in
which such owner trustee assumes all of Company's obligations under the
Equipment Notes and the Indenture on a non-recourse basis (with Company being
released from such obligations, except to the extent accrued before the
assumption), leases the Aircraft to Company, and assigns such lease to Indenture
Trustee pursuant to an amended and restated trust indenture (a "Sale-
Leaseback"). In connection with such Sale-Leaseback, each of the parties hereto
(or their successors) will execute and deliver appropriate documentation
permitting the owner trustee to assume Company's obligations under the Equipment
Notes and the Indenture on a non-recourse basis, releasing Company from all
obligations in respect of the Equipment Notes and the Indenture (except to the
extent accrued before the assumption), and take all other actions as are
reasonably necessary to permit such assumption by the owner trustee. In
connection with any such Sale-Leaseback, (a) the documents shall include (1) a
participation agreement substantially in the form of the Leased Aircraft
Participation Agreement (as defined in the Note Purchase Agreement), among the
parties hereto (or their successors), the owner trustee, and the owner
participant, with (x) changes to reflect the assumption of the Equipment Notes
by the owner trustee on a non-recourse basis (rather than the issuance thereof
by the owner trustee and purchase thereof by the Pass-Through Trustees), and
also to reflect the release of Company from all obligations under the Equipment
Notes and the Indenture (except to the extent accrued before the assumption),
and (y) other changes permitted by the Note Purchase Agreement applicable to the
revision of the Leased Aircraft Participation Agreement in connection with a
leveraged lease, (2) a lease agreement, substantially in the form of the Lease
(as defined in the Note Purchase Agreement), between Company and the owner
trustee, with changes permitted by the Note Purchase Agreement in connection
with a leveraged lease, (3) an amended and restated trust indenture (amending
and restating the Indenture), substantially in the form of the Leased Aircraft
Indenture (as defined in the Note Purchase Agreement), between the owner trustee
and Indenture Trustee, with (x) changes to reflect Owner Trustee's assumption of
Company's obligations under the Equipment Notes and the Indenture on a non-
recourse basis and the release of Company's obligations under the Equipment
Notes and the Indenture, and (y) other changes permitted by the Note Purchase
Agreement applicable to the revision of the Leased Aircraft Indenture in
connection with a leveraged lease, (4) a purchase agreement assignment,
substantially in the form of the Aircraft Purchase Agreement Assignment (as
defined in the Note Purchase Agreement), between Company and the owner trustee,
with changes permitted by the Note Purchase Agreement applicable to the Aircraft
Purchase Agreement Assignment in connection with a leveraged lease, and (5) a
trust agreement, substantially in the form of the Trust Agreement (as defined in
the Note Purchase Agreement), between the owner trustee and the owner
participant, with changes permitted by the Note Purchase Agreement
-25-
applicable to the Trust Agreement in connection with a leveraged lease; and (b)
the Equipment Notes shall be delivered to Indenture Trustee for cancellation in
exchange for new equipment notes to be issued to the Holders by the owner
trustee, such new equipment notes to be substantially in the form of Exhibit B
to the Leased Aircraft Indenture (as defined in the Note Purchase Agreement).
Such new equipment notes will have the same payment terms as the Equipment
Notes, except that if Company enters into a Sale-Leaseback by ___________, 200_,
Company may reoptimize the new equipment notes to be issued to the Holders by
the owner trustee in compliance with the Mandatory Economic Terms (as defined in
the Note Purchase Agreement).
Notwithstanding the foregoing, Company will only be permitted to enter
into a Sale- Leaseback if it (i) obtain a written confirmation from each Rating
Agency that such Sale-Leaseback will not result in a withdrawal, suspension or
downgrading of the ratings of any class of Pass- Through Certificates, (ii)
provides the Indenture Trustee with an opinion of counsel (both counsel and
opinion reasonably satisfactory to the Indenture Trustee) that the Pass-Through
Trusts will not be subject to U.S. federal income tax as a result of such Sale-
Leaseback and (iii) furnishes to the Indenture Trustee either (A) an opinion of
counsel (both counsel and opinion reasonably satisfactory to the Indenture
Trustee) that the holders of the Pass-Through Certificates will not recognize
gain or loss for U.S. federal income tax purposes and will be subject to U.S.
federal income tax on the same amount and in the same manner and at the same
time as would have been the case if such Sale- Leaseback had not occurred or (B)
both an opinion of counsel (both counsel and opinion reasonably satisfactory to
the Indenture Trustee) that the holders of the Pass-Through Certificates should
not recognize gain or loss for U.S. federal income tax purposes in connection
with such Sale-Leaseback and should be subject to U.S. federal income tax on the
same amount and in the same manner and at the same time as would have been the
case if such Sale-Leaseback had not occurred and an indemnity in favor of the
holders of the Pass-Through Certificates in form and substance reasonably
satisfactory to the Indenture Trustee.
ARTICLE 14.
[RESERVED]
ARTICLE 15.
MISCELLANEOUS
Section 15.01. Counterparts. This Agreement may be executed by the
------------
parties in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 15.02. No Oral Modifications. Neither this Agreement nor any
---------------------
of its terms may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument
-26-
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought. No such written
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy shall have been delivered to and executed by the Company
and the Indenture Trustee. A copy of each such termination, amendment,
supplement, waiver or modification shall also be delivered to each other party
to this Agreement.
The consent of each of the Pass-Through Trustee and the Subordination
Agent, in its capacity as a party to this Agreement and not as a Holder, shall
not be required to modify, amend or supplement this Agreement or to give any
consent, waiver, authorization or approval with respect to this Agreement under
the circumstances in which the consent of the Indenture Trustee would not be
required for such modification, amendment, supplement, consent, waiver or
approval in accordance with Section 6.01(b) of the Indenture, provided that the
--------
Pass-Through Trustee shall be entitled to receive an Opinion of Counsel (as
defined in the Pass-Through Trust Agreements) necessary, in its sole discretion,
to establish that the Indenture Trustee's consent would not be required under
such circumstances.
Section 15.03. Captions. The table of contents preceding this
--------
Agreement and the headings of the various Articles and Sections of this
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions of this Agreement.
Section 15.04. Successors and Assigns. The terms of this Agreement
----------------------
shall be binding upon, and shall inure to the benefit of, the Company and its
successors and permitted assigns, the Subordination Agent and its successors and
permitted assigns, including without limitation each Holder of an Equipment
Note, the Indenture Trustee and its successors as Indenture Trustee (and any
additional indenture trustee appointed) under the Indenture and the Pass-Through
Trustee and its successors as Pass-Through Trustee (and any additional Pass-
Through trustee appointed).
Section 15.05. Concerning the Indenture Trustee and the Pass-Through
-----------------------------------------------------
Trustee. Allfirst is entering into this Agreement solely in its capacity (except
-------
to the extent otherwise expressly indicated), as Indenture Trustee under the
Indenture and as Pass-Through Trustee under the Pass- Through Trust Agreements
and as Subordination Agent under the Subordination Agreement, and except as
otherwise expressly provided in this Agreement or in the Indenture or the Pass-
Through Trust Agreements Allfirst shall not be personally liable for or on
account of its statements, representations, warranties, covenants or obligations
under this Agreement; provided, however, that Allfirst accepts the benefits
-------- -------
running to it under this Agreement, and each agrees that (except as otherwise
expressly provided in this Agreement or any other Operative Agreement to which
it is a party) it shall be liable in its individual capacity for (a) its own
gross negligence or willful misconduct (whether in its capacity as trustee or in
its individual capacity), (b) any breach of representations and warranties or
any breach of covenants made in its individual capacity pursuant to or in
connection with this Agreement or the other Operative Agreements to which it is
a party, (c)
-27-
the failure to use ordinary care in receiving, handling and disbursing funds,
(d) in the case of the Indenture Trustee, Indenture Trustee's Liens, and (e)
taxes, fees or other charges on, or based on, or measured by, any fees,
commissions or compensation received by it in connection with the transactions
contemplated by the Operative Agreements.
Section 15.06. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15.07. GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF TO THE NON- EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY AND COUNTY OF
NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN
CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO ANY MATTER
RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY MAILING COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET FORTH PURSUANT
TO SECTION 12.01. EACH PARTY HERETO AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 15.07(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
-28-
VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY
OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
Section 15.08. 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 15.09. Reliance of Liquidity Providers. Each of the parties
-------------------------------
hereto agrees and acknowledges that each Liquidity Provider shall be a third
party beneficiary of each of the representations and warranties made herein by
such party (and of each covenant herein made by such party to each Liquidity
Provider), and that each Liquidity Provider may rely on such representations,
warranties and covenants to the same extent as if such representations,
warranties and covenants were made to such Liquidity Provider directly. The
terms of this Agreement shall inure to the benefit of each Liquidity Provider,
their respective successors and permitted assigns.
* * *
-29-
IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers as of the
day and year first written above.
MIDWAY AIRLINES CORPORATION
By:
--------------------------------
Name:
Title:
ALLFIRST BANK, as Indenture Trustee,
Pass-Through Trustee and Subordination
Agent
By:
-----------------------------
Name:
Title:
-30-
Schedule 1
Loan Amounts
------------
Loan Participant Amount
---------------- ------
2000-1A Pass-Through Trust $______________
2000-1B Pass-Through Trust $______________
2000-1C Pass-Through Trust $______________
Exhibit B
Certain Economic Information
"Minimum Liability Amount" shall mean $______________.
------------------------
"Required Insurance Amount" shall mean $______________.
-------------------------
-32-
[Exhibit C-2 to Note Purchase Agreement
Form of Owned Aircraft Indenture]
================================================================================
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML]
dated as of _______, __, 200_
between
MIDWAY AIRLINES CORPORATION
and
ALLFIRST BANK,
as Indenture Trustee
================================================================================
COVERING ONE BOEING MODEL 737-700 AIRCRAFT
BEARING U.S. REGISTRATION NO. N3__ML
AND MANUFACTURER'S SERIAL NUMBER _____
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..................................................................................... 5
Section 1.01 Definitions................................................................................ 5
ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF EQUIPMENT NOTES;..................................... 5
Section 2.04. Form and Terms of Equipment Notes; Payments on Equipment Notes............................. 6
Section 2.05. [Reserved]................................................................................. 8
Section 2.06. Registration, Transfer and Exchange........................................................ 8
Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Equipment Notes............................. 9
Section 2.08. Cancellation of Equipment Notes; Destruction Thereof....................................... 10
Section 2.09. Termination of Interest in Indenture Estate................................................ 10
Section 2.11. [Reserved]................................................................................. 10
Section 2.12. Subordination.............................................................................. 10
ARTICLE III COVENANTS....................................................................................... 11
Section 3.01. Payment of Principal, Make-Whole Premium and Interest...................................... 11
Section 3.02. Offices for Payments, etc.................................................................. 11
Section 3.04. Paying Agents.............................................................................. 12
Section 3.06. [Reserved]................................................................................. 12
Section 3.07. Disposal of Collateral..................................................................... 12
Section 3.10. Holder Lists: Ownership of Equipment Notes................................................. 13
ARTICLE IV COVENANTS OF COMPANY............................................................................ 13
Section 4.01. Possession, Operation and Use, Maintenance Registration.................................... 13
Section 4.02. Inspection................................................................................. 18
Section 4.03. Replacement and Pooling of Parts; Alterations, Modifications and Additions;
Substitution of Engines.................................................................. 18
Section 4.04. Loss, Destruction or Requisition........................................................... 21
Section 4.05. Insurance.................................................................................. 24
Section 4.06. Liens...................................................................................... 28
Section 4.07. Further Assurances......................................................................... 29
ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE....................... 29
Section 5.01. Regular Distribution....................................................................... 29
Section 5.02. Event of Loss and Replacement; Prepayment.................................................. 30
-i-
Section 5.04. Certain Payments........................................................................... 33
Section 5.05. Other Payments............................................................................. 33
Section 5.06. [Reserved]................................................................................. 33
Section 5.07. Application of Payments.................................................................... 34
Section 5.08. Investment of Amounts Held by Indenture Trustee............................................ 34
Section 5.09. Withholding Taxes.......................................................................... 35
ARTICLE VI PREPAYMENT OF EQUIPMENT NOTES................................................................... 35
Section 6.02. Prepayment of Equipment Notes.............................................................. 35
Section 6.03. Notice of Prepayment to Holders............................................................ 36
Section 6.04. Deposit of Prepayment Price................................................................ 36
Section 6.05. Equipment Notes Payable on Prepayment Date................................................. 36
ARTICLE VII INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS........................... 37
Section 7.01. Indenture Event of Default................................................................. 37
Section 7.04. Indenture Trustee May Prove Debt........................................................... 42
Section 7.05. Remedies Cumulative........................................................................ 44
Section 7.06. Suits for Enforcement...................................................................... 44
Section 7.07. Discontinuance of Proceedings.............................................................. 44
Section 7.08. Unconditional Right of Holders to Payments on Equipment Notes.............................. 44
Section 7.09. Control by Holders......................................................................... 44
Section 7.11. Notice of Indenture Default................................................................ 45
ARTICLE VIII [RESERVED]...................................................................................... 46
ARTICLE IX CONCERNING THE INDENTURE TRUSTEE................................................................ 46
Section 9.03. Certain Rights of the Indenture Trustee.................................................... 48
Section 9.04. Indenture Trustee Not Responsible for Recitals, Equipment Notes, or Proceeds............... 49
Section 9.05. Indenture Trustee and Agents May Hold Equipment Notes; Collections, etc. .................. 49
Section 9.06. Moneys Held by Indenture Trustee........................................................... 49
Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc........................... 49
Section 9.08. Replacement Airframes and Replacement Engines.............................................. 49
Section 9.11. Compensation............................................................................... 53
ARTICLE X CONCERNING THE HOLDERS.......................................................................... 53
Section 10.01. Evidence of Action Taken by Holders........................................................ 53
Section 10.02. Proof of Execution of Instruments and of Holding of Equipment Notes........................ 53
-ii-
Section 10.03. Holders to Be Treated as Owners............................................................. 54
Section 10.04. Equipment Notes Owned by Company Deemed Not Outstanding..................................... 54
Section 10.05. ERISA....................................................................................... 55
ARTICLE XI [RESERVED]....................................................................................... 55
ARTICLE XII SUCCESSOR TRUSTEES............................................................................... 55
Section 12.01. [Reserved].................................................................................. 55
Section 12.02.............................................................................................. 55
Section 12.03.............................................................................................. 56
Section 12.04.............................................................................................. 56
Section 12.05.............................................................................................. 57
Section 12.06.............................................................................................. 58
ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS................................. 59
Section 13.01. Supplemental Indentures Without Consent of Holders.......................................... 59
Section 13.02. Supplemental Indentures With Consent of Holders............................................. 61
Section 13.03. Effect of Supplemental Indenture............................................................ 62
Section 13.04. Documents to Be Given to Indenture Trustee.................................................. 62
Section 13.05. Notation on Equipment Notes in Respect of Supplemental Indentures........................... 62
Section 13.06. No Request Necessary for Indenture Supplement............................................... 62
Section 13.07. Notices to Liquidity Providers.............................................................. 62
ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS........................................ 63
Section 14.01. Satisfaction and Discharge of Indenture: Termination of Indenture........................... 63
Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Equipment Notes.......... 63
Section 14.03. Repayment of Moneys Held by Paying Agent.................................................... 64
Section 14.04 Transfer of Unclaimed Money Held by Indenture Trustee and Paying Agent...................... 64
ARTICLE XV MISCELLANEOUS.................................................................................... 64
Section 15.01. Capacity in Which Acting.................................................................... 64
Section 15.02. No Legal Title to Indenture Estate in Holders............................................... 64
Section 15.04. Indenture Trustee, Allfirst, Company, Liquidity Providers and Holders Only.................. 65
Section 15.05. No Action Contrary to Company's Rights...................................................... 65
-iii-
Section 15.06. Notices............................................................................. 65
Section 15.07. Officer's Certificates and Opinions of Counsel...................................... 65
Section 15.08. Severability........................................................................ 66
Section 15.09. No Oral Modifications or Continuing Waivers......................................... 66
Section 15.10. Successors and Assigns.............................................................. 66
Section 15.11. Headings............................................................................ 66
Section 15.12. Normal Commercial Relations......................................................... 66
Section 15.13. Governing Law; Counterparts......................................................... 67
Annex A - Principal Amount of Equipment Notes
Annex B - Amortization Schedule
Appendix A - Definitions
Exhibit A - Form of Indenture Supplement
Exhibit B - Form of Equipment Note
Exhibit C - List of Countries
-iv-
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML]
TRUST INDENTURE AND SECURITY AGREEMENT [N3__ML] dated as of _______,
__, 200_ (the "Indenture"), between MIDWAY AIRLINES CORPORATION, a Delaware
---------
corporation and ALLFIRST BANK, a Maryland state-chartered commercial bank (when
acting in its individual capacity, "Allfirst"), as Indenture Trustee hereunder
(the "Indenture Trustee").
-----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article I hereof;
WHEREAS, the Company, the Indenture Trustee, the Pass Through Trustees
and the Subordination Agent have entered into the Participation Agreement,
pursuant to which the Pass Through Trustees have agreed to purchase the
Equipment Notes from the Company by advancing to the Company an aggregate amount
equal to the principal amount of such Equipment Notes, and the Company has
agreed to issue and deliver pursuant to this Indenture such Equipment Notes to
the Pass Through Trustees, and the Company shall use the proceeds from the
purchase of such Equipment Notes in connection with the financing of the
acquisition of the Aircraft; and
WHEREAS, the Company desires by this Indenture, among other things (i)
to issue the Equipment Notes as provided in the Participation Agreement, and
(ii) to grant to the Indenture Trustee a Lien on the Collateral in accordance
with the terms hereof, in trust, as security for the Secured Obligations;
WHEREAS, all things have been done to make the Equipment Notes, when
executed by the Company, and authenticated, issued and delivered hereunder, the
valid obligations of the Company; and
WHEREAS, all things necessary to make this Indenture the valid,
binding and legal obligation of the Company, enforceable in accordance with its
terms, have been done and performed and have happened.
NOW, THEREFORE, the parties agree as follows:
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the mutual promises contained
herein and to secure (i) the prompt payment of the principal of and Make-Whole
Premium, if any, and interest on, and all other amounts due with respect to, all
the Equipment Notes from time to time outstanding under this Indenture and all
other amounts due hereunder and (ii) the performance and observance by the
Company of all the agreements, covenants and provisions in this Indenture, the
Equipment Notes and the Participation Agreement contained for the benefit of the
Holders, and the prompt payment of any and all amounts from time to time owing
under the Participation Agreement by the Company to the Holders and each of the
Indenture Indemnitees (provided, that, with respect to amounts owed to the
-------- ----
Liquidity Providers which relate to amounts due under the Liquidity Facilities,
the amounts secured hereby shall only include such amounts to the extent due and
owing pursuant to the final paragraph of Section 2.04 hereof) (collectively the
"Secured Obligations") and for the uses and purposes and subject to the terms
-------------------
and provisions of this Indenture, and in consideration of the premises and of
the covenants in this Indenture and in the Equipment Notes and of the purchase
of the Equipment Notes by their Holders, and of the sum of $1 paid to the
Company by the Indenture Trustee at or before the delivery of this Indenture,
the receipt and sufficiency of which are hereby acknowledged, the Company has
granted, bargained, assigned, transferred, conveyed, mortgaged, pledged, granted
a first priority security interest in and confirmed, and does hereby grant,
bargain, assign, transfer, convey, mortgage, pledge and grant a first priority
security interest in and confirm to the Indenture Trustee, its successors and
assigns, in trust for the equal and ratable security and benefit of the Holders
and each of the Indenture Indemnitees, a first priority security interest in and
first mortgage Lien on all estate, right, title and interest of the Company in,
to and under the following described property, rights and privileges (which
collectively, but including all property specifically subjected to the Lien of
this Indenture by the terms hereof, by any supplement to this Indenture
(including the Indenture Supplement) or any mortgage supplemental to this
Indenture, are herein referred to as the "Collateral"), subject always to the
terms and conditions of this Indenture:
(1) The Airframe, as described in the Indenture Supplement, and
any airframe substituted in replacement thereof pursuant to the provisions of
this Indenture; the Engines, as the same are more particularly described in the
Indenture Supplement, whether or not such Engines shall be installed in or
attached to the Airframe or any other airframe, and any Replacement Engine
therefor; and all Parts in respect of the Airframe and the Engines and all
records, logs and other documents at any time maintained with respect to the
foregoing property;
(2) All the tolls, rents, issues, profits, products, revenues and
other income (including sales proceeds) of the property subjected or required to
be subjected to the Lien of this Indenture (it being understood that revenues
earned for the carriage of persons, property as mail are not such proceeds) and
all of the estate, right, title and interest of the Company in and to the same
and every part of said property;
2-
(3) All other moneys and securities (including Permitted
Investments) now or hereafter paid or deposited or required to be paid or
deposited to or with the Indenture Trustee by or for the account of the Company
pursuant to any term of any Operative Agreement, and held or required to be held
by the Indenture Trustee hereunder;
(4) All requisition and insurance proceeds with respect to the
Aircraft or any part thereof, including insurance required to be maintained by
the Company under Section 4.05 hereof;
(5) All right, interest, claims and demands of the Company in, to
and under the Purchase Agreement to the extent the same relate to continuing
rights of the Company in respect of any warranty, express or implied, as to
title, materials, workmanship, design or patent infringement with respect to the
Aircraft and to any service life policy, aircraft or engine performance
guarantee and indemnity provisions with respect to the Aircraft together with
all rights, powers, privileges, options and other benefits of the Company
thereunder with respect to the Aircraft, including, without limitation, the
right to make all waivers and agreements, to give and receive all notices and
other instruments or communications, to take such action upon the occurrence of
a default thereunder, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted thereby or by
law, and to do any and all other things which the Company is or may be entitled
to do thereunder reserving to the Company, however, (i) all of the Company's
---------------------------------
rights and interests in and to the Purchase Agreement as and to the extent that
the same relate to aircraft other than the Aircraft and (ii) with respect to the
Aircraft, so long as Manufacturer shall not have received notice from the
Indenture Trustee that an Indenture Event of Default has occurred and is
continuing and the Indenture Trustee has declared the Indenture to be in default
and until Manufacturer has received notice from the Indenture Trustee that such
Indenture Event of Default has been cured or waived, the right to demand, accept
and retain all rights in and to all property, data and services which
Manufacturer is obligated to provide or does provide pursuant to the Purchase
Agreement; and
(6) All proceeds of the foregoing.
PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions, so long
as no Indenture Event of Default shall have occurred and be continuing the
Company shall have the right, to the exclusion of the Indenture Trustee (or any
Person lawfully claiming through the Indenture Trustee), (a) to quiet enjoyment
of the Airframe and Engines, and to possess, use, retain and control the
Airframe and Engines and all revenues, income and profits derived therefrom, and
(b) with respect to the Purchase Agreement, to exercise in the Company's name
all rights and powers of the buyer under the Purchase Agreement and to retain
any recovery or benefit resulting from the enforcement of any warranty or
indemnity under the Purchase Agreement; and provided further that,
-------- -------
notwithstanding the occurrence and continuation of an Indenture Event of
Default, the Indenture Trustee shall not enter into any amendment of the
Purchase Agreement which would increase the obligations of the Company
thereunder.
3-
HABENDUM CLAUSE
TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee,
its successors and assigns, in trust for the equal and ratable benefit and
security of the Holders from time to time of the Equipment Notes and the
Indenture Indemnitees, except as provided in Section 2.12 and Article V hereof,
without any priority of any one Equipment Note over any other and for the uses
and purposes and subject to the terms and conditions set forth in this
Indenture.
It is expressly agreed that anything contained in this Indenture to
the contrary notwithstanding, the Company shall remain liable under the
Operative Agreements and the Purchase Agreement to perform all of the
obligations assumed by it under any of those documents, all in accordance with
and pursuant to the terms and provisions of those documents, and the Indenture
Trustee, the Holders and the Indenture Indemnitees shall have no obligation or
liability under such documents by reason of or arising out of the assignment
under this Indenture, nor shall the Indenture Trustee, the Holders or the
Indenture Indemnitees be required or obligated in any manner to perform or
fulfill any obligations of the Company under or pursuant to the Operative
Agreements or the Purchase Agreement or, except as expressly provided in this
Indenture, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times. The Company
agrees that it will not enter into any agreement that would amend, modify,
supplement, rescind, cancel or terminate the Purchase Agreement in respect of
the Aircraft without the prior written consent of the Indenture Trustee, to the
extent any such amendment, modification, supplement, recision, cancellation or
termination would have a material adverse effect on the Indenture Trustee or the
Holders.
The Company does hereby irrevocably constitute and appoint the
Indenture Trustee the true and lawful attorney of the Company (which appointment
is coupled with an interest) with full power (in the name of the Company or
otherwise) to ask, require, demand and receive any and all moneys and claims for
money (in each case including insurance and requisition proceeds) due and to
become due under or arising out of the Indenture property which now or hereafter
constitutes part of the Collateral, to endorse any checks or other instruments
or orders in connection therewith and to file any claims or to take any action
or to institute any proceeding which the Indenture Trustee may deem to be
necessary or advisable in the premises; provided that, the Indenture Trustee
-------------
shall not exercise any such rights except upon the occurrence and during the
continuance of an Indenture Event of Default.
The Company agrees that at any time and from time to time, upon the
written request of the Indenture Trustee, the Company will, at its own expense
promptly and duly execute and deliver or cause to be duly executed and delivered
any and all such further instruments and documents as the Indenture Trustee may
reasonably deem desirable in obtaining the full benefits of the assignment
hereunder and of the rights and powers herein granted.
4-
It is hereby further covenanted and agreed by and between the parties
as follows :
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless the context otherwise requires,
-----------
capitalized terms utilized herein shall have the meanings set forth or
incorporated by reference, and shall be construed in the manner described, in
Appendix A to this Indenture.
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF EQUIPMENT NOTES;
Section 2.01. Authentication and Delivery of Equipment Notes. Upon the
----------------------------------------------
execution and delivery of this Indenture, and from time to time thereafter,
Equipment Notes in the aggregate principal amount set forth on Annex A hereto
shall be executed by the Company and delivered to the Indenture Trustee for
authentication, and the Indenture Trustee shall thereupon authenticate and
deliver said Equipment Notes to or upon the oral or written order of the
Company, signed, if written, by an authorized officer of the Company, without
any further action by the Company.
Section 2.02. Execution of Equipment Notes. The Equipment Notes shall
----------------------------
be signed on behalf of the Company by an authorized officer of the Company. Such
signatures may be the manual or facsimile signatures of such officer and minor
errors or defects in any reproduction of any such signature shall not affect the
validity or enforceability of any Equipment Note which has been duly
authenticated and delivered by the Indenture Trustee.
In case any officer of the Company who shall have signed any of the
Equipment Notes shall cease to be such officer before the Equipment Notes so
signed shall be authenticated and delivered by the Indenture Trustee, such
Equipment Note nevertheless may be authenticated and delivered as though the
person who signed such Equipment Note had not ceased to be such officer of the
Company; and any Equipment Note may be signed on behalf of the Company by such
person or persons as, at the actual date of the execution of such Equipment
Note, shall be the proper officers of the Company, although at the date of the
execution and delivery of this Indenture any such person was not such an
officer. Equipment Notes bearing the facsimile signatures of individuals who
were authorized officers of the Company at the time such Equipment Notes were
issued shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Equipment Notes or did not hold such offices at the respective dates of
such Equipment Notes.
5-
Section 2.03. Authentication. Only such Equipment Notes as shall bear
--------------
thereon a certificate of authentication substantially in the form set forth in
Exhibit B, executed by the Indenture Trustee by manual signature of one of its
authorized officers, shall be entitled to the security and benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the
Indenture Trustee upon any Equipment Note executed by the Company shall be
conclusive evidence that the Equipment Note so authenticated has been duly
authenticated and delivered hereunder and that the Holder, as evidenced on the
Register, is entitled to the security and benefits of this Indenture.
Section 2.04. Form and Terms of Equipment Notes; Payments on Equipment
--------------------------------------------------------
Notes. The Equipment Notes and the Indenture Trustee's certificate of
-----
authentication shall be substantially in the form set forth in Exhibit B hereto.
The Equipment Notes shall be issuable as registered securities without coupons
and shall be numbered, lettered, or otherwise distinguished in such manner or in
accordance with such plans as the Company may determine with the approval of the
Indenture Trustee.
The Equipment Notes shall be issued in registered form only and in
denominations of $1,000 and any integral multiple thereof, shall be dated the
Delivery Date, shall be issued in three separate series consisting of Series A,
Series B and Series C and the Equipment Notes of each series shall be issued in
the respective aggregate principal amounts, and shall bear interest at the
respective rates per annum, specified on Annex A. Interest shall be calculated
on the basis of a 360-day year of twelve 30-day months.
Any of the Equipment Notes may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market in
which the Equipment Notes are admitted to trading, or to conform to general
usage.
Each Equipment Note shall bear interest from the date of original
issuance thereof or from the most recent date to which interest has been paid,
and shall be payable in arrears on each Payment Date until maturity; provided
--------
that, such interest rate shall be increased by 0.5% per annum, as provided in
----
Section 2(d) and the penultimate paragraph of Section 3 of the Registration
Rights Agreement. The principal amount of each Equipment Note shall be payable
on the dates and in the installments as set forth in Annex B hereto.
Notwithstanding the preceding paragraph, each Equipment Note shall bear
interest at the Past Due Rate on any principal, interest and any other amount
payable hereunder or under such Equipment Note, which shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full, payable from time to time on demand
of the Indenture Trustee.
6-
The principal of, and Make-Whole Premium, if any, and interest on, the
Equipment Notes shall be payable at the Corporate Trust Department of the
Indenture Trustee or at any office or agency maintained for such purpose
pursuant to Section 3.02 hereof in immediately available funds prior to 12:00
noon (New York time) on the due date thereof and the Indenture Trustee shall
remit all such amounts received by it to the Holders at such account or accounts
at such financial institution or institutions as the Holders shall have
designated to the Indenture Trustee in writing, in immediately available funds,
such payment to be made if the payment was received prior to 12:00 noon New York
time by the Indenture Trustee on any Business Day, by 1:00 p.m. New York time on
such Business Day; otherwise, the Indenture Trustee shall make payment promptly,
but not later than 11:00 A.M. New York time on the next succeeding Business Day.
If any amount payable under the Equipment Notes, or under this Indenture, falls
due on a day that is not a Business Day, then such sum shall be payable on the
next succeeding Business Day, without (provided that payment is made on such
next succeeding Business Day) additional interest thereon for the period of such
extension.
The Holder at the close of business on any Record Date with respect to
any Payment Date shall be entitled to receive the interest if any payable on
such Payment Date notwithstanding any transfer or exchange of such Equipment
Note subsequent to the Record Date and prior to such Payment Date, except if and
to the extent the Company shall default in the payment of the interest due on
such Payment Date, in which case such defaulted interest shall be paid to the
Holder at the close of business on a subsequent Record Date (which shall be not
less than five or more than 15 Business Days prior to the date of payment of
such defaulted interest) established by notice given by mail by or on behalf of
the Company to the Holders not less than 15 days preceding such subsequent
Record Date.
The Company agrees to pay to the Indenture Trustee for distribution in
accordance with Section 5.04 hereof (a) any and all indemnity amounts payable by
the Company to (i) the Indenture Trustee in its individual capacity, (ii) the
Subordination Agent or (iii) each Liquidity Provider, in each case pursuant to
Article 6 of the Participation Agreement and (b) the Pro Rata Share of all
amounts owed to each Liquidity Provider by the Subordination Agent under each
Liquidity Facility other than amounts due as (i) repayments of the principal of
advances thereunder, (ii) interest on Downgrade Drawings and Non-Extension
Drawings, except to the extent exceeding Investment Earnings thereon and (iii)
interest on Interest Drawings and Final Drawings except to the extent included
in Net Interest and Related Charges. As used in this Section, "Pro Rata Share"
means as of any time:
(A) with respect to all amounts other than Net Interest and
Related Charges, a fraction the numerator of which is the aggregate
principal balance then outstanding of the Equipment Notes issued under
this Indenture and the denominator of which is the aggregate principal
balance of all Equipment Notes issued under this Indenture and the
Related Indentures, and
7-
(B) with respect to all Net Interest and Related Charges (x) if
there exists a Payment Default under any Equipment Note issued under
this Indenture a fraction, the numerator of which is the aggregate
principal balance then outstanding of Equipment Notes issued under this
Indenture and the denominator of which is the aggregate principal
balance then outstanding of all Equipment Notes issued under this
Indenture and the Related Indentures under which there exists a Payment
Default or (y) at all other times, zero.
As used in this Section, "Net Interest and Related Charges" means the sum of (i)
--------------------------------
the amount, if any, by which interest payable to each Liquidity Provider on any
Interest Drawing and Final Drawing exceeds the amount which would be payable if
such drawings bore interest at the weighted average Past Due Rate applicable to
amounts in default on all Equipment Notes plus (ii) any amounts payable under
Section 3.1, Section 3.2, Section 3.3, Section 3.9 or Section 7.7 of each
Liquidity Facility (or similar provisions of any replacement Liquidity Facility)
which result from any Interest Drawing or Final Drawing. As used in this
Section, a "Payment Default" when used in connection with an Equipment Note
---------------
issued hereunder or an Equipment Note issued under any Related Indenture means a
default in the payment of principal thereof or interest thereon (which default
has not been cured), other than solely because of acceleration.
Section 2.05. [Reserved]
Section 2.06. Registration, Transfer and Exchange. The Indenture
-----------------------------------
Trustee will keep, on behalf of the Company, at each office or agency to be
maintained for the purpose as provided in Section 3.02 hereof a Register or
Registers on which, subject to such reasonable regulations as it may prescribe,
it will register, and will register the transfer of, Equipment Notes as provided
in this Article. Such Register shall be in written form in the English language
or in any other form capable of being converted into such form within a
reasonable period of time. Upon due presentation for registration of transfer of
any Equipment Note at any such office or agency, the Company shall execute and
the Indenture Trustee shall authenticate and deliver in the name of the
transferee or transferees, in authorized denominations, a new Equipment Note or
Equipment Notes of the same Series, and with the same principal amount, interest
rate and amortization schedule, for an equal aggregate principal amount;
provided, that such Equipment Note being transferred shall be canceled in
--------
accordance with Section 2.08 hereof simultaneously with the issuance of the new
Equipment Note. Any Equipment Note or Equipment Notes may be exchanged for an
Equipment Note or Equipment Notes of the same Series but in other authorized
denominations, in an equal aggregate principal amount. Equipment Notes to be
exchanged shall be surrendered at any office or agency to be maintained by the
Indenture Trustee for the purpose as provided in Section 3.02 hereof, and the
Company shall execute and the Indenture Trustee shall authenticate and deliver
in exchange therefor the Equipment Note or Equipment Notes which the Holder
making the exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Equipment Notes presented for registration of transfer, exchange,
prepayment or payment shall (if so required by the Company or the Indenture
Trustee) be duly endorsed by, or be
8-
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and the Indenture Trustee duly executed by the
Holder or its attorney duly authorized in writing and the Indenture Trustee may
require evidence satisfactory to it as to the compliance of any such transfer
with the Securities Act. The Indenture Trustee may require payment from the
Holder of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any exchange or registration of transfer of
Equipment Notes. No service charge shall be levied for any such transaction. The
Indenture Trustee shall not be required to exchange or register a transfer of
any Equipment Notes (a) for a period of 15 days immediately preceding the first
mailing of notice of prepayment of such Equipment Notes or (b) with respect to
which notice of prepayment has been given pursuant to Section 6.03 hereof and
such notice has not been revoked. All Equipment Notes issued upon any transfer
or exchange of Equipment Notes shall be valid obligations of the Company,
evidencing the same debt, and entitled to the same security and benefits under
this Indenture, as the Equipment Notes surrendered upon such transfer or
exchange. Any such transferee of an Equipment Note, by its acceptance of an
Equipment Note, agrees to the provisions of the Participation Agreement
applicable to Holders, and shall be deemed to have covenanted to the parties to
the Participation Agreement as to the matters covenanted by the original Loan
Participant in the Participation Agreement.
Section 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Equipment
--------------------------------------------------------
Notes. In case any Equipment Note shall become mutilated, defaced or be
-----
apparently destroyed, lost or stolen, the Company in its discretion may execute,
and upon the written request of any Holder shall execute, and the Indenture
Trustee shall authenticate and deliver in replacement thereof, a new Equipment
Note, payable to the same Holder, bearing the same principal amount and interest
rate as the Equipment Note being replaced and bearing a number not
contemporaneously or previously outstanding, in exchange and substitution for
the mutilated or defaced Equipment Note, or in lieu of and substitution for the
Equipment Note so apparently destroyed, lost or stolen. In the case of any
Equipment Note so apparently destroyed, lost or stolen, the applicant for a
substitute Equipment Note shall furnish to the Company and the Indenture Trustee
such security or indemnity as may be required by them to indemnify and defend
and to hold each of them harmless and evidence to their satisfaction of the
apparent destruction, loss or theft of such Equipment Note and of the ownership
thereof.
Upon the issuance of any substitute Equipment Note, the Company or the
Indenture Trustee may require payment from the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses incurred in connection therewith. In
case any Equipment Note which has matured or is about to mature, or has been
called for prepayment in full, shall become mutilated or defaced or be
apparently destroyed, lost or stolen, the Company may, instead of issuing a
substitute Equipment Note, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated or defaced Equipment Note),
if the applicant of any Equipment Note so apparently destroyed, lost or stolen,
for such payment shall furnish to the Company and to the Indenture Trustee such
security or indemnity as any of them may require to hold each of them harmless
and the applicant shall also furnish to the
9-
Company and the Indenture Trustee evidence to their satisfaction of the apparent
destruction, loss or theft of such Equipment Note and of the ownership thereof.
Every substitute Equipment Note issued pursuant to the provisions of
this Section by virtue of the fact that any Equipment Note is apparently
destroyed, lost or stolen shall constitute an original additional contractual
obligation of the Company, whether or not the apparently destroyed, lost or
stolen Equipment Note shall be enforceable at any time by anyone and shall be
entitled to all the security and benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture equally and proportionately
with any and all other Equipment Notes duly authenticated and delivered
hereunder. All Equipment Notes shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, defaced, or
apparently destroyed, lost or stolen Equipment Notes and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
Section 2.08. Cancellation of Equipment Notes; Destruction Thereof. All
----------------------------------------------------
Equipment Notes surrendered for payment, prepayment, registration of transfer or
exchange, if surrendered to the Company or any agent of the Company or the
Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation
or, if surrendered to the Indenture Trustee, shall be canceled by it; and no
Equipment Notes shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. The Indenture Trustee shall destroy
cancelled Equipment Notes held by it and deliver a certificate of destruction to
the Company. If the Company shall acquire any of the Equipment Notes, such
acquisition shall not operate as a prepayment or satisfaction of the
indebtedness represented by such Equipment Notes unless and until the same are
delivered to the Indenture Trustee for cancellation.
Section 2.09. Termination of Interest in Indenture Estate. A Holder
-------------------------------------------
shall not, as such, have any further interest in, or other right with respect
to, the Indenture Estate when and if the principal amount of and Make-Whole
Premium, if any, and interest on and other amounts due under all Equipment Notes
held by such Holder and all other sums payable to such Holder hereunder and
under the other Operative Agreements shall have been paid in full.
Section 2.10. Equipment Notes in Respect of Replacement Aircraft. Upon
--------------------------------------------------
the execution and delivery of a supplement to this Indenture covering a
Replacement Airframe and/or Replacement Engine, as provided in Section 9.09
hereof, each Equipment Note shall be deemed to have been issued in connection
with such Replacement Airframe and/or Replacement Engine and (in the case of a
Replacement Airframe) each Equipment Note issued thereafter upon a transfer or
exchange of, or as a replacement for, an Equipment Note, shall be designated as
having been issued in connection with such Replacement Airframe, but without any
other change therein except as provided for in this Article II.
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Section 2.11. [Reserved]
Section 2.12. Subordination. (a) The Company and, by acceptance of its
-------------
Equipment Notes of any Series, each Holder of such Series, hereby agree that no
payment or distribution shall be made on or in respect of the Secured
Obligations owed to such Holder of such Series, including any payment or
distribution of cash, property or securities after the commencement of a
proceeding of the type referred to in clause (v), (vi) or (vii) of Section 7.01
hereof, except as expressly provided in Article V hereof.
(b) By the acceptance of its Equipment Notes of any Series (other than
Series A), each Holder of such Series agrees that in the event that such Holder,
in its capacity as a Holder, shall receive any payment or distribution on any
Secured Obligations in respect of such Series which it is not entitled to
receive under this Section 2.12 or Article V hereof, it will hold any amount so
received in trust for the Senior Holder (as defined in Section 2.12(c) hereof)
and will forthwith turn over such payment to the Indenture Trustee in the form
received to be applied as provided in Article V hereof.
(c) As used in this Section 2.12, the term "Senior Holder" shall mean,
-------------
(i) the Holders of Series A Equipment Notes until the Secured Obligations in
respect of Series A Equipment Notes have been paid in full, (ii) after the
Secured Obligations in respect of Series A Equipment Notes have been paid in
full, the Holders of Series B Equipment Notes until the Secured Obligations in
respect of Series B Equipment Notes have been paid in full, and (iii) after the
Secured Obligations in respect of Series B Equipment Notes have been paid in
full, the Holders of Series C Equipment Notes until the Secured Obligations in
respect of Series C Equipment Notes have been paid in full.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal, Make-Whole Premium and Interest.
-----------------------------------------------------
The Company covenants and agrees that it will duly and punctually pay or cause
to be paid the principal of, and interest and Make-Whole Premium, if any, and
all other amounts due on, each of the Equipment Notes and under this Indenture
at the place or places, at the respective times and in the manner provided in
this Indenture and in the Equipment Notes.
Section 3.02. Offices for Payments, etc. So long as any of the
-------------------------
Equipment Notes remain outstanding, the Indenture Trustee will maintain the
following: (a) an office or agency where the Equipment Notes may be presented
for payment and (b) a facility or agency where the Equipment Notes may be
presented for registration of transfer and for exchange and for prepayment as
provided in this Indenture (the "Registrar"). The Registrar shall keep a
register (the "Register") with respect to the Equipment Notes and their transfer
and exchange. The Indenture Trustee may appoint one or
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more co-registrars ("Co-Registrars") for the Equipment Notes and may terminate
any such appointment at any time upon written notice. The term "Registrar"
includes any Co-Registrar. The Indenture Trustee shall initially act as
Registrar.
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture
----------------------------------------------------
Trustee. The Company, whenever necessary to avoid or fill a vacancy in the
-------
office of Indenture Trustee, will appoint, in the manner provided in Section
12.02 hereof, an Indenture Trustee, so that there shall at all times be an
Indenture Trustee hereunder.
Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole
-------------
discretion shall appoint a paying agent (the "Paying Agent"), it will cause the
Paying Agent to execute and deliver an instrument in which the Paying Agent
shall agree with the Indenture Trustee, subject to the provisions of this
Section:
(a) that it will hold all sums received by it as such
agent for the payment of the principal of, and interest and Make-Whole
Premium, if any, on the Equipment Notes (whether such sums have been
paid to it by the Indenture Trustee or the Company) in trust for the
benefit of the Holders or of the Indenture Trustee, and
(b) that it will give the Indenture Trustee notice of any
failure by the Company to make any payment of the principal of or
interest or Make-Whole Premium, if any, on the Equipment Notes when the
same shall be due and payable.
Anything in this Section to the contrary notwithstanding, the
agreements to hold sums in trust as provided in this Section are subject to the
provisions of Sections 14.03 and 14.04 hereof.
Section 3.05. [Reserved]
Section 3.06. [Reserved]
Section 3.07. Disposal of Collateral. At any time and from time to time
----------------------
any part of the Collateral may be sold or disposed of in accordance with the
provisions of this Indenture. The Indenture Trustee shall, from time to time,
release any part of the Collateral so sold or disposed of or as to which an
Event of Loss has occurred from the Lien of this Indenture. In addition, to the
extent that such property constitutes an Airframe or Engine, the further
requirements of Section 9.08 hereof shall be satisfied.
Section 3.08. No Representations or Warranties as to Aircraft or
--------------------------------------------------
Documents. THE INDENTURE TRUSTEE DOES NOT MAKE NOR SHALL BE DEEMED TO HAVE MADE
---------
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, WORKMANSHIP, VALUE, CONDITION, DESIGN, COMPLIANCE WITH
SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR
12-
PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF
ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO
THE AIRCRAFT OR ANY ENGINE WHATSOEVER.
Section 3.09. Further Assurances; Financing Statements. At any time and
----------------------------------------
from time to time, upon the request of the Indenture Trustee, the Company, at
its own expense, shall promptly and duly execute and deliver any and all such
further instruments and documents as may be specified (and in the form included)
in such request and as are reasonably necessary or advisable to perfect,
preserve or protect the Liens and assignments created or intended to be created
hereby, or to obtain for the Indenture Trustee the full benefit of the specific
rights and powers granted herein, including, without limitation, the execution
and delivery of Uniform Commercial Code financing statements and continuation
statements with respect thereto, or similar instruments relating to the
perfection of the Liens or assignments created or intended to be created hereby.
Section 3.10. Holder Lists: Ownership of Equipment Notes. (a) The
------------------------------------------
Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall
furnish to the Indenture Trustee semi-annually not more than ten days after each
Record Date, as of such Record Date, or at such other times as the Indenture
Trustee may request in writing, a list, in such form and as of such date as the
Indenture Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders and the amounts and Maturities of the Equipment Notes held by such
Holders.
(b) Ownership of the Equipment Notes shall be proved by the Register
kept by the Registrar.
ARTICLE IV
COVENANTS OF COMPANY
Section 4.01. Possession, Operation and Use, Maintenance Registration.
-------------------------------------------------------
(a) General.
-------
Except as otherwise expressly provided herein, the Company (and any
Permitted Lessee) shall be entitled to operate, use, locate, employ or otherwise
utilize or not utilize the Airframe, Engines and Parts in any lawful manner or
place in accordance with the Company's (or such Permitted Lessee's) business
judgment.
13-
(b) Possession.
----------
The Company shall not lease, or otherwise in any manner deliver,
relinquish or transfer possession of the Airframe or any Engine to any Person or
install any Engine, or permit any Engine to be installed, on any airframe other
than the Airframe, so long as such Airframe is subject to the Lien of this
Indenture, without the prior consent of the Indenture Trustee, which consent
shall not be unreasonably withheld, except that the Company may without the
prior consent of the Indenture Trustee:
(i) enter into a charter or wet lease or other similar
arrangement under which the Company (or such Permitted Lessee) has
operational control of the Airframe and any Engines installed
thereon in the course of the Company's business (which shall not be
considered a transfer of possession hereunder), provided that the
Company's obligations under this Indenture shall continue in full
force and effect notwithstanding any such charter or wet lease or
other similar arrangement;
(ii) deliver possession of the Airframe or any Engine or any
Part to the manufacturer thereof or to any organization for
testing, service, repair, maintenance, overhaul work or other
similar purposes or for alterations or modifications or additions
required or permitted by the terms of this Indenture;
(iii) subject the Airframe and any Engines installed thereon to
interchange agreements or any Engine to interchange or pooling
agreements or arrangements which are applicable to other similar
property owned by or leased to the Company (or such Permitted
Lessee) and are entered into by the Company (or such Permitted
Lessee) in the course of its airline business with any air carrier,
provided, that (A) no such agreement or arrangement shall under any
--------
circumstances result in, contemplate or require the transfer of
title to the Aircraft, Airframe or any Engine and (B) if the
Company's title to any Engine shall nevertheless be divested under
any such agreement or arrangement, such divestiture shall be deemed
to be an Event of Loss with respect to such Engine and the Company
shall comply with Section 4.03(e) hereof in respect thereof;
(iv) install an Engine on an airframe owned by the Company (or
such Permitted Lessee) free and clear of all Liens except (A)
Permitted Liens, (B) those which apply only to the engines (other
than the Engines), appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment (other than Parts)
installed on such airframe, and (C) those created by the rights of
other air carriers under interchange or pooling
14-
agreements or other arrangements customary in the airline industry
which do not contemplate, permit or require the transfer of title
to such airframe or engines installed thereon;
(v) install an Engine on an airframe, leased to the Company
(or such Permitted Lessee) or purchased by the Company (or such
Permitted Lessee) subject to a conditional sale or other security
agreement, provided that such Engine shall not thereby become
--------
subject to the lien of such lease, conditional sale or other
security agreement;
(vi) install an Engine on an airframe, owned by the Company
(or such Permitted Lessee), leased by the Company (or such
Permitted Lessee) or purchased by the Company (or such Permitted
Lessee) subject to a conditional sale or other security agreement
under circumstances where neither clause (iv) nor clause (v) above
is applicable, provided that any divestiture or non-curable
--------
impairment of title to such Engine resulting from such installation
shall be deemed an Event of Loss with respect to such Engine and
the Company shall comply with Section 4.03 (e) hereof;
(vii) transfer possession of the Airframe or Engine to the
United States of America or any instrumentality thereof pursuant to
the Civil Reserve Air Fleet Program (as established and
administered pursuant to Executive Order 11490, as amended, as
superseded by United States Executive Order No. 12656) or any
similar or substitute program ("CRAF Program"), in which event
Company (or such Permitted Lessee) shall promptly notify Indenture
Trustee in writing of any such transfer of possession and, in the
case of any transfer pursuant to the CRAF Program, in such
notification shall identify by name, address and telephone numbers
the Contracting Office Representatives of the Military Airlift
Command of the United States Air Force to whom notices must be
given and to whom requests or claims must be made to the extent
applicable under the CRAF Program;
(viii) transfer possession of the Airframe or any Engine to the
United States of America, or to a foreign government, when required
by Applicable Law (it being understood that nothing in this clause
(viii) shall relieve the Company from its obligations under Section
4.04(a) if such transfer becomes an Event of Loss), in which event
Company shall promptly notify Indenture Trustee in writing of any
such transfer of possession;
(ix) transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency thereof
pursuant to a sublease, contract or other instrument; and
15-
(x) so long as no Specified Default shall have occurred and
be continuing, and subject to the provisions of this Section
4.01(b), enter into a lease with respect to any Engine or the
Airframe and Engines or engines then installed on the Airframe to
a Permitted Lessee which is not the subject of a petition filed
under any bankruptcy laws or other insolvency laws in effect at
the time such lease is entered into, or any other foreign air
carrier; provided that in the case only of a lease to a foreign
--------
air carrier that is not a Permitted Lessee, the Indenture Trustee
receives at the time of such lease an opinion of counsel to the
Company (which counsel shall be reasonably satisfactory to the
Indenture Trustee) to the effect that there exist no possessory
rights in favor of the lessee under the laws of such sublessee's
country which would, upon bankruptcy or insolvency of or other
default by the Company and assuming that at such time such lessee
is not insolvent or bankrupt, prevent the return of such Engine
or the Airframe and such Engine or engine to the Indenture
Trustee in accordance with and when permitted by the terms of
Section 7.02 upon the exercise by the Indenture Trustee of its
remedies under Section 7.02;
provided that (1) the rights of any transferee who receives possession by reason
--------
of a transfer permitted by this Section 4.01(b) (other than by a transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to all
the terms of this Indenture, (2) the Company shall remain primarily liable
hereunder for the performance of all the terms of this Indenture and all the
terms and conditions of this Indenture and the other applicable Operative
Agreements shall remain in effect and (3) no lease or transfer of possession
otherwise in compliance with this Section 4.01(b) shall (x) result in any
registration or reregistration of the Aircraft except to the extent permitted by
Section 4.01(e) or the maintenance, operation or use thereof except in
compliance with Sections 4.01(c) and 4.01(d), or (y) permit any action not
permitted to the Company hereunder.
In the case of any lease permitted under this Section 4.01(b), the
Company will include in such lease appropriate provisions which (a) make such
lease expressly subject and subordinate to all of the terms of this Indenture
including the rights of the Indenture Trustee to avoid such lease in the
exercise of its rights to repossession of the Airframe and Engines hereunder;
(b) expressly prohibit any subleasing of the Airframe and Engines; (c) require
that the Airframe and Engines be maintained in accordance with a maintenance
program approved by the Aeronautical Authority applicable thereto; (d) require
the lessee to comply with the terms of Section 4.05 hereof; and (e) require that
the Airframe and Engines be used in accordance with the limitations applicable
to the Company's possession and use provided in this Indenture.
The Indenture Trustee hereby agrees for the benefit of the lessor or
secured party of any engine or of any airframe (other than the Airframe) leased
to the Company or purchased by the Company subject to a conditional sale or
other security agreement, which lease or conditional sale or other security
agreement (in the case of any such airframe) also covers an engine or engines
16-
owned by the lessor under such lease or subject to a security interest in favor
of the secured party under such conditional sale or other security agreement,
that the Indenture Trustee will not acquire or claim, as against such lessor or
secured party, any right, title or interest in any such engine as the result of
such engine being installed on the Airframe at any time while such engine is
owned by such lessor or is subject to such conditional sale or other security
agreement or security interest in favor of such secured party.
(c) Operation and Use.
-----------------
The Company shall not operate, use or locate the Airframe or any
Engine, or suffer such Airframe or any Engine to be operated, used or located
(i) in any area excluded from coverage by any insurance required by the terms of
Section 4.05 hereof, except in the case of a requisition by the United States of
America where the Company obtains indemnity from the Government for the benefit
of the Additional Insureds against substantially the same risks and for at least
the amounts of the insurance required by Section 4.05 hereof covering such area,
or (ii) outside the United States or Canada in any recognized or, in the
Company's reasonable judgment, threatened area of hostilities unless covered by
war risk insurance, or in either case unless the Airframe or such Engine is
operated or used under contract with the Government under which contract the
Government assumes liability for substantially the same risks in at least the
same amounts as would be covered by such insurance. So long as the Airframe or
an Engine is subject to the Lien of this Indenture, the Company shall not permit
the Airframe or such Engine to be used or operated in violation of any
Applicable Law or in violation of any airworthiness certificate, license or
registration relating to the Aircraft or such Engine issued by any competent
governmental authority, unless (i) the validity thereof is being contested in
good faith and by appropriate proceedings which do not involve a material danger
of the sale, forfeiture or loss of the Airframe or such Engine, or (ii) it is
not possible for the Company (or a Permitted Lessee) to comply with the laws of
a jurisdiction other than the United States (or other than any jurisdiction in
which the Aircraft is then registered) because of a conflict with the applicable
laws of the United States (or such jurisdiction in which the Aircraft is then
registered).
(d) Maintenance.
-----------
So long as the Airframe or an Engine is subject to the Lien of an
Indenture, the Company, at its own cost and expense, shall service, repair,
maintain, overhaul and test the Airframe and such Engine or cause the same to be
done in accordance with a maintenance program approved by the Aeronautical
Authority, and shall keep or cause to be kept the Airframe and such Engine in
such operating condition as may be necessary to enable the airworthiness
certification of the Aircraft to be maintained in good standing at all times
under the applicable rules and regulations of the Aeronautical Authority, except
when aircraft of the same type, model or series as the Airframe (powered by
engines of the same type as those with which the Airframe shall be equipped at
the time of grounding) registered in the same country have been grounded by the
Aeronautical Authority, provided, however, that if the airworthiness certificate
-------- -------
of the Aircraft shall be withdrawn, then, subject to Section 4.04 hereof, so
long as the Company (or a Permitted Lessee) is taking or causing
17-
to be taken all necessary action to promptly correct the condition which caused
such withdrawal, no Indenture Default or Indenture Event of Default shall arise
from such withdrawal. Nothing herein shall be deemed to prevent the Company (or
a Permitted Lessee) from taking the Aircraft out of service for maintenance or
modifications permitted hereunder or storage in accordance with applicable
Aeronautical Authority requirements and sound practice for such storage. The
Company shall maintain or cause to be maintained all records, logs and other
documents required by the Aeronautical Authority to be maintained in respect of
the Aircraft.
(e) Registration
------------
Except as otherwise permitted by Section 4.02(b) of the Participation
Agreement, or as otherwise required by the Transportation Code or rules,
regulations, or orders promulgated thereunder, so long as the Airframe or an
Engine is subject to the Lien of an Indenture, the Aircraft shall be duly
registered in the name of the Company under the Transportation Code.
Section 4.02. Inspection
----------
So long as the Airframe or an Engine is subject to the Lien of an
Indenture, at all reasonable times but upon at least 15 days' prior notice to
the Company and at a time and place reasonably acceptable to the Company, the
Indenture Trustee or its authorized representatives may at its own expense and
risk conduct a visual walk-around inspection of the Aircraft and any such Engine
(including a visual walk-around inspection of the Aircraft during any "C" check
or other heavy maintenance) and may inspect the books and records of the Company
relating to the operation and maintenance thereof; provided that (a) such
--------
representatives shall be fully insured to the reasonable satisfaction of the
Company by the Indenture Trustee with respect to any risks incurred in
connection with any such inspection, (b) any such inspection shall be subject to
the safety, security and workplace rules applicable at the location where such
inspection is conducted and any applicable governmental rules or regulations,
(c) in the case of an inspection during a maintenance visit, such inspection
shall not in any respect interfere with the normal conduct of such maintenance
visit or extend the time required for such maintenance visit or, in any event,
at any time interfere with the use or operation of the Airframe or any Engine or
with the normal conduct of the Company's or a Permitted Lessee's business, and
(d) the Company shall not be required to undertake or incur any additional
liabilities in connection with any such inspection. All information obtained in
connection with any such inspection shall be held confidential by the Indenture
Trustee and shall not be furnished or disclosed by the Indenture Trustee to
anyone other than its bank examiners, auditors, accountants, agents and legal
counsel and except as may be required by an order of any court or administrative
agency or by any statute, rule, regulation or order of any governmental
authority or as may be necessary to enforce the terms of this Indenture. The
Indenture Trustee shall have no duty to make any such inspection and shall not
incur any liability or obligation by reason of not making any such inspection.
18-
Section 4.03. Replacement and Pooling of Parts; Alterations,
Modifications and Additions; Substitution of Engines.
--------- -----------------------
(a) Replacement of Parts.
--------------------
So long as the Airframe or an Engine is subject to the Lien of this
Indenture, except as otherwise provided in the proviso to the third sentence of
Section 4.03(d) or if the Airframe or an Engine to which a Part relates has
suffered an Event of Loss, the Company, at its own cost and expense, will
promptly replace all Parts that may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. In addition, in the ordinary
course of maintenance, service, repair, overhaul or testing, the Company (or a
Permitted Lessee), at its own cost and expense, may remove any Parts, whether or
not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use, provided that the Company (or such
--------
Permitted Lessee), at its own cost and expense, shall, except as otherwise
provided in the proviso to the third sentence of Section 4.03(d), replace such
Parts as promptly as practicable with replacement Parts or temporary replacement
parts as provided in Section 4.03(c) hereof. All replacement Parts shall be free
and clear of all Liens except for pooling arrangements to the extent permitted
by Section 4.03(c) and Permitted Liens and shall be in as good operating
condition as, and shall have a value and utility at least equal to, the Parts
replaced assuming such replaced Parts were in the condition and repair required
to be maintained by the terms hereof.
(b) Subject to Lien.
---------------
Except as otherwise provided in the proviso to the third sentence of
Section 4.03(d), all Parts at any time removed from the Airframe or any Engine
shall remain and subject to the Lien of this Indenture, no matter where located,
until such time as such Parts shall be replaced by Parts that have been
incorporated or installed in or attached to such Airframe or Engine and that
meet the requirements for replacement Parts specified in Section 4.03(a).
Immediately upon any replacement Part becoming incorporated or installed in or
attached to an Airframe or Engine as provided in Section 4.03(a), without
further act, (i) the replaced Part shall thereupon be free and clear of the Lien
of this Indenture and shall no longer be deemed a Part hereunder; and (ii) such
replacement Part shall become subject to the Lien of this Indenture and be
deemed part of such Airframe or Engine, as the case may be, for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to such Airframe or Engine.
(c) Pooling or Parts Leasing.
------------------------
Any Part removed from the Airframe or from any Engine as provided in
Section 4.03(a) may be subjected by the Company (or a Permitted Lessee) to a
pooling or parts leasing agreement or arrangement of a type customary in the
airline industry entered into in the ordinary course of the Company's (or such
Permitted Lessee's) business, provided the part replacing
19-
such removed Part shall be incorporated or installed in or attached to such
Airframe or Engine in accordance with Sections 4.03(a) and 4.03(b) as promptly
as practicable after the removal of such removed Part. In addition, any
replacement part when incorporated or installed in or attached to the Airframe
or any Engine in accordance with Section 4.03(a) may be owned by another airline
or vendor as customary in the airline industry, subject to a pooling or parts
leasing arrangement, provided that the Company (or a Permitted Lessee) , at its
--------
expense within a commercially reasonable time, either (i) causes title to such
temporary replacement part to become subject to the Lien of this Indenture, free
and clear of all Liens except Permitted Liens, at which time such temporary
replacement part shall become a Part or (ii) replaces such temporary replacement
part by incorporating or installing in or attaching to such Airframe or Engine a
further replacement Part owned by the Company (or such Permitted Lessee) free
and clear of all Liens except Permitted Liens and which will become subject to
the Lien of this Indenture in accordance with Section 4.03(b).
(d) Alterations, Modifications and Additions.
----------------------------------------
The Company, at its own expense, shall make (or cause to be made)
alterations and modifications in and additions to the Airframe and any Engine as
may be required to be made from time to time by Applicable Law regardless of
upon whom such requirements are, by their terms, nominally imposed; provided,
--------
that the Company may, in good faith, contest the validity or application of any
such standard in any reasonable manner which does not materially adversely
affect the lien of this Indenture. In addition, the Company (or a Permitted
Lessee), at its own expense, may from time to time make or cause to be made such
alterations and modifications in and additions to the Airframe and any Engine as
the Company (or such Permitted Lessee) may deem desirable in the proper conduct
of its business (including, without limitation, removal of Parts), provided
--------
further that no such alteration, modification or addition diminishes, in the
Company's reasonable judgment, the value, utility, condition or airworthiness of
such Airframe or Engine below the value, utility, condition or airworthiness
thereof immediately prior to such alteration, modification or addition, assuming
such Airframe or Engine was then in the condition required to be maintained by
the terms hereof, except that the value (but not the utility, condition or
airworthiness) of the Aircraft may be reduced by the value of Parts which the
Company deems obsolete or no longer suitable or appropriate for use in the
Airframe or any Engine which shall have been removed and not replaced, if the
aggregate value of all such obsolete or unsuitable Parts removed from the
Aircraft and not replaced shall not exceed $300,000. All Parts incorporated or
installed in or attached or added to the Airframe or any Engine as the result of
any alteration, modification or addition effected by the Company (or a Permitted
Lessee) shall be free and clear of any Liens except Permitted Liens and become
subject to the Lien of this Indenture; provided that the Company (or a Permitted
--------
Lessee) may at any time remove any such Part from the Airframe or an Engine if
(i) such Part is in addition to, and not in replacement of or in substitution
for, any Part originally incorporated or installed in or attached to such
Airframe or Engine on the Delivery Date or any Part in replacement of, or in
substitution for, any such original Part, (ii) such Part is not required to be
incorporated or installed in or attached or added to such Airframe or Engine
pursuant to the terms of Section 4.01(d) or the first sentence of this Section
4.03(d) and (iii) such Part can be
20-
removed from such Airframe or Engine without diminishing or impairing the value,
condition, utility or airworthiness which such Airframe or Engine would have had
at the time of removal had such alteration, modification or addition not been
effected by the Company (or such Permitted Lessee) assuming the Aircraft was
otherwise maintained in the condition required by this Indenture. Upon the
removal by the Company (or such Permitted Lessee) of any such Part as above
provided, title thereto shall be free and clear of all rights of the Indenture
Trustee and the Lien of this Indenture shall no longer be deemed a Part
hereunder.
(e) Substitution of Engines.
-----------------------
The Company (or a Permitted Lessee) shall have the right at
its option at any time, on at least 30 days' prior notice to the Indenture
Trustee and the Indenture Trustee, to substitute, and if an Event of Loss shall
have occurred with respect to an Engine, shall within 90 days of the occurrence
of such Event of Loss and on at least five days' prior notice to the Indenture
Trustee substitute, a Replacement Engine for any Engine not then installed or
held for use on the Airframe. In such event, immediately upon the effectiveness
of such substitution on the date set forth in such notice and without further
act, (i) the replaced Engine shall thereupon be released from the Lien of this
Indenture and shall no longer be deemed an Engine hereunder, and (iii) such
Replacement Engine shall become subject to the Lien of this Indenture and be
deemed part of the Aircraft for all purposes hereof to the same extent as the
Engine originally installed on or attached to the Airframe. Upon the
substitution of a Replacement Engine, the conditions set forth in Section 9.08
shall be satisfied at the Company's sole cost and expense and the parties agree
to cooperate with the Company to the extent necessary to enable it to timely
satisfy such conditions.
Upon satisfaction of all conditions to such substitution, (x)
the Indenture Trustee shall execute and deliver to the Company such documents
and instruments as the Company shall reasonably request to evidence the release
of such Engine from the Lien of this Indenture; (y) the Indenture Trustee shall
assign to the Company all claims it may have against any other Person relating
to an Event of Loss giving rise to such substitution and (z) the Company shall
receive all insurance proceeds and proceeds in respect of any Event of Loss
giving rise to such replacement to the extent not previously applied to the
purchase price of the Replacement Engine as provided in Sections 4.05(e)(i) and
4.04(e)(ii).
Section 4.04. Loss, Destruction or Requisition.
--------------------------------
(a) Event of Loss with Respect to the Airframe.
------------------------------------------
Upon the occurrence of an Event of Loss with respect to the
Airframe, the Company shall forthwith (and in any event within 30 days after
such occurrence) give the Indenture Trustee notice of such Event of Loss. The
Company shall, within 60 days after such occurrence, give the Indenture Trustee
notice of its election to perform one of the following options (it being agreed
that
21-
if the Company shall not have given the Indenture Trustee such notice of such
election, the Company shall be deemed to have elected to perform the option
identified in the following clause (ii)):
(i) subject to the satisfaction of the
conditions contained in Section 9.08, on a date not
more than 180 days after the occurrence of the Event
of Loss, cause a Replacement Airframe, (together with
the same number of Replacement Engines as the number
of Engines, if any, which were subject to such Event
of Loss) to be subjected to the Lien of this
Indenture; provided that, if the Company shall not
-------- ----
perform its obligation to effect such replacement
under this clause (i) during the 180-day period of
time provided herein, it shall give the Indenture
Trustee notice to such effect upon or before the
expiration of such period of time and shall promptly
pay on the first Business Day next following the
thirtieth (30th) day after the date of such notice to
the Indenture Trustee, in immediately available
funds, the amount specified in clause (ii) below; or
(ii) pay or cause to be paid to the
Indenture Trustee in immediately available funds on a
date specified at least 30 days in advance by the
Company, which date shall be a Business Day not more
than 180 days after the occurrence of the Event of
Loss, an amount equal to in immediately available
funds, for distribution to the holders as provided in
Section 5.02, an amount equal to the aggregate unpaid
principal of the Equipment Notes, together with
accrued but unpaid interest thereon to the date of
payment, plus any other amounts then payable
hereunder to the Holders.
(b) Effect of Replacement.
---------------------
Should the Company have provided a Replacement Aircraft as
provided for in Section 4.04(a)(i) above, the Lien of this Indenture will cease
with respect to the replaced Airframe and any Engines installed thereon at the
time of such Event of Loss and the Indenture Trustee shall (i) execute and
deliver to the Company such documents and instruments, prepared at the Company's
expense, as the Company shall reasonably request to evidence (on the public
record or otherwise) the release of the Indenture Trustee's security interest in
and to the replaced Airframe and the Engine or Engines if any installed on the
Airframe at the time of the Event of Loss, (ii) assign to the Company all claims
it may have against any other Person arising from the Event of Loss and (iv) the
Company shall be entitled to receive all insurance proceeds and proceeds from
any award in respect of condemnation, confiscation, seizure or requisition,
including any investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Aircraft as provided in Sections
4.05(e)(iii) and 8(e)(i). Should the Company have provided a Replacement
Airframe, together with Replacement Engines, if any, all provisions of this
Indenture relating to the Airframe and Engine or Engines, if any, being replaced
shall be applicable to the Replacement Airframe and Replacement Engine or
Replacement Engines with the same force and effect.
22-
(c) Effect of Payment.
-----------------
In the event of a payment in full of the amounts payable as
provided in Section 4.04(a)(ii), (i) the Indenture Trustee shall execute and
deliver to the Company such documents and instruments, prepared at the Company's
expense, as the Company shall reasonably request to evidence (on the public
record or otherwise) the release of the Security Trustee's purchase money
equipment security interest in and to the replaced Airframe and the Engine or
Engines if any installed on the Airframe at the time of the Event of Loss; (ii)
any remaining insurance proceeds, including any investment interest thereon,
shall be promptly paid over to the Company; and (iii) the Indenture Trustee
shall convey to the Company all claims for damage to such Airframe and Engines,
if any, against third persons arising from the Event of Loss.
(d) Conditions to Airframe Replacement.
----------------------------------
The Company's right to substitute a Replacement Aircraft as
provided in Section 4.04(a)(i) shall be subject to the fulfillment, at the
Company's sole cost and expense, in addition to the conditions contained in such
Section 4.04(a)(i), of the conditions precedent set forth in Section 9.08.
(e) Non-Insurance Payments Received on Account of an
------------------------------------------------
Event of Loss.
-------------
As between the Indenture Trustee and the Company, any payments
on account of an Event of Loss (other than insurance proceeds or other payments
the application of which is provided for in this Section 4.04 or elsewhere in
this Indenture, as the case may be, or payments in respect of damage to the
business or property of the Company) with respect to the Aircraft, an Engine or
any Part received at any time by the Indenture Trustee or by the Company from
any governmental authority or other Person will be applied as follows:
(i) if such payments are received with
respect to an Event of Loss as to the Aircraft, and
the Airframe or the Airframe and the Engines or
engines installed thereon are being replaced by the
Company pursuant to Section 4.04(a)(i), such payments
shall be paid over to, or retained by, the Company,
provided that if the Company has not completed such
--------
replacement, such payments shall be paid over to, or
retained by, the Indenture Trustee as security, and
upon completion of, or in connection with a closing
for, such replacement, be paid over to or retained by
the Company;
(ii) if such payments are received with
respect to an Event of Loss to an Engine or Part that
has been or is being replaced by the Company pursuant
to the terms hereof, such payments shall be paid over
to, or retained by, the Company; and
23-
(iii) if such payments are received with
respect to an Event of Loss as to the Aircraft, and
if the Airframe or the Airframe and the Engines or
engines installed thereon has not been and will not
be replaced as contemplated by Section 4.04(a), so
much of such payments as shall not exceed the amounts
required to be paid by the Company pursuant to
Section 4.04(a) hereof shall be applied in reduction
of the Company's obligation to pay such amounts, to
the extent not already paid by the Company, and,
after all such amounts required to be paid to the
Indenture Trustee pursuant to Section 4.04(a)(ii)
above shall be paid in full, shall be paid over to
the Company.
(f) Requisition for Use.
-------------------
In the event of a requisition for use by any government of the
Airframe and the Engines, if any, or engines installed on the Airframe, the
Company shall promptly notify the Indenture Trustee of such requisition and all
of the Company's obligations under this Indenture shall continue to the same
extent as if such requisition had not occurred except to the extent that the
performance or observance of any obligation by the Company shall have been
prevented or delayed by such requisition, provided that the Company's
--------
obligations for the payment of money and under Section 4.05 (except while an
assumption of liability by the Government of the scope referred to in Section
4.01(c) is in effect) shall not be reduced or delayed by such requisition. Any
payments received by the Indenture Trustee or the Company from such government
with respect to such requisition of use shall be paid over to, or retained by,
the Company. In the event of an Event of Loss of an Engine resulting from the
requisition for use by a government of such Engine (but not the Airframe), the
Company will replace such Engine hereunder by complying with the terms of
Section 4.03(e) and any payments received by the Indenture Trustee or the
Company from such government with respect to such requisition shall be paid over
to, or retained by, the Company.
(g) Certain Payments to be Held As Security.
---------------------------------------
Any amount referred to in this Section 4.04 or Section 4.05
hereof which is payable to the Company shall not be paid to the Company, or, if
it has been previously paid directly to the Company, shall not be retained by
the Company, if at the time of such payment a Specified Default shall have
occurred and be continuing, but shall be paid to and held by the Indenture
Trustee as security for the obligations of the Company under this Indenture,
unless and until applied by Indenture Trustee to Company's obligations and at
such time as there shall not be continuing any such Specified Default, such
amount and any gain realized as a result of Permitted Investments required to be
made pursuant to Section 5.08 shall to the extent not so applied be paid over to
the Company.
Section 4.05. Insurance.
---------
24-
(a) Public Liability and Property Damage Insurance.
----------------------------------------------
Subject to the rights of the Company under Section 4.05(d), so
long as the Airframe or an Engine is subject to the Lien of the Indenture, the
Company shall, without expense to the Indenture Trustee, maintain or cause to be
maintained in effect with insurers of recognized responsibility public liability
insurance (including, without limitation, passenger legal liability, property
damage and product liability coverage but excluding manufacturer's product
liability coverage) with respect to the Aircraft in an amount not less than the
Company may carry from time to time on other similar aircraft in its fleet but
not less than the Minimum Liability Amount; provided that an agreement of the
--------
Government to insure against or indemnify for substantially the same risks to at
least the same amount shall satisfy the requirements of this Section 4.05(a).
Such insurance shall be of the type usually carried by the Company with respect
to similar aircraft and engines, and covering risks of the kind customarily
insured against by the Company.
During any period that the Aircraft is grounded and not in
operation for any reason, the Company may modify the insurance required by this
Section 4.05(a)(i) to reduce the amounts of public liability and property damage
insurance and (ii) to modify the scope of the risks covered and the type of
insurance, in both circumstances to conform to such insurance customary in the
United States airlines industry for regional air carriers similarly situated
with the Company in respect of similar aircraft which are grounded, not in
operation, and stored or hangared, except that the amounts of coverage and scope
of risk covered and the type of insurance shall be the same as from time to time
applicable to aircraft owned or leased by Company on the ground, not in
operation, and stored or hangared.
(b) Insurance Against Loss or Damage to the Aircraft and
----------------------------------------------------
Engines.
-------
Subject to the rights of the Company under Section 4.05(d), so
long as the Airframe or an Engine is subject to the Lien of the Indenture, the
Company shall, without expense to the Indenture Trustee, maintain or cause to be
maintained in effect at all times with insurers of recognized responsibility all
risk, agreed value, ground and flight hull insurance, which may exclude war
risks and allied perils, covering the Aircraft for an amount not less than the
Required Insurance Amount; provided that, neither the Company nor any Permitted
-------- ----
Lessee shall be required to maintain all-risk flight aircraft hull insurance
with respect to any period in which the Aircraft is grounded for any reason and
properly stored or hangared. Such hull insurance or other personal property
insurance of the Company shall cover Engines or engines and Parts temporarily
removed from the Airframe, pending replacement by installation of the same or
similar Engines, engines or Parts on the Airframe. Such insurance shall be of
the type usually carried by the Company or a Permitted Lessee with respect to
similar aircraft and engines, and covering risks of the kind customarily insured
against by the Company or such Permitted Lessee. If and to the extent that the
Company or a Permitted Lessee operates the Aircraft (A) on routes where it
maintains war risk insurance in effect with respect to other similar owned or
leased aircraft in its fleet, or (B) on routes (other than routes within the
United States, Canada, Mexico, Bermuda and islands other than Cuba in the
Caribbean
25-
Basin) where the custom in the industry is to carry war risk insurance, the
Company shall maintain or cause to be maintained such insurance in effect with
respect to the Aircraft in the lesser of an amount at least equal to the
Required Insurance Amount or the amount of such insurance customarily carried by
corporations engaged in the same or similar business similarly situated with the
Company or such Permitted Lessee and owning or operating similar aircraft and
engines on such routes or similar routes, provided that if the requirement to
maintain war risk insurance arises under clause (A) of this sentence, such
insurance shall be maintained in an amount not less than that maintained by the
Company or such Permitted Lessee on similar aircraft in its fleet. An agreement
by the Government to insure against or indemnify for substantially the same
risks to at least the same amount will satisfy any of the requirements of this
Section 4.05(b).
During any period that the Aircraft is on the ground and not
in operation, the Company may carry or cause to be carried, in lieu of the
insurance required by this Section 4.05(b), insurance otherwise conforming with
the provisions of this Section 4.05(b) except that the scope of the risks and
the type of insurance shall be in substantially similar form, of such types and
having limits within the range of limits (but no less than Required Insurance
Amount from time to time) as are customarily obtained by similarly situated
United States carriers in respect of similar aircraft which are grounded, not in
operation, and stored or hangared, provided that the scope of the risks and the
--------
type of insurance shall be the same as from time to time applicable to aircraft
owned by the Company of the same type similarly on the ground and not in
operation, provided further that the Company shall maintain insurance against
-------- -------
risk of loss or damage to the Aircraft in an amount equal to the Required
Insurance Amount from time to time during such period that the Aircraft is on
the ground and not in operation.
(c) Additional Insureds: Loss Payment.
---------------------------------
The Company shall cause all policies of insurance carried in
accordance with this Section 4.05 to name the Additional Insureds as their
respective interests may appear as additional insureds. Such policies shall
provide with respect to such Additional Insureds that (i) none of their
respective interests in such policies shall be invalidated by any act or
omission or breach of warranty or condition contained in such policies by the
Company or, in the case of any particular Additional Insured, any other
Additional Insured; (ii) no cancellation or lapse of coverage for nonpayment of
premium or otherwise, and no substantial change of coverage which adversely
affects the interests of any such Additional Insured, shall be effective as to
such Additional Insured until 30 days (or such lesser period as may be
applicable in the case of any war risk coverage) after receipt by such
Additional Insured of written notice from the insurers of such cancellation,
lapse or change; (iii) they shall have no liability for premiums, commissions,
calls, assessments or advances with respect to such policies; (iv) such policies
will be primary without any right of contribution from any other insurance
carried by such Additional Insureds; and (v) the insurers waive any rights of
set-off, counterclaim, deduction or subrogation against such Additional
Insureds. Each liability policy shall provide that all the provisions thereof,
except the limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured and provide that the exercise by
the insurer
26-
of rights of subrogation derived from rights retained by the Company will not
delay payment of any claim that would otherwise be payable but for such rights
of subrogation. Each hull policy shall name the Indenture Trustee as loss payee
as long as the Indenture shall remain in effect; provided that, so long as the
-------- ----
insurers shall not have received written notice that an Indenture Event of
Default has occurred and is continuing, if insurance proceeds in the aggregate
equal $2,000,000 or less, then such proceeds shall be payable to the Company
and, notwithstanding the foregoing, any amounts up to the Required Insurance
Amount (i) of any proceeds which in the aggregate exceed $2,000,000, (ii) of any
proceeds in respect of a total loss or an Event of Loss or (iii) if the insurers
shall have received written notice that an Indenture Event of Default has
occurred and is continuing, any proceeds with respect to any single loss, shall
be payable to such loss payee.
(d) Deductibles and Self-Insurance.
------------------------------
The Company may from time to time self-insure, by way of
deductible or premium adjustment provisions in insurance policies or otherwise,
the risks required to be insured against pursuant to this Section 9 in such
amounts as are then self-insured with respect to similar owned or leased
aircraft in the Company's fleet but in no case shall such self-insurance in the
aggregate exceed $15,000,000 on a per occurrence or on fleetwide basis. A
deductible per occurrence that is not in excess of the prevailing standard
market deductible for similar aircraft, shall be permitted in addition to such
self-insurance.
(e) Application of Hull Insurance Proceeds.
--------------------------------------
Subject to Section 4.04(g), as between the Indenture Trustee
and the Company, any payments received under policies of hull or other property
insurance required to be maintained by the Company pursuant to Section 4.05(b),
shall be applied as follows:
(i) if such payments are received with
respect to loss or damage (including an Event of Loss
with respect to an Engine) not constituting an Event
of Loss with respect to the Airframe, payments in the
aggregate of $2,000,000 or less shall be paid over to
or retained by the Company and, subject to Section
4.05(c), any payments which in the aggregate are
greater than $2,000,000 shall be paid over to or
retained by the Indenture Trustee for payment to the
Company only upon performance of its repair or
replacement obligation;
(ii) if such payments are received with
respect to an Event of Loss with respect to the
Airframe and the Airframe is not being replaced by
the Company pursuant to Section 4.04(a)(i), so much
of such payments as shall not exceed the Required
Insurance Amount and other amounts required to be
paid by the Company pursuant to Section 4.04(a)(ii)
shall be applied in reduction of the Company's
obligation to pay such amounts if not already
27-
paid by the Company, and to reimburse the Company if
such amounts shall have been paid, and the balance,
if any, of such payments shall be promptly paid over
to or retained by the Company; and
(iii) if such payments are received with
respect to the Airframe or the Airframe and Engines
or engines installed thereon and the Airframe is
being replaced by the Company pursuant to Section
4.04(a)(i), such payments shall be paid over to, or
retained by the Company, provided that if the Company
has not completed such replacement, such payments
shall be paid over to, or retained by, the Indenture
Trustee as security, and upon completion of, or in
connection with a closing for, such replacement, be
paid over to or retained by the Company.
(f) Insurance for Own Account.
-------------------------
Nothing in this Section 9 shall prohibit the Company obtaining
insurance with respect to the Aircraft for its own account (including, without
limitation, hull insurance under the same policies maintained pursuant to this
Section 4.05 in amounts in excess of those required to be maintained pursuant to
this Section 4.05) and any proceeds payable thereunder shall be payable as
provided in the insurance policy relating thereto, provided that no such
--------
insurance may be obtained which would limit or otherwise adversely affect the
availability of coverage or payment of any insurance required to be obtained or
maintained pursuant to this Section 4.05, it being understood that all salvage
rights to the Airframe or the Engines shall remain with the Company's insurers
at all times.
(g) Reports, etc.
------------
So long as the Airframe or an Engine is subject to the Lien of
the Indenture, the Company will furnish to the Indenture Trustee evidence of
renewal of the insurance policies required pursuant to this Section 4.05 prior
to the cancellation, lapse or expiration of such insurance policies and, on or
before the renewal dates of the insurance policies carried by the Company
pursuant to this Section 4.05, a report signed by a firm of aircraft insurance
brokers, not affiliated with the Company, appointed by the Company, stating the
opinion of such firm that the insurance then carried and maintained on the
Aircraft complies with the terms hereof and that such renewal insurance will on
and after the effective date thereof so comply with the terms hereof, provided
--------
that all information contained in such report shall be held confidential by the
Indenture Trustee, and shall not be furnished or disclosed by them to anyone
except as may be required by Applicable Law. The Company will instruct such firm
to give prompt written advice to the Indenture Trustee of any default in the
payment of any premium and of any other act or omission on the part of the
Company of which it has knowledge and which would in such firm's opinion
invalidate or render unenforceable, in whole or in any material part, any
insurance on the Aircraft. The Company will also instruct such firm to advise
the Indenture Trustee in writing at least 30 days prior to the
28-
termination or cancellation of, or material adverse change in, such insurance
carried and maintained on the Aircraft pursuant to this Section 4.05.
Section 4.06. Liens.
-----
So long as the Airframe or an Engine is subject to the Lien of
this Indenture, the Company shall not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Airframe or any
Engine or title thereto or any interest therein or in this Indenture except (a)
the Lien of this Indenture and the rights of the parties to the other Operative
Agreements; (b) the rights of others under agreements or arrangements to the
extent expressly permitted in Sections 4.01(b) and 4.03(c); (c) Liens for Taxes
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve a material danger of the sale,
forfeiture or loss of the Airframe or an Engine; (d) Liens of suppliers,
mechanics, workers, repairers, employees, airport operators, air traffic control
authorities or other like Liens arising in the ordinary course of business and
for amounts the payment of which is either not yet delinquent or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings, so long as such proceedings do not
involve a material danger of the sale, forfeiture or loss of the Airframe or an
Engine; (e) Liens arising out of judgments or awards against the Company with
respect to which at the time there shall have been secured a stay of execution;
(f) Indenture Trustee's Liens, (g) salvage and similar rights of insurers under
policies of insurance maintained with respect to the Aircraft and (h) Liens with
respect to which the Company (or any Permitted Lessee) has provided a bond or
other security adequate in the reasonable opinion of the Indenture Trustee.
Liens described in clauses (a) through (h) above are referred to herein as
"Permitted Liens." The Company shall promptly, at its own expense, take such
action as may be necessary to duly discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time that the Lien of this Indenture
is in effect.
Section 4.07. Further Assurances.
------------------
The Company and the Indenture Trustee will each promptly and
duly execute and deliver to the other such further documents and assurances and
take such further action as the other may from time to time reasonably request
in order to more effectively carry out the intent and purpose of this Indenture
and to establish and protect the rights and remedies created or intended to be
created in favor of the Indenture Trustee and the Company hereunder, including,
without limitation, if requested by the Indenture Trustee or the Company, the
execution and delivery of supplements or amendments hereto, in recordable form,
subjecting any replacement or substituted aircraft or engine to this Indenture
and the recording or filing of counterparts hereof, or of financing statements
with respect hereto.
29-
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE INDENTURE ESTATE
--------------------------------
Section 5.01. Regular Distribution. Except as otherwise provided in
--------------------
Section 5.03 hereof, each installment of principal and interest in respect of
the Equipment Notes shall be distributed by the Indenture Trustee no later than
the time herein provided in the following order of priority:
first, (i) so much of such installment or payment as shall be
----- required to pay in full the aggregate amount of principal and
interest (as well as any interest on any overdue principal
and, to the extent permitted by applicable law, on any overdue
interest) then due under all Series A Equipment Notes shall be
distributed to the Holders of Series A Equipment Notes
ratably, without priority of one over the other, in the
proportion that the amount of such payment or payments then
due under each Series A Equipment Note bears to the aggregate
amount of the payments then due under all Series A Equipment
Notes;
(ii) after giving effect to paragraph (i) above, so much of
such installment or payment as shall be required to pay in
full the aggregate amount of the payment or payments of
principal and interest (as well as any interest on any overdue
principal and, to the extent permitted by applicable law, on
any overdue interest) then due under all Series B Equipment
Notes shall be distributed to the Holders of Series B
Equipment Notes ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under each Series B Equipment Note bears to
the aggregate amount of the payments then due under all Series
B Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, so much of
such installment or payment as shall be required to pay in
full the aggregate amount of the payment or payments of
principal and interest (as well as any interest on any overdue
principal and, to the extent permitted by applicable law, on
any overdue interest) then due under all Series C Equipment
Notes shall be distributed to the Holders of Series C
Equipment Notes ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under each Series C Equipment Note bears to
the aggregate amount of the payments then due under all Series
C Equipment Notes.
Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as
-----------------------------------------
otherwise provided in Section 5.03 hereof, any payment received by the Indenture
Trustee as the result or in connection with an Event of Loss with respect to the
Aircraft (and with respect to which the Company has not made the replacement
election in Section 4.04(a)(i)) or as the result of, or in connection with any
event giving rise to, a prepayment pursuant to Section 6.02 hereof, shall be
promptly distributed by the Indenture Trustee in the following order of
priority:
30-
first, (a) to reimburse the Indenture Trustee for any costs or expenses
-----
reasonably incurred in connection with such prepayment and (b) then to
pay any other similar amounts then due to the other Indenture
Indemnitees;
second, (i) to pay the amounts specified in paragraph (i) of clause
------
"second" of Section 5.03 hereof then due and payable in respect of the
Series A Equipment Notes;
(ii) after giving effect to paragraph (i) above, to pay the amounts
specified in paragraph (ii) of clause "second" of Section 5.03 hereof
then due and payable in respect of the Series B Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, to pay the
amounts specified in paragraph (iii) of clause "second" of Section
5.03 hereof then due and payable in respect of the Series C Equipment
Notes;
provided, that payments pursuant to this clause "second" shall be made
--------
without the payment of Make-Whole Premium; and
third, as provided in clause "third" of Section 5.03 hereof;
-----
provided that if a Replacement Airframe shall be substituted for an Airframe
--------
subject to an Event of Loss as provided in Sections 4.04(a)(i) and 9.08 hereof,
any proceeds which result from such Event of Loss and are paid to the Indenture
Trustee shall be held by the Indenture Trustee as part of the Collateral and,
unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds
shall be released to the Company upon the release of such damaged Airframe and
the replacement thereof as herein provided.
(b) Any amounts received directly or indirectly from any governmental
authority, insurer or other party pursuant to any provision of Section 4.04 or
4.05 hereof as the result of loss or damage not constituting an Event of Loss
with respect to the Aircraft, or as a result of such loss or damage constituting
an Event of Loss if and to the extent that such amounts would at the time be
required to be paid to the Company pursuant to Section 4.04 or 4.05 hereof but
for the fact that a Specified Default exists shall be held by the Indenture
Trustee as security for the obligations of the Company hereunder and shall be
invested in accordance with the terms of Section 5.08 hereof and at such time as
the conditions for payment to the Company specified in Section 4.04 or 4.05
hereof, as the case may be, shall be fulfilled and no Specified Default exists,
such amount, and the proceeds of any investment thereof, shall, to the extent
not theretofore applied, be paid to the Company.
Section 5.03. Payment After Indenture Event of Default, etc. Except as
---------------------------------------------
otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all
payments received and all amounts held or realized by the Indenture Trustee
after an Indenture Event of Default shall have occurred and so long
31-
as such an Indenture Event of Default shall be continuing and the Equipment
Notes shall have become due and payable as provided in Section 7.02(b) or (c)
hereof, shall be promptly distributed by the Indenture Trustee in the following
order of priority:
first, so much of such payments or amounts as shall be required to pay
-----
or reimburse (i) the Indenture Trustee for any tax (except to the
extent resulting from a failure of the Indenture Trustee to
withhold pursuant to Section 5.09 hereof), expense, charge or
other loss (including, without limitation, all amounts to be
expended at the expense of, or charged upon the tolls, rents,
revenues, issues, products and profits of, the property included
in the Indenture Estate pursuant to Section 7.03(b) hereof)
incurred by the Indenture Trustee (to the extent not previously
reimbursed) the expenses of any sale, taking or other proceeding,
attorneys' fees and expenses, court costs, and any other
expenditures incurred or expenditures or advances made by the
Indenture Trustee or the Holders in the protection, exercise or
enforcement of any right, power or remedy or any damages
sustained by the Indenture Trustee or the Holders, liquidated or
otherwise, upon such Indenture Event of Default, shall be applied
by the Indenture Trustee as between itself and the Holders in
reimbursement of such expenses and (ii) all similar amounts
payable to the other Indenture Indemnitees hereunder and under
the Participation Agreement; and in the case the aggregate amount
to be so distributed is insufficient to pay as set forth in
clauses (i) and (ii), then ratably, without priority of one over
the other, in proportion to the amounts owed each hereunder;
second, so much of such payment or amounts remaining as shall be required
------
to reimburse the then existing or prior Holders for payments made
pursuant to Section 9.03(d) hereof (to the extent not previously
reimbursed) shall be distributed to such then existing or prior
Holders ratably, without priority of one over the other, in
accordance with the amount of the payment or payments made by
each such then existing or prior Holder pursuant to said Section
9.03(d) hereof;
third, (i) so much of such payments or amounts remaining as shall be
-----
required to pay in full the aggregate unpaid principal amount of
all Series A Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon and all other Secured Obligations
(other than Make-Whole Premium) in respect of the Series A
Equipment Notes to the date of distribution, shall be distributed
to the Holders of Series A Equipment Notes, and in case the
aggregate amount so to be distributed shall be insufficient to
pay in full as aforesaid, then ratably, without priority of one
over the other, in the proportion that the aggregate unpaid
principal amount of all Series A Equipment Notes held by each
Holder plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (other than Make-Whole Premium) to the
date of distribution, bears to the aggregate unpaid principal
amount of all Series A Equipment Notes held by all such Holders
plus the accrued but unpaid interest and
32-
other amounts due thereon (other than Make-Whole Premium) to the
date of distribution;
(ii) after giving effect to paragraph (i) above, so much of
such payments or amounts remaining as shall be required to pay in
full the aggregate unpaid principal amount of all Series B
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other than
Make- Whole Premium) in respect of the Series B Equipment Notes
to the date of distribution, shall be distributed to the Holders
of Series B Equipment Notes, and in case the aggregate amount so
to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other,
in the proportion that the aggregate unpaid principal amount of
all Series B Equipment Notes held by each Holder plus the accrued
but unpaid interest and other amounts due hereunder or thereunder
(other than Make-Whole Premium) to the date of distribution,
bears to the aggregate unpaid Principal Amount of all Series B
Equipment Notes held by all such Holders plus the accrued but
unpaid interest and other amounts due thereon (other than Make-
Whole Premium) to the date of distribution; and
(iii) after giving effect to paragraph (ii) above, so much of
such payments or amounts remaining as shall be required to pay in
full the aggregate unpaid principal amount of all Series C
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other than
Make- Whole Premium) in respect of the Series C Equipment Notes
to the date of distribution, shall be distributed to the Holders
of Series C Equipment Notes, and in case the aggregate amount so
to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other,
in the proportion that the aggregate unpaid principal amount of
all Series C Equipment Notes held by each Holder plus the accrued
but unpaid interest and other amounts due hereunder or thereunder
(other than Make-Whole Premium) to the date of distribution,
bears to the aggregate unpaid principal amount of all Series C
Equipment Notes held by all such Holders plus the accrued but
unpaid interest and other amounts due thereon (other than Make-
Whole Premium) to the date of distribution;
(it being understood that amounts payable under this clause
"second" shall not in any event include Make-Whole Premium); and
fourth, the balance, if any of such payments or amounts remaining thereafter
------
shall be distributed to the Company.
Section 5.04. Certain Payments. Notwithstanding anything to the
----------------
contrary contained in this Article V, the Indenture Trustee will distribute,
promptly upon receipt, any indemnity or other payment received by it from the
Company in respect of (i) the Indenture Trustee in its individual
33-
capacity, (ii) the Subordination Agent, (iii) each Liquidity Provider, (iv) the
Pass-Through Trustee and (v) any other Indenture Indemnitees, in each case
pursuant to Article 7 of the Participation Agreement, directly to the Person
(which may include the Indenture Trustee) entitled thereto. Any payment received
by the Indenture Trustee under clause (b) of the last paragraph of Section 2.04
shall be distributed to the Subordination Agent to be distributed in accordance
with the terms of the Intercreditor Agreement.
Section 5.05. Other Payments. Any payments received by the Indenture
--------------
Trustee for which no provision as to the application thereof is made elsewhere
in this Indenture shall be distributed by the Indenture Trustee (a) to the
extent received or realized at any time prior to the payment in full of all
Secured Obligations to the Holders, in the order of priority specified in
Section 5.01 hereof, and (b) to the extent received or realized at any time
after payment in full of all Secured Obligations to the Holders, in the
following order of priority:
first, in the manner provided in clause "first" of Section 5.03 hereof,
----- -----
and
second, in the manner provided in clause "third" of Section 5.03 hereof.
------ -----
Section 5.06. [Reserved]
----------
Section 5.07. Application of Payments. Each payment of principal of
-----------------------
and interest or other amounts due on each Equipment Note shall, except as
otherwise provided herein, be applied,
first, to the payment of interest on such Equipment Note due and payable
-----
to the date of such payment, as provided in such Equipment Note,
as well as any interest on overdue principal and Make-Whole
Premium, if any, and, to the extent permitted by law, interest
and other amounts due thereunder,
second, to the payment of any other amount (other than the principal of
------
such Equipment Note), including any Make-Whole Premium, due
hereunder or under such Equipment Note to such Holder; and
third, to the payment of the principal of such Equipment Note if then
-----
due hereunder or under such Equipment Note.
Section 5.08. Investment of Amounts Held by Indenture Trustee.
-----------------------------------------------
Amounts held by the Indenture Trustee pursuant to Section 5.02(b) hereof or
otherwise to be invested pursuant to this Section 5.08 shall be invested by the
Indenture Trustee from time to time in securities selected by (i) so long as no
Indenture Event of Default shall have occurred and be continuing, the Company
(and in the absence of written direction by the Company, the Indenture Trustee
shall invest such monies in direct obligations of the United States of America)
or (ii) so long as an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee and in each case shall be of
34-
the type meeting the criteria for Permitted Investments. Unless otherwise
expressly provided in this Indenture, any income realized as a result of any
such investment, net of the Indenture Trustee's reasonable fees and expenses in
making such investment, shall be held and applied by the Indenture Trustee in
the same manner as the principal amount of such investment is to be applied and
any losses, net of earnings and such reasonable fees and expenses, shall be
charged against the principal amount invested. The Company shall be responsible
for and will promptly pay to the Indenture Trustee, on demand, the amount of any
loss realized as the result of any such investment (together with any fees,
commissions and other costs and expenses, if any, incurred by the Indenture
Trustee in connection with such investment), such amount to be disposed of in
accordance with the terms hereof. The Indenture Trustee shall not be liable for
any loss resulting from any investment made by it or any investment sold by it
under this Indenture in accordance with instructions from the Company other than
by reason of its willful misconduct or gross negligence, and any such investment
may be sold (without regard to its maturity) by the Indenture Trustee without
instructions whenever the Indenture Trustee reasonably believes such sale is
necessary to make a distribution required by this Indenture.
Unless otherwise confirmed in writing, an account statement delivered by
the Indenture Trustee to the Company shall be deemed written confirmation by the
Company that the investment transactions identified therein accurately reflect
the investment directions given to the Indenture Trustee by the Company unless
the Company notifies the Indenture Trustee in writing to the contrary within 30
days of the date of receipt of such statement.
Section 5.09. Withholding Taxes The Indenture Trustee, as agent for the
-----------------
Company, shall exclude and withhold from each payment of principal, premium, if
any, and interest and other amounts due hereunder or under the Equipment Notes,
and any and all withholding taxes applicable thereto as required by law. The
Indenture Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable in respect of the Equipment
Notes, it will withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the Holders, it will file any
necessary withholding tax returns or statements when due, and that, as promptly
as possible after the payment thereof, it will deliver to each Holder
appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such Holder may reasonably request from time
to time.
ARTICLE VI
PREPAYMENT OF EQUIPMENT NOTES
Section 6.01. No Prepayment Except as Specified. Except as provided in
---------------------------------
Sections 6.02, the Equipment Notes may not be prepaid.
35-
Section 6.02. Prepayment of Equipment Notes. (a) The Outstanding
-----------------------------
Equipment Notes shall be prepaid in full and not in part:
(i) If an Event of Loss occurs with respect to the
Airframe or with respect to the Airframe and the Engines or engines
then installed on the Airframe (unless pursuant to Section 4.04(a)(i)
replacement equipment is substituted for the Airframe and Engines, if
any, subject to such Event of Loss).
(ii) At the option of the Company, upon not less than
25 days' prior written notice.
(b) In the case of a prepayment of the Equipment Notes pursuant to
Section 6.02(a)(i) above, the Equipment Notes shall be prepaid in full on the
date as specified in Section 4.04(a)(ii). In the case of a prepayment of the
Equipment Notes pursuant to Section 6.02(a)(ii) above, the Equipment Notes shall
be prepaid on the date designated in the notice referred to therein. The day on
which the Equipment Notes are to be prepaid pursuant to this Section 6.01(b) is
herein referred to as the "Prepayment Date".
---------------
On or prior to the Prepayment Date, immediately available funds shall
be deposited with the Indenture Trustee in an amount in respect of the Equipment
Notes equal to:
(1) if such prepayment is made pursuant to Section
6.02(a)(i) the sum of (A) the aggregate principal amount of such
Equipment Notes then Outstanding, (B) accrued interest on the
Equipment Notes to the Prepayment Date and (C) all other aggregate
sums due the Indenture Trustee hereunder or under the Participation
Agreement, but excluding any Make-Whole Premium or other premium or
penalty, or
(2) if such prepayment is made pursuant to Section
6.02(a)(ii), the sum of the amounts specified in clauses (A), (B) and
(C) of the preceding clause (1) plus any Make-Whole Premium payable in
respect of all Equipment Notes
(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").
----------------
Section 6.03. Notice of Prepayment to Holders. In order to effect any
-------------------------------
prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give
prompt notice by first class mail of prepayment to each Holder. Any notice of
prepayment given by the Company may be revoked by the Company at any time on or
before the Prepayment Date by prompt notice to the Holders.
All notices of prepayment shall state: (1) the Prepayment Date, (2)
the applicable basis for determining the Prepayment Price, (3) that on the
Prepayment Date, subject to the provisions hereof, the Prepayment Price will
become due and payable and interest on the Equipment Notes shall cease
36-
to accrue on and after such Prepayment Date, and (4) the place or places where
such Equipment Notes are to be surrendered for payment.
Section 6.04. Deposit of Prepayment Price. On the Prepayment Date,
---------------------------
the Company shall, to the extent an amount equal to the Prepayment Price, as the
case may be, shall not then be held in cash by the Indenture Trustee in
immediately available funds and deposited for the purpose, pay to the Indenture
Trustee an amount equal to the difference between (a) the amount then so held
and (b) the Prepayment Price. If there shall so be on deposit and/or deposited
the applicable Prepayment Price on or prior to a Prepayment Date, interest shall
cease to accrue in respect of all the Outstanding Equipment Notes on and after
such Prepayment Date.
Section 6.05. Equipment Notes Payable on Prepayment Date. On the
------------------------------------------
Prepayment Date, the Outstanding Equipment Notes shall (except (A) if the
Company has requested the Indenture Trustee to revoke such notice of prepayment
in accordance with Section 6.03 hereof) become due and payable and from and
after such Prepayment Date (unless there shall be a default in the payment of
the Prepayment Price) such Equipment Notes shall cease to bear interest. Upon
surrender by any Holder of its Equipment Note for prepayment in accordance with
said notice, such Holder shall be paid the principal amount of its Equipment
Note then outstanding, accrued interest thereon to the Prepayment Date, all
other sums due to such Holder hereunder, plus, if a Make-Whole Premium is
payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of
such Equipment Note.
If any Equipment Note called for prepayment shall not be so paid upon
timely surrender thereof for prepayment, the principal shall, until paid,
continue to bear interest from the Prepayment Date at the interest rate
applicable to such Equipment Note.
ARTICLE VII
INDENTURE EVENTS OF DEFAULT; REMEDIES
OF INDENTURE TRUSTEE AND HOLDERS
Section 7.01. Indenture Event of Default. "Indenture Event of
--------------------------
Default" means any of the following events (whatever the reason for such
Indenture Event of Default and whether it shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the failure of the Company (i) to pay principal,
interest or Make-Whole Premium, if any, on any Equipment Note when
due, and such failure shall have continued unremedied for ten Business
Days after the date when due or (ii) to pay any other amounts
hereunder or under the Equipment Notes when due and such failure shall
have
37-
continued unremedied for a period of 30 days after the Company shall
receive written demand therefor from the Indenture Trustee or by the
Holders of not less than 25% in aggregate principal amount of
Outstanding Equipment Notes; or
(ii) (A) any representation or warranty made the
Company, in any Operative Agreement or in any certificate the Company,
furnished to the Indenture Trustee or any Holder in connection
herewith or therewith or pursuant hereto or thereto shall prove to
have been incorrect in any material respect when made and was and
remains in any respect material to the Holders and such
misrepresentation shall not have been corrected within 30 days
following notice thereof identified as a "Notice of Indenture Event of
Default" being given to the Company by the Indenture Trustee or by a
Majority in Interest of Holders, unless such misrepresentation is
capable of being corrected, and Company shall, after the delivery of
such notice, be diligently proceeding to correct such
misrepresentation and shall in fact correct such misrepresentation
within 180 days after delivery of such notice; or
(iii) any covenant made by the Company shall be
breached in any material respect and such breach shall remain
unremedied for a period of 30 days after there has been given to the
Company by a Majority in Interest Holders a written notice identified
as a "Notice of Indenture Event of Default" specifying such breach and
requiring it to be remedied unless such failure is curable and the
Company shall, after the delivery of such notice, be diligently
proceeding to correct such failure and shall in fact correct such
failure 180 days after delivery of such notice; or
(iv) the Company shall file any petition or answer
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
present or future bankruptcy, insolvency or similar statute, law or
regulation;
(v) an order for relief shall be entered in respect
of the Company by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
in effect; or the Company shall file any answer admitting or not
contesting the material allegations of a petition filed against the
Company in any proceeding referred to in clause (vi) below or seek or
consent or acquiesce in the appointment of any trustee, custodian,
receiver or liquidator of the Company or of all or any substantial
part of its properties; or
(vi) without the consent or acquiescence of the
Company an order shall be entered constituting an order for relief or
approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief under
any present or future bankruptcy, insolvency or similar statute, law
or regulation, or if any such petition shall be filed against the
Company and such petition shall not be dismissed within 60 days, or
if, without the consent or acquiescence of the Company as the case may
be, an order shall be entered
38-
appointing a trustee, custodian, receiver or liquidator of the Company
or of all or any substantial part of the properties of the Company and
such order shall not be dismissed within 60 days;
Section 7.02. Remedies. (a) If an Indenture Event of Default shall
--------
have occurred and be continuing and so long as the same shall be continuing
unremedied, then and in every such case, the Indenture Trustee may, and when
required by the provisions of Article IX or Section 7.02(c) hereof shall, (i)
exercise any or all of the rights and powers and pursue any and all of the
remedies pursuant to this Article VII. The Indenture Trustee may take possession
of all or any part of the properties covered or intended to be covered by the
Lien and security interest created hereby or pursuant hereto and may exclude the
Company, and any transferee of the Company (subject to Section 15.05 hereof),
and all Persons claiming under any of them wholly or partly therefrom. In
addition, the Indenture Trustee may (subject to the provisions of the next
succeeding paragraph) exercise any other right or remedy in lieu of or in
addition to the foregoing that may be available to it under applicable law, or
proceed by appropriate court action to enforce the terms hereof. Without
limiting any of the foregoing, it is understood and agreed that the Indenture
Trustee may exercise any right of sale of the Aircraft available to it, even
though it shall not have taken possession of the Aircraft and shall not have
possession thereof at the time of such sale.
(b) If an Indenture Event of Default under clause (iv), (v) or (vi)
of Section 7.01 hereof shall occur and be continuing, the unpaid principal of
all Outstanding Equipment Notes, together with interest accrued but unpaid
thereon and all other amounts due thereunder, but without Make- Whole Premium,
shall immediately become due and payable, without presentment, demand, protest
or notice, all of which are hereby waived.
(c) If any Indenture Event of Default not described in the preceding
paragraph (b) shall have occurred and be continuing, then and in every such
case, the Indenture Trustee may on its own accord or at the direction of a
Majority in Interest of Holders, at any time, by written notice to the Company,
declare the principal of all the Equipment Notes to be due and payable,
whereupon the unpaid principal amount of all Outstanding Equipment Notes,
together with accrued interest thereon and all other amounts due thereunder, but
without Make-Whole Premium, shall immediately become due and payable without
presentment, demand, protest or other notice, all of which are hereby waived. At
any time after such declaration and prior to the sale or disposition of the
Indenture Estate, however, a Majority in Interest of Holders by notice to the
Company may rescind such declaration, whether made by the Indenture Trustee on
its own accord or as directed, if (x) there has been paid or deposited with the
Indenture Trustee a sum sufficient to pay all overdue installments of interest
on all Equipment Notes (together, to the extent permitted by law, with interest
on such overdue installments of interest), the principal on any Equipment Notes
that would have become due otherwise than by such declaration of acceleration,
all sums paid or advanced by the Indenture Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, or (y) all Indenture Events of Default (other than the
nonpayment of principal that has become due solely because of such acceleration)
have been either
39-
cured or waived as provided in Section 7.11 hereof. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
(d) Each Holder shall be entitled at any sale to credit against any
purchase price bid at such sale by such Holder all or any part of the unpaid
obligations owing to such Holder secured by the Lien of this Indenture (but only
to the extent that an amount equal to such purchase price would have been paid
to such Holder pursuant to Article V hereof if such purchase price were paid in
cash and the foregoing provisions of this subsection (d) were not given effect).
(e) In the event of any sale of the Collateral, or any part thereof,
pursuant to any judgment or decree of any court or otherwise in connection with
the enforcement of any of the term of this Indenture, the unpaid principal
amount of all Equipment Notes then outstanding, together with accrued interest
thereon (without Make-Whole Premium), and other amounts due thereunder, shall
immediately become due and payable without presentment, demand, protest or
notice, all of which are hereby waived.
(f) Notwithstanding anything contained herein, so long as the Pass
Through Trustee under any Pass Through Trust Agreement (or its designee) is a
Holder, the Indenture Trustee will not be authorized or empowered to acquire
title to the Indenture Estate or take any action with respect to the Indenture
Estate so acquired by it if such acquisition or action would cause any Trust to
fail to qualify as a "grantor trust" for federal income tax purposes.
Section 7.03. Return of Aircraft, etc. (a) Subject to Section 7.02
-----------------------
hereof, if an Indenture Event of Default shall have occurred and be continuing,
at the request of the Indenture Trustee, the Company shall promptly execute and
deliver to the Indenture Trustee such documents as the Indenture Trustee may
reasonably deem necessary or advisable to enable the Indenture Trustee or an
agent or representative designated by the Indenture Trustee, at such time or
times and place or places as the Indenture Trustee may specify, to obtain
possession of all or any part of the Collateral to which the Indenture Trustee
shall at the time be entitled under this Indenture. Subject to the foregoing, if
the Company shall for any reason fail to execute and deliver such documents
after such request by the Indenture Trustee, the Indenture Trustee may pursue
all or part of such wherever it may be found and enter any of the premises of
the Company wherever such Collateral may be or be supposed to be and search for
such Collateral and take possession of and remove such Collateral. All expenses
of pursuing, searching for and taking such Collateral shall, until paid, be
secured by the Lien of this Indenture.
(b) Upon every such taking of possession, the Indenture Trustee may,
from time to time, at the expense of the Company, make all such expenditures for
maintenance, use, operation, storage, insurance, leasing, control, management,
disposition, modification, alterations and repairs to and of the Collateral, as
the Indenture Trustee may reasonably deem proper. In each case subject to
Section 7.02 hereof, the Indenture Trustee shall have the right to maintain,
use, operate, store, insure, lease, dispose of, modify, alter, control or manage
the Collateral and to carry on the business and to
40-
exercise all rights and powers of the Company relating to the Collateral as the
Indenture Trustee may reasonably deem best, including the right to enter into
any and all such agreements with respect to the maintenance, use, operation
insurance, storage, leasing, control, management, modification, alteration or
disposition of all or any part of the Indenture Estate as the Indenture Trustee
may determine. Further, the Indenture Trustee shall be entitled to collect and
receive directly all tolls, rents, revenues, issues, income, products and
profits of the Collateral and every part thereof, without prejudice, however, to
the right of the Indenture Trustee under any provision of this Indenture to
collect and receive all cash held by, or required to be deposited with, the
Indenture Trustee under this Indenture. Such tolls, rents, revenues, issues,
income, products and profits shall be applied to pay the expenses of the use,
operation, storage, insurance, leasing, control, management, modification,
alteration or disposition of the Collateral and of all maintenance and repairs,
and of conducting the business thereof, and to make all payments which the
Indenture Trustee may be required or may reasonably elect to make for any taxes,
assessments, insurance or other proper charges upon the Collateral (including
the employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Company), and all other
payments which the Indenture Trustee may be required or authorized to make under
any provision of this Indenture, as well as just and reasonable compensation for
the services of the Indenture Trustee and of all persons properly engaged and
employed for such purposes by the Indenture Trustee; provided, that any excess
--------
amounts shall be promptly distributed in accordance with Section 5.03 hereof.
(c) Subject to Section 7.02 hereof, if an Indenture Event of Default
shall have occurred and be continuing and the Indenture Trustee shall be
entitled to exercise remedies hereunder, the Indenture Trustee, either with or
without taking possession, and either before or after taking possession, and
without instituting any legal proceedings whatsoever, may sell, assign, transfer
and deliver the whole or, from time to time, to the extent permitted by law, any
part of the Collateral, or any part thereof, or interest therein, at any private
sale or public auction to the highest bidder, with or without demand,
advertisement or notice, except that in respect of any private sale 30 days'
prior written notice by registered mail to the Company will be provided, for
cash or, with the consent of the Company, credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Indenture Trustee in exercising reasonable commercial discretion may
determine; provided, that any such action shall be at the time lawful and that
--------
all mandatory legal requirements shall be complied with. Any notice required
pursuant to the terms hereof in the case of a public sale, shall state the time
and place fixed for such sale. Any such public sale shall be held at such time
or times within ordinary business hours as the Indenture Trustee shall fix in
the notice of such sale. At any such sale, the Collateral may be sold in one lot
as an entirety or in separate lots. The Indenture Trustee shall not be obligated
to make any sale pursuant to such notice. The Indenture Trustee may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
such sale, and any such sale may be made at any time or place to which the same
may be so adjourned without further notice or publication. The Indenture Trustee
may exercise such right of sale without possession or production of the
Equipment Notes or proof of ownership thereof, and as representative of the
Holders may exercise such right without notice to the Holders or without
including the Holders as
41-
parties to any suit or proceedings relating to the foreclosure of any part of
the Collateral. The Company shall execute any and all such bills of sale,
assignments and other documents, and perform and do all other acts and things
reasonably requested by the Indenture Trustee in order to permit consummation of
any sale of the Collateral in accordance with this Section 7.03(c) and to
effectuate the transfer or conveyance referred to in the first sentence of this
Section 7.03(c). Notwithstanding any other provision of this Indenture, the
Indenture Trustee shall not sell the Collateral or any part thereof unless the
Equipment Notes shall have been accelerated.
(d) To the extent permitted by Applicable Law, and subject to Section
7.02 hereof, the Indenture Trustee or any Holder may be a purchaser of the or
any part thereof or any interest therein at any sale thereof, whether pursuant
to foreclosure or power of sale or otherwise. The Indenture Trustee may apply
against the purchase price therefor the amount then due hereunder or under any
of the Equipment Notes secured hereby and any Holder may apply against the
purchase price therefor the amount then due to it hereunder or under the
Equipment Notes held by such Holder to the extent of such portion of the
purchase price as it would have received had it been entitled to share any
distribution thereof. The Indenture Trustee or any Holder or nominee thereof
shall, upon any such purchase, acquire good title to the property so purchased,
free of the Lien of this Indenture and, to the extent permitted by applicable
law, free of all rights of redemption in the Company in respect of the property
so purchased.
(e) The Indenture Trustee shall, as a matter of right, be entitled to
the appointment of a receiver (who may be the Indenture Trustee or any successor
or nominee) for all or any part of the Collateral, whether such receivership be
incidental to a proposed sale of the Collateral or the taking of possession
thereof or otherwise, and the Company hereby consents to the appointment of such
receiver and will not oppose any such appointment. Any receiver appointed for
all or any part of the Collateral shall be entitled to exercise all of the
rights and powers of the Indenture Trustee with respect to the Collateral.
(f) Subject to the provisions of this Indenture, to the extent
permitted by Applicable Law, upon the occurrence and during the continuation of
an Indenture Event of Default the Company irrevocably appoints the Indenture
Trustee the true and lawful attorney-in-fact of the Company (which appointment
is coupled with an interest) in its name and stead and on its behalf, for the
purpose of effectuating any sale, assignment, transfer or delivery for the
enforcement of the Lien of this Indenture, whether pursuant to foreclosure or
power of sale, assignments and other instruments as may be necessary or
appropriate, with full power substitution, the Company hereby ratifying and
confirming all that such attorney or any substitute shall do by virtue hereof in
accordance with applicable law. Nevertheless, if so requested by the Indenture
Trustee or any purchaser, the Company shall ratify and confirm any such sale,
assignment, transfer or delivery, by executing and delivering to the Indenture
Trustee or such purchaser all bills of sale, assignments, releases and other
proper instruments to effect such ratification and confirmation as may be
designated in any such request.
42-
Section 7.04. Indenture Trustee May Prove Debt. If the Company shall
--------------------------------
fail to pay any amount payable hereunder or under the Equipment Notes, the
Indenture Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Company and collect in the manner provided
by law out of the property of the Company wherever situated, the moneys adjudged
or decreed to be payable; provided, that any sale of any portion of the
--------
Collateral shall be done in accordance with Sections 7.02 and 7.03(c) hereof.
In case there shall be pending proceedings relative to the Company
under the Bankruptcy Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Company or its property, or
in case of any other comparable judicial proceedings relative to the Company, or
to the creditors or property of the Company, the Indenture Trustee, irrespective
of whether the principal of the Equipment Notes shall then be due and payable as
therein or herein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in
such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole
amount of principal, interest and other amounts owing and unpaid in
respect of the Equipment Notes or hereunder, and to file such other
papers or documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of the Indenture Trustee and each predecessor
Indenture Trustee, except as a result of negligence or bad faith) and
of the Holders allowed in any judicial proceedings relative to the
Company or to the creditors or property of the Company,
(b) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders in any election of a
trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or person
performing similar functions in comparable proceedings, and
(c) to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute
all amounts received with respect to the claims of the Holders and of
the Indenture Trustee on their behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Holders to make payments to the Indenture
Trustee, and, in the event that the Indenture Trustee shall consent to the
making of payments directly to the Holders, to pay to the Holders such
43-
amounts as shall be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other reasonable expenses and liabilities
incurred, by the Indenture Trustee and each predecessor Indenture Trustee except
as a result of negligence or willful misconduct.
Nothing contained herein shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Equipment Notes or the rights of any Holder thereof, or to
authorize the Indenture Trustee to vote in respect of the claim of any Holder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and rights to assert claims under this Indenture,
or under any of the Equipment Notes, may be enforced by the Indenture Trustee
without the possession of such Equipment Notes. Any trial or other proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
reasonable expenses, disbursements and compensation of the Indenture Trustee,
each predecessor Indenture Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Holders, as provided herein.
In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party) the Indenture Trustee shall be
held to represent all the Holders of the Equipment Notes, and it shall not be
necessary to make any Holders parties to such proceedings.
Section 7.05. Remedies Cumulative. Each and every right, power and
-------------------
remedy given to the Indenture Trustee in this Indenture shall be cumulative and
shall be in addition to every other right, power and remedy specifically given
herein or now or hereafter existing at law, in equity or by statute, and each
and every right, power and remedy whether specifically given herein or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Indenture Trustee or the Holders, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or later any
other right, power or remedy. No delay or omission by the Indenture Trustee or
of any Holder in the exercise of any right, remedy or power or in the pursuance
of any remedy shall impair any such right, power or remedy or be construed to be
a waiver of any default on the part of the Company or to be an acquiescence in
any such default.
Section 7.06. Suits for Enforcement. If an Indenture Event of Default
---------------------
has occurred, has not been waived and is continuing, the Indenture Trustee may
in its discretion and subject to its rights of appropriate indemnification under
Sections 7.09 and 9.03 and Article XI hereof proceed to protect and enforce its
rights and rights of the Holders by such appropriate judicial proceedings as the
Indenture Trustee shall deem most effectual to protect and enforce any of such
rights, either at law
44-
or in equity or in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the
exercise of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Indenture Trustee or the Holders by this Indenture
or by law; provided that, any sale of any portion of the Indenture Estate shall
-------- ----
be done in accordance with Sections 7.02 and 7.03(c) hereof.
Section 7.07. Discontinuance of Proceedings. In case the Indenture
-----------------------------
Trustee or any Holder shall have instituted any proceeding to enforce any right,
power or remedy under this Indenture by foreclosure, entry or otherwise, and
such proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Indenture Trustee or such Holder,
then the Company, the Indenture Trustee, and the Holders shall, subject to any
binding determination in such proceeding, be restored to their former positions
and rights under this Indenture with respect to the Indenture Estate, and all
rights, remedies and powers of the Indenture Trustee and the Holders shall
continue as if no such proceeding had been instituted.
Section 7.08. Unconditional Right of Holders to Payments on Equipment
-------------------------------------------------------
Notes. Notwithstanding any other provision in this Indenture and any provision
-----
of any Equipment Note, the right of any Holder to receive payment of the
principal of and interest and Make-Whole Premium, if any, on such Equipment Note
on or after the respective due dates and in the manner expressed in such
Equipment Note, or, subject to Section 7.08 hereof, to institute suit for the
enforcement of any such payment on or after such respective dates as provided
herein, shall not be impaired or affected without the consent of such Holder.
Section 7.09. Control by Holders. The Majority in Interest of Holders
------------------
shall have the right to direct the Indenture Trustee as to the time, method, and
place of conducting any proceeding for any remedy available to the Indenture
Trustee under this Indenture, or exercising any trust or power conferred on the
Indenture Trustee by this Indenture; provided that such direction shall not be
--------
otherwise than in accordance with law and the provisions of this Indenture and
the Indenture Trustee shall have received, to the extent provided in Sections
7.06 and 9.03 and Article XI hereof, such reasonable indemnification as it may
require against the costs, expenses and liabilities to be incurred by the
Indenture Trustee; and provided further that (subject to the provisions of
--------
Section 9.02 hereof) the Indenture Trustee shall have the right to decline to
follow any such direction if the Indenture Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Indenture Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or Responsible Officers
of the Indenture Trustee shall determine that the action or proceedings so
directed would involve the Indenture Trustee in personal liability or if the
Indenture Trustee in good faith shall so determine that the actions or
forbearance specified in or pursuant to such direction shall be unduly
prejudicial to the interests of Holders not joining in the giving of said
direction, it being understood that (subject to Section 9.02 hereof) the
Indenture Trustee shall have no duty to ascertain whether or not such actions or
forbearance are unduly prejudicial to such Holders.
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Nothing in this Indenture shall impair the right of the Indenture Trustee
in its discretion to take any action deemed proper by the Indenture Trustee and
which is not inconsistent with the direction by the Majority in Interest of
Holders.
Section 7.10. Waiver of Past Indenture Default. Upon written instructions
--------------------------------
from the Majority in Interest of Holders, the Indenture Trustee shall waive any
past Indenture Default and its consequences and upon any such waiver such
Indenture Default shall cease to exist and any Indenture Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other Indenture
Default or impair any right consequent thereon; provided, however, that in the
-------- -------
absence of written instructions from all Holders and each Liquidity Provider,
the Indenture Trustee shall not waive any Indenture Default (a) in the payment
of the principal of or Make-Whole Premium, if any, or interest on, or other
amounts due under, any Equipment Note then Outstanding, or (b) in respect of a
covenant or provision of this Indenture which, under Article XIII hereof, cannot
be modified or amended without the consent of each Holder.
Section 7.11. Notice of Indenture Default. The Indenture Trustee shall
---------------------------
transmit to the Company, the Holders and the Liquidity Provider notice of any
Indenture Event of Default actually known to a Responsible Officer of the
Indenture Trustee or any Indenture Event of Default or Indenture Default arising
out of Section 7.01(i), such notice to be transmitted by mail to the Holders,
the Liquidity Provider and the Company promptly after the occurrence thereof,
unless any such Indenture Default or Indenture Event of Default shall have been
cured before the giving of such notice; except in the case of default in the
payment of the principal of or interest on or any other amount due under any of
the Equipment Notes, the Indenture Trustee shall be protected in withholding
such notice to the Holders if and so long as the board of directors, the
executive committee, or a trust committee of directors or trustees and/or
Responsible Officers of the Indenture Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
ARTICLE VIII
[RESERVED]
ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
Section 9.01. Acceptance of Trusts. The Indenture Trustee in its
--------------------
individual capacity hereby accepts the trusts imposed upon it by this Indenture,
and covenants and agrees to perform the same as expressed herein and agrees to
receive and disburse all moneys constituting part of the Collateral in
accordance with the terms hereof.
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Section 9.02. Duties Before, and During, Existence of Indenture Event of
----------------------------------------------------------
Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture
-------
Event of Default and after the curing or waiving of all Indenture Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. So long as an Indenture
Event of Default has occurred and has not been cured or waived, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own gross negligence (or any simple
negligence in the handling of funds) or its own willful misconduct, except that:
(i) prior to the occurrence of an Indenture Event of Default and after
the curing or waiving of all Indenture Events of Default which may have
occurred:
(x) the duties and obligations of the Indenture Trustee shall be
determined solely by the express provisions of this Indenture, and the
Indenture Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read in to this Indenture
against the Indenture Trustee; and
(y) in the absence of bad faith on the part of the Indenture
Trustee, the Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
any statements, certificates or opinions furnished to the Indenture Trustee
and conforming to the requirements of this Indenture; but in the case of
any such statements, certificate or opinions which by any provision hereof
are specifically required to be furnished to the Indenture Trustee, the
Indenture Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture;
(ii) the Indenture Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of the
Indenture Trustee, unless it shall be proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any action
taken or not taken by it in good faith in accordance with the direction of the
Holders of not less than a majority in aggregate principal amount of Outstanding
Equipment Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee, or exercising any
trust or power conferred upon the Indenture Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Indenture Trustee shall have
47-
determined in good faith that the repayment of such funds or adequate indemnity
against such liability is not reasonably assured to it.
The Indenture Trustee agrees that it will execute and the Company agrees
that it will, at its own expense, file or cause to be filed such continuation
statements with respect to financing statements relating to the security
interest created hereunder in the Collateral as may be specified from time to
time in written instructions of the Holders of not less than 25% in aggregate
principal amount of Equipment Notes (which instructions may, by their terms, be
operative only at a future date and which shall be accompanied by the execution
form of such continuation statement so to be filed); provided that,
notwithstanding the foregoing, the Indenture Trustee may execute and file or
cause to be filed any financing statement which it from time to time deems
appropriate.
(b) [Reserved]
(c) The Indenture Trustee agrees that it will, in its individual capacity
and at its own cost and expense (but without any right of indemnity in respect
of any such cost or expense under Article XI hereof or under any other Operative
Agreement) promptly take such action as may be necessary duly to discharge all
Indenture Trustee's Liens on any part of the Indenture Estate.
(d) [Reserved]
(e) The Indenture Trustee will furnish to each Holder promptly upon
receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments furnished to
the Indenture Trustee, to the extent that the same shall not have been otherwise
furnished to such Holder pursuant to this Indenture or to the extent the
Indenture Trustee does not reasonably believe that the same shall have been
furnished by the Company directly to such Holder.
Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section
---------------------------------------
9.02 hereof:
(a) the Indenture Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officer's Certificate (unless other
evidence in respect thereof be herein specifically prescribed) upon which the
Indenture Trustee may rely to prove or establish a matter set forth therein;
(c) the Indenture Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or
48-
omitted to be taken by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(d) the Indenture Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred therein or thereby;
(e) the Indenture Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Indenture Event of Default hereunder and
after the curing or waiving of all Indenture Events of Default, the Indenture
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, or other paper or document unless requested in writing to do
so by the Majority in Interest of Holders; provided that, if the payment within
a reasonable time to the Indenture Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture, the
Indenture Trustee may require reasonable indemnity against such costs, expenses
or liabilities as a condition to proceeding; the reasonable expenses of every
such examination shall be paid by the Company or, if paid by the Indenture
Trustee or any predecessor trustee, shall be repaid by the Company upon demand;
and
(g) the Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys not regularly in its employ and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
Section 9.04. Indenture Trustee Not Responsible for Recitals, Equipment
---------------------------------------------------------
Notes, or Proceeds. The Indenture Trustee assumes no responsibility for the
------------------
correctness of the recitals contained herein and in the Equipment Notes, except
the Indenture Trustee's certificates of authentication. The Indenture Trustee
makes no representation as to the validity or sufficiency of this Indenture or
of the Equipment Notes. The Indenture Trustee shall not be accountable for the
use or application by the Company of any of the Equipment Notes or of the
proceeds thereof.
Section 9.05. Indenture Trustee and Agents May Hold Equipment Notes;
-----------------------------------------------------
Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in
----------------
its individual or any other capacity may become the owner or pledgee of
Equipment Notes with the same rights it would have if it were not the Indenture
Trustee or such agent and may otherwise deal with the Company and receive,
49-
collect, hold and retain collections from the Company with the same rights it
would have if it were not the Indenture Trustee or such agent.
Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08
--------------------------------
hereof and 14.04 hereof, all moneys received by the Indenture Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by mandatory provisions of law. Neither the Company nor,
subject to Section 5.08 hereof, the Indenture Trustee nor any agent thereof
shall be under any liability for interest on any moneys received by it
hereunder.
Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate,
-----------------------------------------------------------
etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the administration of
---
the trusts of this Indenture the Indenture Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be specifically prescribed herein) may, in the absence of bad faith on
the part of the Indenture Trustee, be deemed to be conclusively proved and
established by an Officer's Certificate delivered to the Indenture Trustee, and
such certificate, in the absence of bad faith on the part of the Indenture
Trustee, shall be full warrant to the Indenture Trustee for any action taken,
suffered or omitted by it under the provisions of this Indenture upon the faith
thereof.
Section 9.08. Replacement Airframes and Replacement Engines. At any time
---------------------------------------------
and from time to time any Airframe or Engine may, or is required to, be replaced
under Section 4.04(a) or 4.03(e) hereof by a Replacement Airframe or Replacement
Engine, as the case may be, shall be replaced in accordance with the provisions
of this Section 9.08 and the provisions of such preceding Sections hereof, the
Company shall, from time to time, direct the Indenture Trustee to execute and
deliver to or as directed in writing by the Company an appropriate instrument
releasing such Airframe and/or Engine as appropriate from the Lien of this
Indenture and the Indenture Trustee shall execute and deliver such instrument as
aforesaid without recourse or warranty, but only upon receipt by or deposit with
the Indenture Trustee of the following:
(1) A written request from the Company requesting such release and
specifically describing the Airframe and/or Engine(s) to be so released.
(2) A certificate signed by a duly authorized officer of the Company
stating the following:
A. With respect to the replacement of any Airframe:
(i) a description of the Airframe subject to the Event of Loss
including the manufacturer, model, FAA registration number (or other
applicable registration information) and manufacturer's serial number;
50-
(ii) a description of the Replacement Airframe, including the
manufacturer, model, FAA registration number (or other applicable
registration information) and manufacturer's serial number;
(iii) that on the date of the supplement to this Indenture
relating to the Replacement Airframe the Company will be the legal owner of
and have good title to such Replacement Airframe free and clear of all
Liens except Permitted Liens that such Replacement Airframe will on such
date be in at least as good operating condition and repair as required by
the terms of this Indenture, and that such Replacement Airframe has been
or, substantially concurrently with such replacement, will be duly
registered in the name of the Company under the Transportation Code or
under the law then applicable to the registration of the Airframe subject
to the Event of Loss and that an airworthiness certificate has been duly
issued under the Transportation Code (or such other applicable law) with
respect to such Replacement Airframe and that such registration and
certificate is, or will be, in full force and effect, and that the Company
will have the full right and authority to use such Replacement Airframe;
(iv) that the insurance required by Section 4.05 hereof is in
full force and effect with respect to such Replacement Airframe;
(v) that the Replacement Airframe is of the same or an
improved make or model as the Airframe requested to be released from this
Indenture;
(vi) that the value of the Replacement Airframe as of the date
of such certificate is not less than the value of the Airframe requested to
be released (assuming such Airframe was in the condition and repair
required to be maintained under this Indenture);
(vii) that no Indenture Event of Default exists or would result
from the making and granting of the request for release and the addition of
a Replacement Airframe;
(viii) that the release of the Airframe subject to the Event of
Loss will not impair the security of this Indenture in contravention of any
of the provisions of this Indenture; and
(ix) that upon such replacement, the Lien of this Indenture
will apply to the Replacement Airframe and such Lien will be a first
priority security interest in favor of the Indenture Trustee.
B. With respect to the replacement of any Engine:
(i) a description of the Engine subject to the Event of Loss
including the manufacturer's serial number;
51-
(ii) a description of the Replacement Engine including the
manufacturer's name, the engine model and serial number;
(iii) that on the date of the supplement to this Indenture
relating to the Replacement Engine the Company will be the legal owner of
such Replacement Engine free and clear of all Liens except Permitted Liens,
and that such Replacement Engine will on such date be in at least as good
operating condition and repair as required by the terms of the Indenture
and will otherwise conform to the requirements set forth in the definition
of "Replacement Engine";
(iv) that the value of the Replacement Engine as of the date of
such certificate is not less than the value of the Engine to be released
(without regard to the number of hours or cycles remaining until the next
scheduled maintenance visit, and assuming such Engine was in the condition
and repair required to be maintained under the Indenture);
(v) that the release of the Engine subject to the Event of
Loss will not impair the security of the Indenture in contravention of any
of the provisions of this Indenture;
(vi) that upon such replacement, the Lien of this Indenture
will apply to the Replacement Engine and such Lien will be a first priority
security interest in favor of the Indenture Trustee; and
(vii) that each of the conditions specified in Section 4.03(e)
of this Indenture with respect to such Replacement Engine has been
satisfied.
(3) The appropriate instruments subjecting such Replacement Airframe or
Replacement Engine to the Trust Agreement and to the Lien of this Indenture.
(4) A certificate from a firm of independent aircraft appraisers of
national standing reasonably satisfactory to the Indenture Trustee and the
Company confirming the accuracy of the information set forth in clause (2)A(vi)
of this Section 9.08.
(5) The opinions of counsel to the Company (which may be Company's General
Counsel), or (with respect to those matters set forth in clause (ii) below
relating to the filing of documents pursuant to the Transportation Code) of the
Company's special aviation counsel, or (in either case) other counsel reasonably
satisfactory to the Indenture Trustee, stating that:
(i) the certificates, opinions and other instruments and/or
property which have been or are therewith delivered to and deposited with
the Indenture Trustee conform to the requirements of this Indenture and the
Lease and, upon the basis of such application,
52-
the property so sold or disposed of may be properly released from the Lien
of this Indenture and all conditions precedent herein provided for relating
to such release have been complied with; and
(ii) the Replacement Airframe or Replacement Engine has been
validly subjected to the Lien of this Indenture, the instruments subjecting
such Replacement Airframe or Replacement Engine to the Lien of this
Indenture, have been duly filed for recordation pursuant to the
Transportation Code or any other law then applicable to the registration of
the Aircraft, and no further action, filing or recording of any document is
necessary or advisable in order to establish and perfect the Lien of this
Indenture on such Replacement Airframe or Replacement Engine and, with
respect to a Replacement Airframe, the Indenture Trustee would be entitled
to the benefits of Section 1110 of the Bankruptcy Code with respect to such
Replacement Airframe, provided, that such opinion need not be to the effect
specified in the foregoing clause to the extent that the benefits of such
Section 1110 would not have been, by reason of a change in law or
governmental interpretation thereof after the date hereof, available to the
Indenture Trustee with respect to the Aircraft immediately prior to such
substitution had such Event of Loss not occurred.
Section 9.09. Indenture Supplement for Replacements. In the event of the
-------------------------------------
substitution of a Replacement Airframe or a Replacement Engine as contemplated
by Section 4.04(a) or 4.03(e) hereof, as the case may be, the Company and the
Indenture Trustee agree for the benefit of the Holders, subject to fulfillment
of the conditions precedent and compliance by the Company with its obligations
set forth in Section 4.04(a) or 4.03(e) hereof, as the case may be, to execute
and deliver a supplement to this Indenture as contemplated by Section 9.08(3)
hereof and, provided no Indenture Event of Default shall have occurred and be
continuing, execute and deliver to the Company an appropriate instrument
releasing the Airframe or Engine being replaced from the Lien of this Indenture.
Section 9.10. Effect of Replacement. In the event of the substitution of a
---------------------
Replacement Airframe or a Replacement Engine as contemplated by Section 4.04(a)
or 4.03(e) hereof as the case may be, and Section 9.08 hereof, all provisions of
this Indenture relating to the Airframe or Engine or Engines being replaced
shall be applicable to such Replacement Airframe or Replacement Engine or
Engines with the same force and effect as if such Replacement Airframe or
Replacement Engine or Engines were the same Airframe or engine or engines, as
the case may be, as the Airframe or Engine or Engines being replaced but for any
Event of Loss with respect to the Airframe or Engine or Engines being replaced.
Section 9.11. Compensation. The Company covenants and agrees to pay, and
------------
the Indenture Trustee shall be entitled to receive, reasonable compensation and
payment or reimbursement for its reasonable advances, expenses and disbursements
(including the reasonable compensation and expenses and disbursements of its
counsel, agents and other persons not regularly in its employ) in connection
with its services rendered hereunder or in any way relating to or arising out of
the
53-
administration of the Collateral and shall have a priority claim on the
Collateral for the payment of such compensation, advances, expenses and
disbursements to the extent that such compensation, advances, expenses and
disbursements shall not be paid by the Company, and shall have the right to use
or apply any moneys held by it hereunder in the Collateral toward such payments.
The Indenture Trustee agrees that it shall have no right against any Holder for
any fee as compensation for its services as trustee under this Indenture.
ARTICLE X
CONCERNING THE HOLDERS
Section 10.01. Evidence of Action Taken by Holders. (a) Any request,
-----------------------------------
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee and, if
expressly required herein, to the Company. Proof of execution of any instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Sections 9.02 and 9.03 hereof) conclusive in
favor of the Indenture Trustee and the Company, if made in the manner provided
in this Article.
(b) For the purpose of determining the Holders entitled to vote or consent
to any direction, waiver or other action of such Holders under Section 7.10 or
7.11 hereof, the Company may set a record date for such vote or consent by
specifying such record date in an Officer's Certificate delivered to the
Indenture Trustee. Such record date shall be a date not more than 15 days prior
to the first solicitation of such vote or consent.
Section 10.02. Proof of Execution of Instruments and of Holding of
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Equipment Notes. Subject to Sections 9.02 and 9.03 hereof, the execution of any
---------------
instrument by a Holder or his agent or proxy may be proved in accordance with
such reasonable rules and regulations as may be prescribed by the Indenture
Trustee. The holding of Equipment Notes shall be proved by the Register or by a
certificate of the Registrar.
Section 10.03. Holders to Be Treated as Owners. Prior to due presentment
-------------------------------
for registration of transfer of any Equipment Note, the Company, the Indenture
Trustee, any agent of the Indenture Trustee, the Paying Agent, if any and the
Registrar shall deem and treat the Person in whose name such Equipment shall be
registered upon the Register as the absolute owner of such Equipment Note
(whether or not such Equipment Note shall be overdue and notwithstanding any
notation of ownership or other writing thereon) for the purpose of receiving
payment of or on account of the principal of and, subject to the provisions of
this Indenture, interest on such Equipment Note and for
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all other purposes; and neither the Company nor the Indenture Trustee (nor any
agent of the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar
shall be affected by any notice to the contrary. All such payments so made to
any such person, or upon his order, shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Equipment Note.
Section 10.04. Equipment Notes Owned by Company Deemed Not Outstanding. In
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determining whether the Holders of the requisite aggregate principal amount of
Equipment Notes have concurred in any direction, consent or waiver under this
Indenture, Equipment Notes which are owned by the Company, or any Affiliate
thereof shall be disregarded and deemed not to be Outstanding for the purpose of
any such determination; provided that for the purpose of determining whether the
Indenture Trustee shall be protected in relying on any such direction, consent
or waiver, only if a Responsible Officer of the Indenture Trustee has actual
knowledge that certain Equipment Notes are so owned by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, shall such Equipment Notes be so disregarded; and
provided further that if all Equipment Notes which would be deemed Outstanding
in the absence of the foregoing provision are owned by the Company, or by any
Affiliate thereof, then such Equipment Notes shall be deemed Outstanding for the
purpose of any such determination. Equipment Notes so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Indenture Trustee the pledgee's right so to act with
respect to such Equipment Notes and that the pledgee is not the Company, or any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company. In case of a dispute as to such right,
the advice of counsel shall be full protection in respect of any decision made
by the Indenture Trustee in accordance with such advice, unless the Company is
actually named in the Register. Upon request of the Indenture Trustee, the
Company shall furnish to the Indenture Trustee promptly an Officer's Certificate
listing and identifying all Equipment Notes, if any, known by the Company, to be
owned or held by or for any of the above-described persons; and, subject to
Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be entitled to accept
such Officer's Certificate as conclusive evidence of the facts set forth therein
and of the fact that all Equipment Notes not listed therein are outstanding for
the purpose of any such determination.
Section 10.05. ERISA. Any Person, other than the Subordination Agent and
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any Pass- Through Trustee who is acquiring the Equipment Notes will be deemed to
represent and warrant that (i) no assets of an employee benefit plan subject to
Title I of ERISA or an individual retirement account or plan subject to Section
4975 of the Code, or any trust established under any such plan or account, have
been used to acquire or hold any of the Equipment Notes, or (ii) that one or
more administrative or statutory exemptions from the prohibited transaction
rules under Section 406 of ERISA and Section 4975 of the Code applies to its
purchase and holding of the Equipment Notes such that its purchase and holding
of the Equipment Notes will not result in a non-exempt prohibited transaction
under Section 406 of ERISA and Section 4975 of the Code.
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ARTICLE XI
[RESERVED]
ARTICLE XII
SUCCESSOR TRUSTEES
Section 12.01. [Reserved].
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Section 12.02. Resignation and Removal of Indenture Trustee: Appointment of
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Successor. (a) The Indenture Trustee or any successor thereto may resign at any
---------
time without cause by giving at least 30 days' prior written notice to the
Company and each Holder, such resignation to be effective upon the acceptance of
the trusteeship by a successor Indenture Trustee. In addition, the Company or
the Majority in Interest of the Holders may at any time remove the Indenture
Trustee without cause by an instrument in writing delivered to the Indenture
Trustee, and the Indenture Trustee shall promptly notify each Holder thereof of
such action in writing, such removal to be effective upon the acceptance of the
trusteeship by a successor Indenture Trustee. In the case of the resignation or
removal of the Indenture Trustee, the Majority in Interest of the Holders (based
on the recommendation of the Company), may appoint a successor Indenture Trustee
by an instrument signed by such Holders. If a successor Indenture Trustee shall
not have been appointed within 30 days after such notice of resignation or
removal, the Indenture Trustee, the Company or any Holder may apply to any court
of competent jurisdiction to appoint a successor Indenture Trustee to act until
such time, if any, as a successor shall have been appointed as provided above.
The successor Indenture Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Indenture Trustee appointed
as provided above.
(b) In case at any time any of the following shall occur:
(i) the Indenture Trustee shall cease to be eligible in
accordance with the provisions of Section 12.03 hereof and shall fail to
resign after written request therefor by the Company or by any Holder; or
(ii) the Indenture Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of
the Indenture Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Indenture Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation;
then the Company may remove the Indenture Trustee and appoint a successor
trustee by written instrument, in duplicate, executed by a Responsible Officer
of the Company, one copy of which
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instrument shall be delivered to the Indenture Trustee so removed and one copy
to the successor trustee, or, subject to the provisions of Section 7.13 hereof,
any Holder who has been a bona fide Holder for at least six months may, on
behalf of himself and all others similarly situated Holders, petition any court
of competent jurisdiction for the removal of the Indenture Trustee and the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Indenture Trustee and
appoint a successor trustee, which removal and appointment shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.04 hereof. The successor Indenture Trustee so appointed by such court
shall immediately and without further act be superseded by any successor
Indenture Trustee appointed as provided above within one year from the date of
appointment by such court.
Section 12.03. Persons Eligible for Appointment as Indenture Trustee. There
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shall at all times be an Indenture Trustee hereunder which shall be (i)(x) a
bank or trust company organized and doing business under the laws of the United
States of America or any state or the District of Columbia having a combined
capital and surplus of at least $100,000,000 or (y) a bank or trust company
whose obligations hereunder are fully guaranteed by a direct or indirect parent
thereof having a combined capital and surplus of at least $100,000,000 and (ii)
a Person authorized under applicable law to exercise corporate trust powers and
subject to supervision of examination by Federal, state or District of Columbia
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Indenture Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Indenture Trustee shall resign
immediately in the manner and with the effect specified in Section 12.02 hereof.
Section 12.04. Acceptance of Appointment by Successor Trustee. Any
----------------------------------------------
successor trustee appointed as provided in Section 12.02 hereof shall execute
and deliver to the Company and to its predecessor trustee an instrument
accepting such appointment hereunder, in form and substance reasonably
satisfactory to the Company, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, upon payment of its charges then
unpaid, the trustee ceasing to act shall, subject to Section 14.04 hereof, pay
over to the successor trustee all moneys at the time held by it hereunder and
shall execute and deliver an instrument transferring to such successor trustee
all such rights, powers, duties and obligations. Upon request of any such
successor trustee, the Company shall execute any and all instruments in writing
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers. Any trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
trustee to secure any amounts then due it pursuant to the provisions of Article
XI hereof.
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No successor trustee shall accept appointment as provided in this Section
12.04 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 12.03 hereof.
Upon acceptance of appointment by a successor trustee as provided in this
Section 12.04, the successor trustee shall mail notice thereof by first-class
mail to the Holders at their last addresses as they shall appear in the
Register, and shall mail a copy of such notice to the Company. If the acceptance
of appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 12.02 hereof.
Section 12.05. Merger, Consolidation or Succession to Business of Indenture
------------------------------------------------------------
Trustee. Any corporation into which the Indenture Trustee may be merged or
-------
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to the corporate trust business
of the Indenture Trustee, shall be the successor to the Indenture Trustee
hereunder, provided that, anything herein to the contrary notwithstanding, such
corporation shall be eligible under the provisions of Section 12.03 hereof,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
In case at the time such successor to the Indenture Trustee shall succeed
to the trusts created by this Indenture any of the Equipment Notes shall have
been authenticated but not delivered, any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor Indenture
Trustee and deliver such Equipment Notes so authenticated; and, in case at that
time any of the Equipment Notes shall not have been authenticated, any successor
to the Indenture Trustee may authenticate such Equipment Notes either in the
name of any predecessor hereunder or in the name of the successor Indenture
Trustee; and in all such cases such certificate shall have the full force which
it is anywhere in the Equipment Notes or in this Indenture provided that the
certificate of the Indenture Trustee shall have; provided, that the right to
adopt the certificate of authentication of any predecessor Indenture Trustee or
to authenticate Equipment Notes in the name of any predecessor Indenture Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 12.06. Appointment of Separate Trustees. (a) At any time or times,
--------------------------------
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Collateral may at the time be located or in which any action of
the Indenture Trustee may be required to be performed or taken, the Indenture
Trustee, by an instrument in writing signed by it, may appoint one or more
individuals or corporations to act as a separate trustee or separate trustees or
co-trustee, acting jointly with the Indenture Trustee, of all or any part of the
Collateral, to the full extent that local law makes it necessary for such
separate trustee or separate trustees or co-trustee acting jointly with the
Indenture Trustee to act.
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(b) The Indenture Trustee and, at the request of the Indenture Trustee,
the Company, shall execute, acknowledge and deliver all such instruments as may
be required by the legal requirements of any jurisdiction or by any such
separate trustee or separate trustees or co-trustee for the purpose of more
fully confirming such title, rights or duties to such separate trustee or
separate trustees or co-trustee. Upon the acceptance in writing of such
appointment by any such separate trustee or separate trustees or co-trustee, it,
he or they shall be vested with such title to the Indenture Estate or any part
thereof, and with such rights, powers, duties and obligations, as shall be
specified in the instrument of appointment, and such rights, powers, duties and
obligations shall be conferred or imposed upon and exercised or performed by the
Indenture Trustee, or the Indenture Trustee and such separate trustee or
separate trustees or co-trustee jointly with the Indenture Trustee subject to
all the terms of this Indenture, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall be
exercised and performed by such separate trustee or separate trustees or co-
trustee, as the case may be. Any separate trustee or separate trustees or co-
trustee may, at any time by an instrument in writing, constitute the Indenture
Trustee its or his attorney-in-fact and agent with full power and authority to
do all acts and things and to exercise all discretion on its or his behalf and
in its or his name. In case any such separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, the title to the Indenture
Estate and all assets, property, rights, powers, duties and obligations and
duties of such separate trustee or co-trustee shall, so far as permitted by law,
vest in and be exercised by the Indenture Trustee, without the appointment of a
successor to such separate trustee or co-trustee unless and until a successor is
appointed.
(c) All provisions of this Indenture which are for the benefit of the
Indenture Trustee (including without limitation Article XI hereof) shall extend
to and apply to each separate trustee or co-trustee appointed pursuant to the
foregoing provisions of this Section 12.06.
(d) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed and act and the Indenture Trustee
shall act, subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred
upon the Indenture Trustee in respect of the receipt, custody,
investment and payment of moneys shall be exercised solely by the
Indenture Trustee;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be conferred or
imposed and exercised or performed by the Indenture Trustee and such
additional trustee or trustees and separate trustee or trustees jointly
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Indenture Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations
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(including the holding of title to the Collateral in any such
jurisdiction) shall be exercised and performed by such additional
trustee or trustees or separate trustee or trustees;
(iii) no power hereby given to, or exercisable by, any such
additional trustee or separate trustee shall be exercised hereunder by
such additional trustee or separate trustee except jointly with, or
with the consent of, the Indenture Trustee; and
(iv) no trustee hereunder shall be liable either personally
or in its capacity as such trustee, by reason of any act or omission of
any other trustee hereunder.
If at any time the Indenture Trustee shall deem it no longer necessary or
prudent in order to conform to any such law, the Indenture Trustee shall execute
and deliver an indenture supplemental hereto and all other instruments and
agreements necessary or proper to remove any additional trustee or separate
trustee.
(e) Any request, approval or consent in writing by the Indenture
Trustee to any additional trustee or separate trustee shall be sufficient
warrant to such additional trustee or separate trustee, as the case may be, to
take such action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 12.06, the
powers of any additional trustee or separate trustee shall not exceed those of
the Indenture Trustee hereunder.
ARTICLE XIII
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
Section 13.01. Supplemental Indentures Without Consent of Holders. The
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Company and the Indenture Trustee, without consent of the Holders, may enter
into an indenture or indentures supplemental hereto for one or more of the
following purposes:
(a) to convey, transfer, assign, mortgage or pledge any property or
assets to the Indenture Trustee as security for the Equipment Notes;
(b) to evidence the succession of another corporation to the Company or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Company herein and in the Equipment
Notes;
(c) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions as it and the Indenture Trustee shall
consider to be for the protection of the Holders, and to make the occurrence, or
the occurrence and continuance, of a default in any such
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additional covenants, restrictions, conditions or provisions an Indenture Event
of Default permitting the enforcement of all or any of the several remedies
provided herein; provided, that in respect of any such additional covenant,
restriction, condition or provision such supplemental indenture may provide for
a particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Indenture Event of Default or may limit the
remedies available to the Indenture Trustee upon such an Indenture Event of
Default or may limit the right of not less than the Majority in Interest of
Holders to waive such an Indenture Event of Default;
(d) to surrender any right or power conferred herein upon the Company;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture; or to make such other provisions in regard to matters or questions
arising under this Indenture or under any supplemental indenture as the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the Holders;
(f) to correct or amplify the description of any property at any time
subject to the Lien of this Indenture or better to assure, convey and confirm
unto the Indenture Trustee any property subject or required to be subject to the
Lien of this Indenture or to subject any Replacement Airframe or Replacement
Engine to the Lien of this Indenture in accordance with the provisions hereof or
to release from the Lien of this Indenture property that has been substituted on
or removed from the Aircraft as contemplated in Section 3.07 hereof; provided
that supplements to this Indenture entered into for the purpose of subjecting
any Replacement Airframe or Replacement Engine to the Lien of this Indenture
need only be executed by the Company;
(g) to provide for the issuance under this Indenture of Equipment Notes
in coupon form (including Equipment Notes registrable as to principal only) and
to provide for exchangeability of such Equipment Notes with Equipment Notes
issued hereunder in fully registered form, and to make all appropriate changes
for such purpose;
(h) to effect the re-registration of the Aircraft pursuant to Section
4.02(b) of the Participation Agreement; and
(i) to add, eliminate or change any provision hereunder so long as such
action shall not adversely affect the interests of the Holders;
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture, to make any further appropriate agreements and
stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Indenture Trustee shall not be obligated to enter into any such supplemental
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indenture which adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any such supplemental indenture may be executed without the consent of
the Holders of Outstanding Equipment Notes, notwithstanding any of the
provisions of Section 13.02 hereof.
Section 13.02. Supplemental Indentures With Consent of Holders. With
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the consent (evidenced as provided in Article X) of the Majority in Interest of
Holders, the Company and the Indenture Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders; provided, however, that, without the
consent of each and every Holder and each Liquidity Provider, no such amendment
of or supplement to this Indenture or any indenture supplemental hereto, or
modification of the terms of, or consent under, any thereof, shall (a) modify
any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce
the amount or extend the time of payment of any amount owing or payable under
any Equipment Note or reduce the interest payable on any Equipment Note, or
alter or modify the provisions of Article V hereof with respect to the order of
priorities in which distributions thereunder shall be made as among Holders of
different Series of Equipment Notes or as between the Holder and the Company or
with respect to the amount or time of payment of any such distribution, or alter
or modify the circumstances under which a Make-Whole Premium shall be payable,
or alter the currency in which any amount payable under any Equipment Note is to
be paid, or impair the right of any Holder to commence legal proceedings to
enforce a right to receive payment hereunder, or (c) create or permit the
creation of any Lien on the Indenture Estate or any part thereof prior to or
pari passu with the Lien of this Indenture, except as expressly permitted
herein, or deprive any Holder of the benefit of the Lien of this Indenture on
the Indenture Estate, except as provided in Section 7.02 hereof or in connection
with the exercise of remedies under Article VII. This Section 13.02 shall not
apply to any indenture or indentures supplemental hereto permitted by, and
complying with the terms of, Section 13.06 hereof.
Upon the request of the Company and upon the filing with the Indenture
Trustee of evidence of the consent of Holders and other documents, if any,
required by Section 10.01, the Indenture Trustee shall join with the Company in
the execution of such supplemental indenture unless such supplemental indenture
affects the Indenture Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Indenture Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
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Promptly after the execution by the Company and the Indenture Trustee
of any supplemental indenture pursuant to the provisions of this Section, the
Indenture Trustee shall mail a notice thereof by first-class mail to the Holders
at their addresses as they shall appear on the registry books of the Registrar,
setting forth in general terms the substance of such supplemental indenture. Any
failure of the Indenture Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
Section 13.03. Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Company, and the Holders
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 13.04. Documents to Be Given to Indenture Trustee. The
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Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may
receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such supplemental indenture complies with the applicable
provisions of this Indenture.
Section 13.05. Notation on Equipment Notes in Respect of Supplemental
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Indentures. Equipment Notes authenticated and delivered after the execution of
----------
any supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Indenture Trustee as to any matter provided for
by such supplemental indenture. If the Company or the Indenture Trustee shall so
determine, new Equipment Notes so modified as to conform, in the opinion of the
Company and the Indenture Trustee, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Indenture Trustee and delivered in exchange for the
Outstanding Equipment Notes.
Section 13.06. No Request Necessary for Indenture Supplement.
---------------------------------------------
Notwithstanding anything contained in Section 13.02 hereof, no written request
or consent of the Indenture Trustee or any Holder pursuant to Section 13.02
hereof shall be required to enable the Company to enter into any supplement to
this Indenture in accordance with the terms and conditions hereof to subject a
Replacement Airframe or Replacement Engine hereto.
Section 13.07. Notices to Liquidity Providers. Any request made to any
------------------------------
Holder for consent to any amendment, supplement or waiver pursuant to Section
7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture
Trustee to each Liquidity Provider.
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ARTICLE XIV
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 14.01. Satisfaction and Discharge of Indenture: Termination of
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Indenture. If at any time after (a) the Company shall have paid or caused to be
---------
paid the principal of and interest on all the Equipment Notes outstanding
hereunder, as and when the same shall have become due and payable and provided
that there shall be no Secured Obligations due to the Indenture Indemnitees or
(b) the Company shall have delivered to the Indenture Trustee for cancellation
all Equipment Notes theretofore authenticated (other than any Equipment Notes
which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 2.07 hereof), then this Indenture shall
cease to be of further effect, and the Indenture Trustee, on demand of the
Company and at the cost and expense of the Company, shall execute proper
instruments acknowledging such satisfaction of and discharging this Indenture.
The Company agrees to reimburse and indemnify the Indenture Trustee for any
costs or expenses thereafter reasonably and properly incurred and to compensate
the Indenture Trustee for any services thereafter reasonably and properly
rendered by the Indenture Trustee in connection with this Indenture or the
Equipment Notes.
Upon (or at any time after) payment in full to the Indenture Trustee,
as trust funds, of the principal of and interest on and Make-Whole Premium, if
any, and all other amounts due hereunder and under all Equipment Notes, and of
any Secured Obligations owed to the Indenture Indemnitees and provided that
there shall then be no other amounts due to the Indenture Trustee hereunder or
under the Participation Agreement or otherwise secured hereby, the Company shall
direct the Indenture Trustee to execute and deliver to or as directed in writing
by the Company an appropriate instrument releasing the Aircraft from the Lien of
this Indenture and releasing the Indenture Documents from the assignment thereof
hereunder, and the Indenture Trustee shall execute and deliver such instrument
as aforesaid and, at the Company's expense, will execute and deliver such other
instruments or documents as may be reasonably requested by the Company to give
effect to such release; provided, however, that this Indenture and the trusts
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created hereby shall terminate earlier and this Indenture shall be of no further
force or effect upon any sale or other final disposition by the Indenture
Trustee of all property forming a part of the Indenture Estate and the final
distribution by the Indenture Trustee of all moneys or other property or
proceeds constituting part of the Collateral in accordance with the terms
hereof. Except as aforesaid otherwise provided, this Indenture and the trusts
created hereby shall continue in full force and effect in accordance with the
terms hereof.
Section 14.02. Application by Indenture Trustee of Funds Deposited for
-------------------------------------------------------
Payment of Equipment Notes. Subject to Section 14.04 hereof, all moneys
--------------------------
deposited with the Indenture Trustee pursuant to Section 14.01 hereof shall be
held in trust and applied by it to the prompt payment, either directly or
through any Paying Agent, to the Holders of the particular Equipment Notes for
the payment or prepayment of which such moneys have been deposited with the
Indenture Trustee, of
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all sums due and to become due thereon for principal, interest and Make-Whole
Premium, if any, but such money need not be segregated from other funds except
to the extent required by law.
Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the
----------------------------------------
satisfaction and discharge of this Indenture all moneys then held by any Paying
Agent under the provisions of this Indenture shall, upon demand of the Company,
be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent
shall be released from all further liability with respect to such moneys.
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee
-----------------------------------------------------
and Paying Agent. Any moneys deposited with or paid to the Indenture Trustee or
----------------
any Paying Agent for the payment of the principal of or interest or Make-Whole
Premium on any Equipment Note and not applied but remaining unclaimed for two
years and eleven months after the date upon which such principal, interest or
Make-Whole Premium shall have become due and payable, shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be paid to the Company by the Indenture Trustee or such Paying
Agent and the Holder of such Equipment Note, as a general unsecured creditor,
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property laws, thereafter look only to the Company for
any payment which such Holder may be entitled to collect, and all liability of
the Indenture Trustee, or any Paying Agent with respect to such moneys shall
thereupon cease.
ARTICLE XV
MISCELLANEOUS
Section 15.01. Capacity in Which Acting. Allfirst acts hereunder not in
------------------------
its individual capacity but solely as trustee except as expressly provided
herein and in the other Operative Agreements.
Section 15.02. No Legal Title to Indenture Estate in Holders. No Holder
---------------------------------------------
shall have legal title to any part of the Collateral. No transfer, by operation
of law or otherwise, of any Equipment Note or other right, title and interest of
any Holder in and to the Collateral or hereunder shall operate to terminate this
Indenture or entitle such Holder or any successor or transferee of such Holder
to an accounting or to the transfer to it of legal title to any part of the
Collateral.
Section 15.03. Sale of Collateral by Indenture Trustee is Binding. Any
--------------------------------------------------
sale or other conveyance of all or any part of the Collateral by the Indenture
Trustee made pursuant to the terms of this Indenture shall bind the Company and
the Holders and shall be effective to transfer or convey all right, title and
interest of the Indenture Trustee, the Company, and such Holders therein and
thereto. No purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency or regularity of such sale or conveyance or
as to the application of any sale or other proceeds with respect thereto by the
Indenture Trustee.
65-
Section 15.04. Indenture Trustee, Allfirst, Company, Liquidity
-----------------------------------------------
Providers and Holders Only. Nothing in this Indenture, whether express or
--------------------------
implied, shall be construed to give to any person other than the Company,
Allfirst, the Indenture Trustee, each Liquidity Provider and the Holders any
legal or equitable right, remedy or claim under or in respect of this Indenture.
Upon termination of this Indenture pursuant to Article XIV hereof, the Indenture
Trustee in connection with the satisfaction of the Indenture shall return to the
Company all property (and related documents and instruments) constituting or
evidencing the Collateral.
Section 15.05. No Action Contrary to Company's Rights. Notwithstanding
--------------------------------------
any of the provisions of this Indenture to the contrary, so long as no Indenture
Event of Default shall have occurred and be continuing, the Indenture Trustee
will not take any action that interferes with the peaceful and quiet possession
and enjoyment of the Aircraft by the Company or any Permitted Lessee.
Section 15.06. Notices. Unless otherwise expressly specified or
-------
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Indenture to be made, given, furnished or filed shall be in writing, and shall
be given and become effective in the manner set forth in Section 12.01 of the
Participation Agreement. Any party hereto may change the address to which
notices to such party will be sent by giving notice of such change to the other
parties to this Indenture.
Section 15.07. Officer's Certificates and Opinions of Counsel. Upon any
----------------------------------------------
application or demand by the Company to the Indenture Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Indenture Trustee upon request (a) an Officer's Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and that the proposed action is in conformity
with the requirements of this Indenture, and (b) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or demand as
to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
Any certificate, statement or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the certificate
or opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters information with respect to which is in the possession of the
Company upon the certificate, statement or opinion of or representations by an
officer or officers of the Company, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or
66-
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel thereto may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants employed by the Company, as the case may be, unless such officer or
counsel, as the case may be, knows that the certificate or opinion or
representations with respect to the accounting matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Indenture Trustee shall contain a statement that such
firm is independent.
Section 15.08. Severability. Any provision of this Indenture 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15.09. No Oral Modifications or Continuing Waivers. No terms
-------------------------------------------
or provisions of this Indenture or the Equipment Notes may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party or other person against whom enforcement of the change, waiver,
discharge or termination is sought; and any waiver of the terms hereof or of any
Equipment Note shall be effective only in the specific instance and for the
specific purpose given.
Section 15.10. Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, each of the
parties hereto and the successors and permitted assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by any Holder shall bind the successors and assigns of such Holder.
Section 15.11. Headings. The headings of the various Articles and
--------
Sections herein and in the table of contents hereto are for the convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
Section 15.12. Normal Commercial Relations. Anything contained in this
---------------------------
Indenture to the contrary notwithstanding, the Indenture Trustee and any Holder,
or any bank or other affiliate of any such party, may conduct any banking or
other financial transactions, and have banking or other commercial
relationships, with the Company fully to the same extent as if this Indenture
were not in effect, including without limitation the making of loans or other
extensions of credit to the Company for any purpose whatsoever, whether related
to any of the transactions contemplated hereby or otherwise.
67-
Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH
---------------------------
EQUIPMENT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. This Indenture may be executed by the parties hereto
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.
68-
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture and
Security Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
MIDWAY AIRLINES CORPORATION
By:
--------------------------------
Name:
Title:
ALLFIRST BANK, as Indenture Trustee
By:
--------------------------------
Name:
Title:
69-
Annex A
Principal Amount of Equipment Notes
-----------------------------------
Series Principal Amount Interest Rate
------ ---------------- -------------
A
B
C
Annex B
Amortization Schedule
---------------------
Series A Series B Series C
Payment Date Equipment Notes Equipment Notes Equipment Notes
------------ --------------- --------------- ---------------
Exhibit A to
Trust Indenture and
Security Agreement
Indenture Supplement No. __ [N3__ML]
This Indenture Supplement No. __ [N3__ML] dated _______, __, 200_, of
Midway Airlines Corporation, a Delaware Corporation.
WITNESSETH:
WHEREAS, the Indenture provides for the execution and delivery of this
Indenture Supplement which shall particularly describe the Aircraft included in
the property covered by the Indenture.
WHEREAS, the Trust Indenture and Security Agreement [N3__ML] dated as
of __________ (the "Indenture") between the Company and Allfirst Bank, as
Indenture Trustee (herein called the "Indenture Trustee") provides for the
execution and delivery of an Indenture Supplement substantially in the form of
this Indenture Supplement No. __, which Supplement shall particularly describe
the Aircraft included in the Collateral, and shall specifically mortgage such
Aircraft to the Indenture Trustee.
WHEREAS, the Indenture relates to the Aircraft and the Engines
described in the following paragraph and a counterpart of the Indenture is
attached to and made a part of this Indenture Supplement No. __, and this
Indenture Supplement No. __, together with such attachment, is being filed for
recordation on or promptly after the date of this Indenture Supplement No. __
with the Federal Aviation Administration as one document.
NOW, THEREFORE, to secure the prompt payment of the principal of and
Make-Whole Premium, if any, and interest on, and all other amounts due with
respect to, all Outstanding Equipment Notes under the Indenture and all other
amounts due hereunder and the performance and observance by the Company of all
the agreements, covenants and provisions for the benefit of the Holders
contained in the Indenture, the Participation Agreement and the Equipment Notes,
and the prompt payment of any and all amounts from time to time owing under the
Participation Agreement by the Company to the Holders and the Indenture
Indemnitees (provided that, with respect to amounts owed to the Liquidity
Providers which relate to amounts due under the Liquidity Facilities, the
amounts secured by the Indenture shall only include such amounts to the extent
due and owing pursuant to the final paragraph of Section 2.04 of the Indenture)
and for the uses and purposes and subject to the terms and provisions of the
Indenture and the Equipment Notes, and in consideration
of the premises and of the covenants contained in the Indenture, and of the
purchase of the Equipment Notes by the Holders, and of the sum of $1 paid to the
Company by the Indenture Trustee at or before the delivery of the Indenture, the
receipt of which is hereby acknowledged, the Company has granted, bargained,
assigned, transferred, conveyed, mortgaged, pledged, granted a security interest
in, and confirmed, and does hereby grant, bargain, assign, transfer, convey,
mortgage, pledge, grant a security interest in, and confirm, unto the Indenture
Trustee, its successors and assigns, in trust for the equal and ratable security
and benefit of the Holders, in the trust created by the Indenture, and subject
to all of the terms, conditions, provisions and limitations set forth in the
Indenture, a first priority security interest in and mortgage lien on all
estate, right, title and interest of the Company in, to and under the following
described property:
AIRFRAME
One Airframe identified as follows:
FAA Manufacturer's
Registration Serial
Manufacturer Model Number Number
------------ ----- ------------- ------
The Boeing Company 737-700 N3__ML ____________
together with all appliances, equipment, instruments and accessories (including,
without limitation, radio and radar) from time to time belonging thereto, owned
by the Company and installed in or appurtenant to said aircraft.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated takeoff
horsepower or the equivalent thereof, identified as follows:
Manufacturer's
Serial
Manufacturer Model Number
------------ ----- -----------------
CFM International, Inc. CFM-56-7B20 _________________
_________________
together with all equipment and accessories belonging thereto, by whomsoever
manufactured, owned by the Company and installed in or appurtenant to such
aircraft engines.
2-
Together with all substitutions, replacements and renewals of the
property described above, and all property owned by the Company which shall
hereafter become physically attached to or incorporated in the property
described above, whether the same are now owned by the Company or shall
hereafter be acquired by it.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the benefit and security of
the Holders for the uses and purposes and subject to the terms and provisions
set forth in the Indenture.
This Indenture Supplement shall be construed as supplemental to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
This Indenture Supplement is being delivered in the State of New York.
3-
IN WITNESS WHEREOF, the Company has caused this Indenture Supplement
No. __ to be duly executed as of the date first written above by one of its
officers thereunto duly authorized.
MIDWAY AIRLINES CORPORATION
By:
________________________________
Name:
Title:
4-
Exhibit B
to
Trust Indenture and
Security Agreement
[Form of Equipment Note]
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE.
ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER
THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS
IS AVAILABLE.
No. _________ $____________
EQUIPMENT NOTE [N3__ML] OF MIDWAY AIRLINES CORPORATION
SERIES _____
Interest Rate Maturity
------------- --------
___% ____________, 2___
MIDWAY AIRLINES CORPORATION, a Delaware corporation, (herein in such
--------------------------- --------------------
capacity called the "Company") hereby promises to pay to Allfirst Bank, a
Maryland state-chartered commercial bank, as Subordination Agent, or its
registered assigns, the principal sum of ______________________ ________________
Dollars, together with interest on the principal outstanding from time to time,
semiannually on each April 1 and October 1, on such principal sum at the rate
per annum set forth above; provided that, such interest rate shall be increased
-------- ----
by 0.5% per annum, as provided in Section 2(d) and the penultimate paragraph of
Section 3 of the Registration Rights Agreement. The principal amount of this
Equipment Note shall be payable in installments on the dates and the amounts set
forth in Schedule I hereto. Notwithstanding the foregoing, the final payment
made on this Equipment Note shall be in an amount sufficient to discharge in the
full the unpaid principal amount and all accrued and unpaid interest on, and any
other amounts due under, this Equipment Note. Notwithstanding anything to the
contrary contained herein, if any date on which a payment under this Equipment
Note
becomes due and payable is not a Business Day, then such payment shall not be
made on such scheduled date but shall be made on the next succeeding Business
Day and if such payment is made on such next succeeding Business Day, no
interest shall accrue on the amount of such payment during such extension.
This Equipment Note shall bear interest at the Past Due Rate on any
principal hereof and on any other amount payable hereunder or under the
Indenture which shall not be paid in full when due (whether at stated maturity,
by acceleration, by mandatory prepayment or otherwise), for the period from and
including the date thereof to but excluding the date the same is paid in full,
payable from time to time on demand of the Indenture Trustee.
Principal and interest and other amounts due hereunder shall be payable at
the office or agency of Allfirst Bank, a Maryland state-chartered commercial
bank, as Indenture Trustee (the "Indenture Trustee") maintained for such purpose
in immediately available funds prior to 12:00 noon. (New York time) on the due
date thereof and the Indenture Trustee shall remit all such amounts received by
it to the Holders at such account or accounts at such financial institution or
institutions as the Holders shall have designated to the Indenture Trustee in
writing, in immediately available funds, such payment to be made if the payment
was received prior to 12:00 noon, New York time by the Indenture Trustee on any
Business Day, by 1 p.m. New York time on such Business Day; otherwise, the
Indenture Trustee shall make payment promptly, but not later than 11:00 A.M. New
York time on the next succeeding Business Day; provided that, at the option of
the Indenture Trustee or its Paying Agent, interest may be paid by mailing a
check therefor payable to or upon the written order of the registered holder
entitled thereto at his last address as it appears on the Register. If any
amount payable under this Equipment Note, or under the Indenture, falls due on a
day that is not a Business Day, then such sum shall be payable on the next
succeeding Business Day, without (provided that payment is made on such next
succeeding Business Day) additional interest thereon for the period of such
extension.
Allfirst Bank is not acting individually hereunder, but solely as Indenture
Trustee.
Any Person, other than the Subordination Agent and any Pass-Through
Trustee, who is acquiring the Equipment Notes will be deemed to represent and
warrant that (i) no assets of an employee benefit plan subject to Title I of
ERISA or an individual retirement account or plan subject to Section 4975 of the
Code, or any trust established under any such plan or account, have been used to
acquire or hold any of the Equipment Notes, or (ii) that one or more
administrative or statutory exemptions from the prohibited transaction rules
under Section 406 of ERISA and Section 4975 of the Code applies to its purchase
and holding of the Equipment Notes such that its purchase and holding of the
Equipment Notes will not result in a non-exempt prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code.
This Equipment Note is one of a duly authorized issue of Equipment Notes
issued under the Trust Indenture and Security Agreement [N3__ML] dated as of
___________ (the
2-
"Indenture") between the Company and the Indenture Trustee. Capitalized terms
not otherwise defined herein shall have the meanings given to them in the
Indenture. Reference is made to the Indenture and all supplements and amendments
thereto (a copy of which is on file with the Indenture Trustee at its principal
corporate trust office) for a more complete statement of the terms and
provisions thereof, including a statement of the properties conveyed, pledged
and assigned thereby, the nature and extent of the security, the respective
rights of the Company, the Indenture Trustee and the Holders, and the terms upon
which the Equipment Notes are, and are to be, executed and delivered, to all of
which terms and conditions in the Indenture each Holder hereof agrees by its
acceptance of this Equipment Note.
This Equipment Note is subject to prepayment as provided in Section 6.02 of
the Indenture but not otherwise. In addition, this Equipment Note may be
accelerated as provided in Section 7.02 of the Indenture.
The indebtedness evidenced by this Equipment Note is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of the Secured Obligations (as defined in
the Indenture) in respect of [Series A Equipment Notes]/1/, [Series A and Series
B Equipment Notes]/2/ and this Equipment Note is issued subject to such
provisions. The Holder of this Equipment Note, by accepting the same, (a) agrees
to and shall be bound by such provisions, (b) authorizes and directs the
Indenture Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture, and (c) appoints the Indenture Trustee such Holder's attorney-in-fact
for such purpose.*
This Equipment Note shall be governed by, and construed in accordance with,
the laws of the State of New York.
This Equipment Note shall not be secured by or be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose unless
authenticated by the Indenture Trustee as evidenced by the manual signature of
one of its authorized officers on the certificate below.
-------------------------
/1/ To be inserted in the case of a Series B Equipment Note.
/2/ To be inserted in the case of a Series C Certificate.
* To be inserted for each Equipment Note other than any Series A
Equipment Note.
3-
IN WITNESS WHEREOF, the Company has caused this Equipment Note to be
duly executed in its corporate name by its officer thereunto duly authorized.
Dated: _________________ Midway Airlines Corporation
By ______________________________
Name:
Title:
4-
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Equipment Notes referred to in the within mentioned
Indenture.
Dated: _______________ ALLFIRST BANK, as Indenture Trustee
By_________________________________
Name:
Title:
Schedule I to Equipment Note
Principal Amortization
----------------------
Payment Date Principal Amount
------------ ----------------
Exhibit C
Lists of Countries
Exhibit C-1 - Permitted for Re-Registration
Australia Ireland
Austria Italy
Belgium Japan
Canada Luxembourg
Denmark Netherlands
Finland New Zealand
France Spain
Germany Sweden
Greece Switzerland
Iceland United Kingdom
Exhibit C-2 - Permitted for Leasing
Argentina Iceland
Australia Ireland
Austria Italy
Belgium Jamaica
Bermuda Japan
Brazil Liechtenstein
Canada Netherlands
Chile Norway
Denmark Portugal
Finland Singapore
France Spain
Germany Sweden
Switzerland Taiwan
United Kingdom
