<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
________
Date of Report (Date of earliest event reported): May 4, 1995.
UNITED AIR LINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-21220* 36-2675206
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
1200 East Algonquin Road
Elk Grove Township, Illinois
Mailing Address: P.O. Box 66100, Chicago, Illinois 60666
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code: (708) 952-4000
================================================================================
* Registrant is the wholly-owned subsidiary of UAL Corporation (File 1-6033).
Registrant became subject to filing periodic reports under the Securities
Exchange Act of 1934 as a result of a public offering of securities which became
effective June 3, 1988 (Registration Nos. 33-21220 and 22-18246).
Page 1 of 6 pages
Exhibit Index at sequentially numbered page 5.
<PAGE>
Item 7. Financial Statements and Exhibits.
---------------------------------
The following documents are being filed in connection with, and
incorporated by reference into, United Air Lines, Inc.'s Registration
Statement on Form S-3 (Registration No. 33-46033) as declared effective on
April 27, 1992, relating to Pass Through Certificates, Series 1995-A.
Capitalized terms not otherwise defined shall have the same meanings
ascribed thereto in the related Prospectus Supplement dated May 2, 1995 and
filed with the Commission pursuant to Rule 424(b).
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C><C>
Exhibit 1(e) - Form of Underwriting Agreement
relating to the issuance of
Pass Through Certificates,
Series 1995-A.
Exhibit 4(a)(1)(A) - Form of Amended and Restated
Pass Through Trust Agreement
between United and State Street
Bank and Trust Company of
Connecticut, National
Association.
Exhibit 4(a)(7) - Forms of Pass Through Trust
Supplement Nos. 1995-A1 and
1995-A2 between United and the
First Security Bank of Utah,
National Association relating
to Pass Through Certificates,
Series 1995-A1 and 1995-A2,
respectively.
Exhibit 4(a)(8) - Forms of Pass Through
Certificates, Series 1995-A1
and 1995-A2, respectively
(included in Exhibit 4(a)(7)).
Exhibit 4(b)(36) - Forms of Trust Indenture and
Mortgage between the Owner
Trustee and the Loan Trustee
relating to the Equipment Notes
for Aircraft No. 1, Aircraft
No. 2 and Aircraft No. 3,
respectively.
Exhibit 4(b)(37) - Forms of Equipment Notes
(included in Exhibit 4(b)(36)).
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C><C>
Exhibit 4(b)(38) - Forms of Participation
Agreement among United, the
Owner Participant, the Loan
Trustee, the Owner Trustee and
the Trustee, relating to the
Equipment Notes for Aircraft
No. 1, Aircraft No. 2 and
Aircraft No. 3, respectively.
Exhibit 4(b)(39) _ Forms of Lease Agreement
between United and the Owner
Trustee relating to the
Equipment Notes for Aircraft
No. 1, Aircraft No. 2 and
Aircraft No. 3, respectively.
Exhibit 4(b)(40) - Forms of Trust Agreement
between the Owner Participant
and the Owner Trustee relating
to the Equipment Notes for
Aircraft No. 1, Aircraft No. 2
and Aircraft No. 3,
respectively.
Exhibit 4(b)(41) - Form of Redemption and
Refinancing Agreement among
United, the Trustee, the Owner
Participant, the Owner Trustee,
the Loan Trustee and the
Original Loan Participant
relating to the Equipment Notes
for Aircraft No. 3.
Exhibit 5(c) - Opinion of Ray, Quinney &
Nebeker, counsel for First
Security Bank of Utah, National
Association as Trustee and Loan
Trustees.
Exhibit 23(d) - Consent of Ray, Quinney &
Nebeker (included in Exhibit
5(c).
Exhibit 25(a) - Statement of Eligibility of
Trustee on Form T-1 for First
Security Bank of Utah, National
Association.
</TABLE>
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNITED AIR LINES, INC.
May 4, 1995 By: /s/DOUGLAS A. HACKER
-------------------------
Douglas A. Hacker
Senior Vice President-
Finance
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibits Page
- -------- ----
<S> <C><C>
Exhibit 1(e) - Form of Underwriting
Agreement relating to the
issuance of Pass Through
Certificates, Series 1995-A.
Exhibit 4(a)(1)(A) - Form of Amended and
Restated Pass Through Trust
Agreement between United
and State Street Bank and
Trust Company of
Connecticut, National
Association.
Exhibit 4(a)(7) - Forms of Pass Through Trust
Supplement Nos. 1995-A1 and
1995-A2 between United and
the First Security Bank of
Utah, National Association
relating to Pass Through
Certificates, Series 1995-
A1 and 1995-A2,
respectively.
Exhibit 4(a)(8) - Forms of Pass Through
Certificates, Series 1995-
A1 and 1995-A2,
respectively (included in
Exhibit 4(a)(7)).
Exhibit 4(b)(36) - Forms of Trust Indenture
and Mortgage between the
Owner Trustee and the Loan
Trustee relating to the
Equipment Notes for
Aircraft No. 1, Aircraft
No. 2 and Aircraft No. 3,
respectively.
Exhibit 4(b)(37) - Forms of Equipment Notes
(included in Exhibit
4(b)(36)).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibits Page
- -------- ----
<S> <C><C>
Exhibit 4(b)(38) - Forms of Participation
Agreement among United, the
Owner Participant, the Loan
Trustee, the Owner Trustee
and the Trustee, relating
to the Equipment Notes for
Aircraft No. 1, Aircraft
No. 2 and Aircraft No. 3,
respectively.
Exhibit 4(b)(39) - Forms of Lease Agreement
between United and the
Owner Trustee relating to
the Equipment Notes for
Aircraft No. 1, Aircraft
No. 2 and Aircraft No. 3,
respectively.
Exhibit 4(b)(40) - Forms of Trust Agreement
between the Owner
Participant and the Owner
Trustee relating to the
Equipment Notes for
Aircraft No. 1, Aircraft
No. 2 and Aircraft No. 3,
respectively.
Exhibit 4(b)(41) - Form of Redemption and
Refinancing Agreement among
United, the Trustee, the
Owner Participant, the
Owner Trustee, the Loan
Trustee and the Original
Loan Participant relating
to the Equipment Notes for
Aircraft No. 3.
Exhibit 5(c) - Opinion of Ray, Quinney &
Nebeker, counsel for First
Security Bank of Utah,
National Association as
Trustee and Loan Trustees.
Exhibit 23(d) - Consent of Ray, Quinney &
Nebeker (included in
Exhibit 5(c).
Exhibit 25(a) - Statement of Eligibility of
Trustee on Form T-1 for
First Security Bank of
Utah, National Association.
</TABLE>
<PAGE>
============================================================
UNITED AIR LINES, INC.
$________________
Pass Through Certificates, Series 1995-A1 and 1995-A2
PURCHASE AGREEMENT
Dated: May 2, 1995
===========================================================
<PAGE>
UNITED AIR LINES, INC.
$____________
Pass Through Certificates, Series 1995-A1 and 1995-A2
Purchase Agreement
New York, New York
May 2, 1995
To the Underwriters named in Schedule I:
Dear Sirs:
United Air Lines, Inc., a Delaware corporation (the "Company"), in
connection with the financing of two leveraged lease transactions and the
refinancing of one leveraged lease transaction in which the Company, as lessee,
proposes that First Security Bank of Utah, National Association ("First
Security"), as trustee (the "Trustee"), will issue and sell to the underwriters
named in Schedule I hereto its pass through certificates in the aggregate
principal amounts and with the interest rates and final distribution dates set
forth on Schedule A hereto (the "Offered Certificates") on the terms and
conditions stated herein and in Schedule II. The aggregate principal amount of
Offered Certificates due on each such final distribution date is referred to as
a "Pass Through Certificate Designation". As used herein, unless the context
otherwise requires, the term "Underwriters" shall mean the firms named as
Underwriters in Schedule I and the term "you" shall mean the Underwriters as
indicated in Schedule I.
The Offered Certificates will be issued under a Pass Through Trust
Agreement dated as of February 1, 1992, as amended and restated as of May 1,
1995 (the "Basic Agreement"), among the Company, State Street Bank and Trust
Company of Connecticut, National Association, as original trustee ("State
Street") and First Security as sucessor trustee, as supplemented with respect to
each of the Pass Through Certificate Designations by a Trust Supplement, dated
as of the date hereof (each a "Trust Supplement"), between the Company and the
Trustee (the Basic Agreement as it is to be supplemented to by either such Trust
Supplement being referred to herein as a "Designated Agreement"; collectively
the
<PAGE>
2
"Designated Agreements"). The Offered Certificates and each Designated
Agreement are more fully described in the Prospectus referred to below.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") (i) a registration statement (No. 33-46033) on
Form S-3 ("Registration Statement 33-46033") relating to certain securities,
including the Offered Securities, and (ii) a registration statement (No. 33-
57192) on Form S-3 ("Registration Statement 33-57192") relating to certain
securities, and, in each case, the offering thereof from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended (the "1933
Act"). Each such registration statement, as amended, has been declared
effective by the Commission. As provided in Section 3(a), a final prospectus
supplement reflecting the terms of the Offered Certificates, the terms of the
offering thereof and the other matters set forth therein has been prepared and
will be filed pursuant to Rule 424 under the 1933 Act. Such prospectus
supplement, in the form first filed on or after the date hereof pursuant to Rule
424, is herein referred to as the "Prospectus Supplement" and any such
prospectus supplement in the form or forms filed prior to the Prospectus
Supplement is herein referred to as a "Preliminary Prospectus Supplement".
Registration Statement 33-46033, including the exhibits thereto and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, as amended at the date hereof, is herein called the
"Registration Statement", and the basic prospectus included in Registration
Statement 33-57192 relating to offerings of pass through certificates under
Registration Statement 33-46033 and Registration Statement 33-57192, as
supplemented by the Prospectus Supplement, and including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, is herein called the "Prospectus", except that, if such basic prospectus is
amended or supplemented on or prior to the date on which the Prospectus
Supplement is first filed pursuant to Rule 424, the term "Prospectus" shall
refer to the basic prospectus as so amended or supplemented and as supplemented
by the Prospectus Supplement, in either case including the documents filed by
the Company with the Commission pursuant to the Securities Exchange Act of 1934,
as amended (the "1934 Act"), that are incorporated by reference therein.
Capitalized terms not otherwise defined in this Agreement shall have
the meanings specified in the Designated Agreements or in the Indentures (as
defined in the Designated Agreements) referred to in the Designated Agreements,
provided that, as used in this Agreement, the term "Operative Documents" shall
- -------- ----
include the Designated Agreements and the term "Financing Agreements" shall mean
any of the Note Purchase Agreements as defined in the Designated Agreements.
The Company understands that you propose to make a public offering of
the Certificates as soon as you deem advisable after this Agreement has been
executed and delivered.
Section 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to and agrees with each of the Underwriters that:
(i) The Company meets the requirements for use of Form S-3 under the
1933 Act; the Registration Statement has become effective; (A) on the
original
<PAGE>
3
effective date of the Registration Statement, on the effective
date of the most recent post-effective amendment thereto, if any, and on
the date of the filing by the Company of any annual report on Form 10-K
after the original effective date of the Registration Statement, the
Registration Statement and any amendments and supplements thereto complied
in all material respects with the requirements of the 1933 Act and the
rules and regulations of the Commission thereunder (the "1933 Act
Regulations") and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and (B) on the date hereof and
at all times subsequent thereto up to the Closing Time (as defined below),
(I) neither the Registration Statement nor any amendment or supplement
thereto contains or will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (II) neither the Prospectus
nor any amendment or supplement thereto includes or will include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the Company makes
no representation or warranty as to statements or omissions made in
reliance upon and in conformity with information furnished or confirmed in
writing to the Company by or on behalf of you expressly for use in the
Registration Statement or the Prospectus or to statements or omissions in
that part of the Registration Statement which constitutes a Statement of
Eligibility under the Trust Indenture Act of 1939, as amended (the "1939
Act") (Form T-1).
(ii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they were
or hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations").
(iii) Arthur Andersen LLP, who have reported upon the audited
consolidated financial statements and the financial statement schedules, if
any, included or incorporated by reference in the Registration Statement,
are independent public accountants as required by the 1933 Act and the 1933
Act Regulations.
(iv) This Agreement has been duly authorized, executed and delivered
by the Company.
(v) The consolidated financial statements included or incorporated by
reference in the Registration Statement present fairly the financial
position of the Company and its consolidated subsidiaries as of the dates
indicated and the consolidated results of operations and changes in
financial position of the Company and its consolidated subsidiaries for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles
<PAGE>
4
applied on a consistent basis throughout the periods involved, except as
may be indicated therein. The financial statement schedules, if any,
included or incorporated by reference in the Registration Statement present
fairly the information required to be stated therein. The selected
consolidated financial data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited consolidated financial statements incorporated by
reference in the Registration Statement.
(vi) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus and to
perform its obligations under this Agreement, the Designated Agreements and
the other Operative Documents to which the Company is or is to be a party;
and the Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it
owns or leases property of a nature, or transacts business of a type, that
would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, considered as one
enterprise.
(vii) The Company is a "citizen of the United States" within the
meaning of Section 40102(a)(15) of Title 49 of the United States Code, as
amended, holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the
United States Code, as amended, for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more cargo. All of the outstanding shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by UAL
Corporation ("UAL"), directly, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind.
(viii) Each of the Designated Agreements and the other Operative
Documents to which the Company is or is to be a party has been duly
authorized by the Company, is or will be substantially in the form
heretofore supplied to you and, constitutes or, when duly executed and
delivered by the Company and the other parties thereto, will constitute, a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and except that the enforceability of the
Leases and the Indentures may also be limited by applicable laws which may
affect the remedies provided therein but which do not affect the validity
of the Leases or the Indentures or make such remedies inadequate for the
practical
<PAGE>
5
realization of the benefits intended to be provided thereby. The Basic
Agreement as executed is substantially in the amended form to be filed as
an exhibit to the Registration Statement and has been duly qualified under
the 1939 Act. At the Closing Time, the Leases and other Operative Documents
to which the Company is or is to be a party will constitute the valid and
binding obligations of the Company. The Equipment Notes, the Indentures,
the Designated Agreements and the Leases and the other Operative Documents
to which the Company is or is to be a party will conform in all material
respects to the descriptions thereof in the Prospectus.
(ix) The Offered Certificates have been duly authorized by the
Trustee. When executed, authenticated, issued and delivered in the manner
provided for in the Designated Agreements and sold and paid for as provided
in this Agreement, the Offered Certificates will constitute valid and
binding obligations of the Trustee entitled to the benefits of the relevant
Designated Agreement, enforceable against the Trustee in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law);
and the Offered Certificates will conform in all material respects to the
description thereof contained in the Prospectus.
(x) The Equipment Notes to be issued under each Indenture have been
duly authorized by the related Owner Trustee and, when duly executed and
delivered by the related Owner Trustee and duly authenticated by the
Indenture Trustee in accordance with the terms of such Indenture, will be
duly issued under such Indenture and will constitute the valid and binding
obligations of such Owner Trustee and the holders thereof will be entitled
to the benefits of such Indenture.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein or contemplated thereby, there has not been (A) any material
adverse change in the condition (financial or otherwise), earnings or
business affairs of the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business, or
(B) any transaction entered into by the Company or any subsidiary, other
than in the ordinary course of business, that is material to the Company
and its subsidiaries, considered as one enterprise.
(xii) The Company is not in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it may be bound
or to which any of its properties may be subject, except for such defaults
that would not have a material adverse effect on the condition (financial
or otherwise), earnings or business affairs of the Company and its
<PAGE>
6
subsidiaries, considered as one enterprise. The execution and delivery by
the Company of this Agreement, the Designated Agreements and the other
Operative Documents to which the Company is or is to be a party, the
consummation by the Company of the transactions contemplated in this
Agreement, in the Prospectus, in the Designated Agreements and in the other
Operative Documents to which the Company is or is to be a party, and
compliance by the Company with the terms of this Agreement, the Designated
Agreements and the other Operative Documents to which the Company is or is
to be a party, do not and will not result in any violation of the charter
or by-laws of the Company, and do not and will not conflict with, or result
in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than Permitted Liens) upon any property or assets of the
Company under (A) any indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Company is a party or by which
it may be bound or to which any of its properties may be subject or (B) any
existing applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its properties other than
the securities or Blue Sky laws of the various states (except in the case
of either clause (A) or (B) above for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not have a material adverse
effect on the condition (financial or otherwise), earnings or business
affairs of the Company and its subsidiaries, considered as one enterprise).
(xiii) No authorization, approval, consent, order or license of or
filing with or notice to any government, governmental instrumentality or
court, domestic or foreign, is required for the valid authorization,
issuance, sale and delivery of the Offered Certificates, the valid
authorization, execution, delivery and performance by the Company of this
Agreement, the Designated Agreements, the Leases and the other Operative
Documents to which the Company is or is to be a party or the consummation
by the Company of the transactions contemplated by this Agreement, the
Designated Agreements, the Leases and the other Operative Documents to
which the Company is or is to be a party, except such as are required under
(x) the 1933 Act, the 1939 Act and the securities or Blue Sky laws of the
various states or similar laws of foreign jurisdictions, (y) the Sections
of Title 49 of the United States Code relating to aviation, as amended (the
"Aviation Act") and filings or recordings with the Federal Aviation
Administration (the "FAA") and (z) the Uniform Commercial Code as is in
effect in Massachusetts and Illinois and filings thereunder, which filings
listed in the preceding clauses (y) and (z) shall have been made or
obtained on or prior to the Closing Time.
(xiv) Except as disclosed in the Prospectus, there is no action, suit
or proceeding before or by any government, governmental instrumentality or
court, domestic or foreign, now pending or, to the knowledge of the
Company, threatened against or affecting the Company that is required to be
disclosed in the Prospectus or
<PAGE>
7
that could reasonably be expected to result in any material adverse change
in the condition (financial or otherwise), earnings or business affairs of
the Company and its subsidiaries, considered as one enterprise, or that
could reasonably be expected to materially and adversely affect the
properties or assets of the Company and its subsidiaries, considered as one
enterprise, or that could reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement or the Financing Agreements; the aggregate of all pending legal
or governmental proceedings to which the Company is a party or which affect
any of its properties that are not described in the Prospectus, including
ordinary routine litigation incidental to its business, are not reasonably
expected to have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Company and its
subsidiaries, considered as one enterprise.
(xv) There are no contracts or documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described and filed as
required.
(xvi) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Prospectus, except to the extent that the failure to so
obtain or file would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(b) Any certificate signed by any officer of the Company and delivered
to an Underwriter or to counsel for the Underwriters in connection with this
Agreement or the offering of the Certificates shall be deemed a representation
and warranty by the Company to the Underwriters as to the matters covered
thereby.
Section 2. Sale and Delivery to the Underwriters; Closing. (a) On
----------------------------------------------
the basis of the representations and warranties herein contained, and subject to
the terms and conditions set forth herein and in Schedule II, if any, the
Company agrees to cause the Trustee to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Trustee, at
the purchase price specified in Schedule A hereto, the aggregate principal
amount of Offered Certificates of each Pass Through Certificate Designation set
forth opposite the name of such Underwriter in Schedule I.
(b) Payment of the purchase price for, and delivery of, the Offered
Certificates shall be made at the date, time and location specified in Schedule
II, or at such other date, time or location as shall be agreed upon by the
Company and you, or as shall otherwise be provided in Section 10 (such date and
time of payment and delivery being herein called the "Closing Time"). Unless
otherwise specified in Schedule II, delivery of the
<PAGE>
8
Offered Certificates shall be made to The Depository Trust Company for the
respective accounts of the several Underwriters against payment by the
Underwriters of the purchase price thereof to or upon the order of the Trustee
by Federal funds check or other immediately available funds as designated by the
Trustee three business days in advance of the Closing Time. The Offered
Certificates shall be registered in the name of Cede & Co. or in such other
names, and in such denominations as you may request in writing at least two full
business days in advance of the Closing Time.
(c) As compensation to the Underwriters for their respective
commitments and obligations hereunder in respect of the Offered Certificates,
including their respective undertakings to distribute Offered Certificates, the
Owner Trustees will pay to each Underwriter an amount equal to that percentage
of the aggregate principal amount of each Pass Through Certificate Designation
purchased by it as set forth in Schedule A; provided that if the Owner Trustees
do not pay such amounts when due, the Company will pay such amounts. Such
payment shall be made simultaneously with the payment by the Underwriters to the
Trustee of the purchase price of the Offered Certificates as specified in
Section 2(b) hereof. Payment of such compensation shall be made by Federal
funds check or other immediately available funds.
Section 3. Certain Covenants of the Company. The Company covenants
--------------------------------
with each Underwriter as follows:
(a) If reasonably requested by you in connection with the offering of
the Offered Certificates, the Company will prepare a preliminary prospectus
supplement containing such information as you and the Company deem
appropriate, and, immediately following the execution of this Agreement,
the Company will prepare a Prospectus Supplement that complies with the
1933 Act and the 1933 Act Regulations and that sets forth the principal
amount of the Offered Certificates and their terms not otherwise specified
in the Indenture, the name of each Underwriter participating in the
offering and the principal amount of the Offered Certificates that each
severally has agreed to purchase, the name of each Underwriter, if any,
acting as representative of the Underwriters in connection with the
offering, the price at which the Offered Certificates are to be purchased
by the Underwriters from the Company, any initial public offering price,
any selling concession and reallowance and any delayed delivery
arrangements, and such other information as you and the Company deem
appropriate in connection with the offering of the Offered Certificates.
The Company will promptly transmit copies of the Prospectus Supplement to
the Commission for filing pursuant to Rule 424 under the 1933 Act and will
furnish to the Underwriters as many copies of any preliminary prospectus
supplement and the Prospectus as you shall reasonably request.
(b) If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Offered Certificates any event
shall occur or condition exist as a result of which it is necessary, in the
reasonable opinion of
<PAGE>
9
counsel for the Underwriters or counsel for the Company, to amend the
Registration Statement or amend or supplement the Prospectus in order that
the Prospectus will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, or if it shall be necessary, in the
reasonable opinion of either such counsel, at any such time to amend the
Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(d), such amendment or supplement as may be necessary to correct
such untrue statement or omission or to make the Registration Statement or
the Prospectus comply with such requirements.
(c) During the period when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the Offered Certificates, the
Company will, subject to Section 3(d), file promptly all documents required
to be filed with the Commission pursuant to Section 13, 14 or 15(d) of the
1934 Act.
(d) During the period when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the Offered Certificates, the
Company will inform you of its intention to file any amendment to the
Registration Statement, any supplement to the Prospectus or any document
that would as a result thereof be incorporated by reference in the
Prospectus; will furnish you with copies of any such amendment, supplement
or other document a reasonable time in advance of filing; and will not file
any such amendment, supplement or other document to which you or your
counsel shall reasonably object.
(e) The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations
and the 1939 Act and the rules and regulations of the Commission thereunder
(the "1939 Act Regulations") so as to permit the completion of the
distribution of the Offered Certificates as contemplated in this Agreement
and in the Prospectus.
(f) During the period when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the Offered Certificates, the
Company will notify you immediately, (i) of the effectiveness of any
amendment to the Registration Statement, (ii) of the transmittal to the
Commission for filing of any supplement to the Prospectus or any document
that would as a result thereof be incorporated by reference in the
Prospectus, (iii) of the receipt of any comments from the Commission with
respect to the Registration Statement, the Prospectus or the Prospectus
Supplement, (iv) of any request by the Commission for any amendment to the
Registration Statement or any supplement to the Prospectus or for
additional information relating thereto or to any document incorporated by
reference in the Prospectus and (v) of the issuance by the Commission of
any stop order suspending
<PAGE>
10
the effectiveness of the Registration Statement, of the suspension of the
qualification of the Offered Certificates for offering or sale in any
jurisdiction, or of the institution or threatening of any proceeding for
any of such purposes. The Company will use every reasonable effort to
prevent the issuance of any such stop order or of any order suspending such
qualification and, if any such order is issued, to obtain the lifting
thereof at the earliest possible moment.
(g) The Company has furnished or will furnish to you one signed and as
many conformed copies of the Registration Statement (as originally filed)
and of all amendments thereto, whether filed before or after the
Registration Statement became effective, as many copies of all exhibits and
documents filed therewith or incorporated by reference therein pursuant to
Item 12 of Form S-3 under the 1933 Act (through the end of the period when
a prospectus is required by the 1933 Act to be delivered in connection with
sales of the Offered Certificates) and one signed and as many conformed
copies of all consents and certificates of experts as you may reasonably
request, and if requested by you, has furnished or will furnish to you, for
each of the Underwriters, one conformed copy of the Registration Statement
(as originally filed) and of each amendment thereto (including documents
incorporated by reference into the Prospectus but without exhibits).
(h) The Company will use its best efforts, in cooperation with the
Underwriters, to qualify the Offered Certificates for offering and sale
under the applicable securities laws of such states and other jurisdictions
as the Underwriters may reasonably designate and to maintain such
qualifications in effect for a period of not less than one year from the
effective date of the Registration Statement; provided, however,
-------- -------
that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as
a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company will use
its reasonable efforts to file such statements and reports as may be
required by the laws of each jurisdiction in which the Offered Certificates
have been qualified as above provided. The Company will also supply you
with such information as is necessary for the determination of the legality
of the Offered Certificates for investment under the laws of such
jurisdictions as you may reasonably request.
(i) The Company will make generally available to its security holders
as soon as practicable, but not later than 45 days after the close of the
period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations),
covering (i) a period of 12 months beginning after the effective date of
the Registration Statement and any post-effective amendment thereof but not
later than the first day of the Company's fiscal quarter next following
such effective date and (ii) a period of 12 months
<PAGE>
11
beginning after the date of this Agreement but not later than the first day
of the Company's fiscal quarter next following the date of this Agreement.
(j) For a period of five years after the Closing Time, the Company
will make available upon request to the Underwriters, copies of all annual
reports, quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated
by the Commission, and such other documents, reports and information as
shall be furnished by the Company to the holders of Offered Certificates or
by UAL to its security holders generally.
(k) Between the date of this Agreement and the Closing Time or such
other date or time as may be specified in Schedule II, the Company will not
without your prior written consent directly or indirectly offer, sell, or
enter into any agreement to sell, any public debt securities registered
under the 1933 Act other than the Offered Certificates, except that the
Company may offer, sell or enter into agreements to sell, in other than an
underwritten offering, any securities registered or to be registered
pursuant to the Company's registration statement on Form S-3, File No.
33-57192, provided that, prior to any such sale or sales of notes having
--------
maturities of more than five years and aggregating more than $75 million,
the Company has provided you at least three business days' notice thereof.
(l) The Company will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing
under Rule 424(b) under the 1933 Act Regulations was received for filing by
the Commission and, in the event it was not, it will promptly file such
prospectus.
Section 4. Payment of Expenses. The Company will pay or cause to be
-------------------
paid all costs and expenses incident to the performance of its obligations under
this Agreement, including, without limitation, (a) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the preliminary prospectuses and
the Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (b) the printing or processing
and distribution of this Agreement, the Designated Agreements, the Offered
Certificates, the other Operative Documents, the Blue Sky Survey and any Legal
Investment Survey, (c) the delivery of the Certificates, (d) the fees and
disbursements of the Company's counsel and accountants, (e) the qualification of
the Offered Certificates under the applicable securities laws in accordance with
Section 3(h), including filing fees and fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the Blue Sky
Survey, (f) any fees charged by rating agencies for rating the Offered
Certificates (including annual surveillance fees related to the Offered
Certificates as long as they are outstanding), (g) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee, in
connection with the Designated Agreements, the Offered Certificates and the
Financing Agreements and (h) certain fees and disbursements of counsel for the
Underwriters, as heretofore agreed. The Company will also cause to be paid all
expenses
<PAGE>
12
incident to the performance of its obligations under the Leases and the
Indentures and each of the other agreements and instruments referred to in the
Indentures and the Financing Agreements.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 5 or 9(a)(i), the Company shall reimburse the
Underwriters for all their reasonable out-of-pocket expenses, including the fees
and disbursements of counsel for the Underwriters.
Section 5. Conditions of Underwriters' Obligations. Except as
---------------------------------------
otherwise provided in Schedule II, the obligations of the Underwriters to
purchase and pay for the Offered Certificates they have respectively agreed to
purchase pursuant to this Agreement are subject to the accuracy of the
representations and warranties of the Company contained herein or in
certificates of any officer of the Company delivered pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, and to
the following further conditions:
(a) At the Closing Time, no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act and no
proceedings for that purpose shall have been instituted or shall be pending
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of counsel for the Underwriters.
(b) At the Closing Time, the Underwriters shall have received the
following signed opinions of counsel, each dated as of the Closing Time, in
form and substance reasonably satisfactory to the Underwriters and counsel
for the Underwriters:
(1) An opinion of Vedder, Price, Kaufman & Kammholz as counsel
for the Company, substantially to the effect set forth on Exhibit A
attached hereto; and
(2) An opinion of Francesca M. Maher, Vice President-Law, Deputy
General Counsel and Corporate Secretary of the Company, substantially
to the effect set forth on Exhibit B attached hereto.
(c) A favorable opinion of Shearman & Sterling, counsel for the
Underwriters, to the effect that the opinions delivered pursuant to
Sections 5(b)(1) and (2) appear on their face to be appropriately
responsive to the requirements of this Agreement except, specifying the
same, to the extent waived by you and with respect to the incorporation and
legal existence of the Company, the Offered Certificates, this Agreement,
the Registration Statement, the Prospectus and such other related matters
as you may require. In giving such opinion such counsel may rely, as to
all matters
<PAGE>
13
governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States (excluding the
Aviation Act) and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to you. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of
the Company and certificates of public officials.
(d) (1) At the Closing Time, (i) there shall not have been, since the
respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
and its subsidiaries, considered as one enterprise, whether or not arising
in the ordinary course of business, (ii) the Company shall have complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Time and (iii) the other
representations and warranties of the Company set forth in Section 1(a)
shall be accurate as though expressly made at and as of the Closing Time.
At the Closing Time, you shall have received a certificate of the President
or a Senior or Executive Vice President or Treasurer, and the Senior Vice
President and Chief Financial Officer, or other senior officer approved by
you, of the Company, dated as of the Closing Time, to such effect.
(2) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Time, there shall not have been any downgrading, nor
any notice given of any intended or potential downgrading or of a possible
change that does not indicate the direction of the possible change, in the
rating accorded any of the Company's securities, including the Offered
Certificates, by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2) under
the 1933 Act.
(e) You shall have received on the date of this Agreement and at the
Closing Time the letters specified in Schedule III.
(f) The Company shall have furnished to the Underwriters and counsel
for the Underwriters, in form and substance satisfactory to them, such
other documents, certificates and opinions as such counsel may reasonably
request for the purpose of enabling such counsel to pass upon the matters
referred to in Section 5(c) and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements, the
performance of any covenant by the Company theretofore to be performed, or
the compliance with any of the conditions in this Agreement.
(g) At the Closing Time, all conditions precedent specified in each of
the Financing Agreements with respect to the Trustee's purchase of the
Equipment Notes shall have been satisfied; the representations and
warranties of the Company contained in each of the Financing Agreements
shall be accurate as of the Closing Time (except
<PAGE>
14
to the extent that they relate solely to an earlier date in which case they
shall be accurate as of such earlier date) and the Underwriters shall have
received a certificate of a Vice President or Treasurer of the Company,
dated as of the Closing Time, to such effect; and the Underwriters shall
have received a copy of each opinion required to be delivered under each of
the Financing Agreements, dated as of the Closing Time, and addressed to
the Underwriters, and of such other documents furnished in connection with
the fulfillment of such conditions as the Underwriters or counsel for the
Underwriters may reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 4. Notwithstanding
any such termination, the provisions of Sections 6, 7 and 8 shall remain in
effect.
Section 6. Indemnification. (a) The Company agrees to indemnify and
---------------
hold harmless each Underwriter and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred (including fees and disbursements of counsel chosen
by you except as otherwise specifically provided in Section 6(c)), arising
out of an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto) and all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
an untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus supplement or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred (including fees and disbursements of counsel chosen
by you except as otherwise specifically provided in Section 6(c)), to the
extent of the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel chosen by you except as otherwise
specifically provided in
<PAGE>
15
Section 6(c)), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (A) made in reliance upon and
in conformity with written information furnished to the Company by an
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus supplement or the Prospectus (or any
amendment or supplement thereto) or (B) made or omitted from a Statement of
Eligibility on Form T-1, other than any such untrue statement or omission made
therein or omitted therefrom in reliance upon information furnished in writing
by the Company for use therein.
The foregoing indemnity with respect to any untrue statement contained
in or omission from a preliminary prospectus supplement shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter) from
whom the person asserting any such loss, liability, claim, damage or expense
purchased any of the Offered Certificates that are the subject thereof if the
Company shall sustain the burden of proving that such person was not sent or
given a copy of the Prospectus (or the Prospectus as amended or supplemented)
(in each case exclusive of the documents from which information is incorporated
by reference) at or prior to the written confirmation of the sale of such
Offered Certificates to such person and the untrue statement contained in or
omission from such preliminary prospectus supplement was corrected in the
Prospectus (or the Prospectus as amended or supplemented).
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 6(a), as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any preliminary prospectus supplement or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter expressly for
use in the Registration Statement (or any amendment thereto) or such preliminary
prospectus supplement or the Prospectus (or any amendment or supplement
thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying
<PAGE>
16
party may participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action, provided that, if such indemnified
party or parties reasonably determine that there may be legal defenses available
to them which are different from or in addition to those available to such
indemnifying party or parties and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then such indemnifying party or parties shall not be entitled to
assume such defense. If the indemnifying party or parties are not entitled to
assume the defense of such action as a result of the proviso to the preceding
sentence, counsel for the indemnifying party or parties shall be entitled to
conduct the defense of such indemnifying party or parties and counsel for the
indemnified party or parties shall be entitled to conduct the defense of such
indemnified party or parties. If an indemnifying party assumes the defense of
such action, the indemnifying parties shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
Section 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity provided for in Section
6 is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company and one or
more of the Underwriters, as incurred, in such proportions that the Underwriters
are responsible for that portion represented by the percentage that the
underwriting commission appearing in Schedule II herein bears to the initial
public offering price appearing on the cover page of the Prospectus and the
Company is responsible for the balance; provided, however, that no person guilty
-------- -------
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
<PAGE>
17
Section 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Company or its officers set forth in or made pursuant to this
Agreement will remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company or an Underwriter or
controlling person and will survive delivery of and payment for the Offered
Certificates.
Section 9. Termination of Agreement. (a) The Underwriters may
------------------------
terminate this Agreement, by notice to the Company, at any time at or prior to
the Closing Time (i) if there has been, since the respective dates as of which
information is given in the Registration Statement and in the Prospectus, any
material adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets, or any outbreak of hostilities or escalation thereof or other
calamity or crisis the effect of which is such as to make it, in your reasonable
judgment, impracticable to market the Offered Certificates or enforce contracts
for the sale of the Offered Certificates or (iii) if trading in any securities
of the Company or UAL has been suspended by the Commission, by the National
Association of Securities Dealers, Inc., or on any exchange or generally in the
over-the-counter market, or if trading generally on the New York Stock Exchange
or in the over-the-counter market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by such exchange or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority or (iv) if a banking moratorium has been declared by
federal, New York or Illinois authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Sections 6, 7 and 8 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 2 or Section 5, with the effect stated in such Section.
Section 10. Default by One of the Underwriters. If either
----------------------------------
Underwriter shall fail at the Closing Time to purchase the Offered Certificates
which it is obligated to purchase hereunder (the "Defaulted Certificates"), you
shall have the right, but not the obligation, within 24 hours thereafter, to
make arrangements for the non-defaulting Underwriter or any other underwriters
(the "Non-Defaulting Underwriter"), to purchase all, but not less than all, of
the Defaulted Certificates upon the terms herein set forth; if, however, the
Non-Defaulting Underwriter shall have not completed such arrangements within
such 24-hour period, then this Agreement shall terminate without liability on
the part of the Non-Defaulting Underwriter.
<PAGE>
18
No action pursuant to this Section shall relieve a defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Non-Defaulting Underwriter or the
Company shall have the right to postpone the Closing Time for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used in
this Section, the term "Underwriter" includes any person substituted for an
Underwriter under this Section.
Section 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if delivered,
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed as set forth in Schedule I. Notices to the
Company shall be directed to it by mail at United Air Lines, Inc., P.O. Box
66100, Chicago, Illinois 60666, attention of Senior Vice President-Finance, or
at United Air Lines, Inc., 1200 East Algonquin Road, Elk Grove Township,
Illinois 60007, attention of Senior Vice President-Finance.
Section 12. Parties. This Agreement is made solely for the benefit
-------
of the Underwriters, the Company and, to the extent expressed, any person
controlling the Company or an Underwriter, and the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns and, subject to the provisions
of Section 10, no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser, as such purchaser, from the Underwriters of the Offered
Certificates. If there are two or more Underwriters, all of their obligations
hereunder are several and not joint.
Section 13. Governing Law and Time. This Agreement shall be governed
----------------------
by the internal laws of the State of New York. Specified times of the day refer
to New York City time.
Section 14. Counterparts. This Agreement may be executed in one or
------------
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement. A
party may submit its signed counterpart of this Agreement by telecopier and such
counterpart so received by telecopier shall for all purposes constitute an
original.
<PAGE>
19
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon it will
become a binding agreement between the Company and the Underwriters in
accordance with its terms.
Very truly yours,
UNITED AIR LINES, INC.
By:
-------------------------------
Name:
Title:
Confirmed and Accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
LEHMAN BROTHERS INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
----------------------------
Name:
Title:
<PAGE>
SCHEDULE A
(1995 Pass Through Certificates, Series 1995-A1 and 1995-A2)
UNITED AIR LINES
----------------
<TABLE>
<CAPTION>
Pass
Through Aggregate Final Underwriting
Certificate Principal Interest Distribution Discounts and Purchase
Designation Amount Rate Date Commissions** Price
- ----------- --------- -------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
1995-A1 9.02%
1995-A2 9.56%
</TABLE>
_______________________________
** Expressed as percentage of Aggregate Principal Amount
<PAGE>
SCHEDULE I
to
Purchase
Agreement
Dated: _________, 1995
UNITED AIR LINES, INC.
Principal Amount
Being Purchased
---------------
<TABLE>
<CAPTION>
1995-A1 1995-A2
------- -------
<S> <C> <C>
MERRILL LYNCH & CO. $ $
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
World Financial Center
250 Vesey Street
New York, New York 10281
Notice to: ________________
LEHMAN BROTHERS INC. $ $
American Express Tower
World Financial Center
New York, New York 10285
Notice to: Kirk L. Meighan
</TABLE>
<PAGE>
SCHEDULE II
to
Purchase
Agreement
Dated: ___________, 1995
UNITED AIR LINES, INC.
Underwriting fees,
discounts, commissions
or other compensation: $____________
Closing date, time and location: May 15, 1995
9:00 A.M.,
Chicago Time;
Vedder, Price, Kaufman
& Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
<PAGE>
SCHEDULE III
to
Purchase
Agreement
Dated: __________, 1995
UNITED AIR LINES, INC.
Matters to be covered by Letter or Letters of
Independent Auditors
Arthur Andersen LLP shall have furnished to you the following letter,
dated as of the date hereof and as of the Closing Time, in form and substance
satisfactory to you, to the extent that:
(i) They are independent auditors with respect to the Company within
the meaning of the 1933 Act and the 1933 Act Regulations, and the answer to
Item 10 of the Registration Statement insofar as it relates to them is
none;
(ii) In their opinion, the audited consolidated financial statements
and schedules incorporated by reference in the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1934 Act and the published rules and
regulations thereunder with respect to registration statements on Form S-3;
(iii) On the basis of a reading of the unaudited consolidated
financial statements of the Company contained in the Company's Quarterly
Reports on Form 10-Q for the quarter ended March 31, 1995 incorporated by
reference in the Registration Statement, a reading of the latest unaudited
consolidated financial statements made available by the Company, a reading
of the minutes of the Board of Directors of the Company and any committees
thereof and of the consent of the sole stockholder of the Company, and a
reading of the minutes of the Board of Directors of UAL Corporation and any
committees thereof and of the stockholders of UAL Corporation, since the
date of the latest audited consolidated financial statements incorporated
by reference in the Registration Statement, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, which do not
constitute an audit in accordance with generally accepted auditing
standards and which would not necessarily reveal matters of significance
with respect to the comments set forth in such letter, nothing came to
their attention that caused them to believe that:
<PAGE>
2
(A) the unaudited consolidated financial statements incorporated
by reference in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of
the 1933 Act and the 1934 Act and the 1933 Act Regulations and the
1934 Act Regulations as they apply to Form 10-Q or are not presented
in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited consolidated
financial statements of the Company incorporated by reference in the
Registration Statement;
(B) the unaudited consolidated balance sheet of the Company at
March 31, 1995 is not stated on a basis substantially consistent with
that of the audited consolidated financial statements of the Company
incorporated by reference in the Registration Statement;
(C) as of a specified date not more than five days prior to the
date of delivery of such letter, there has been any change in the
consolidated long-term debt of the Company, or any decrease in
consolidated net current assets of the Company or other items
specified by you, in each case as compared with amounts shown in the
latest unaudited consolidated balance sheet incorporated by reference
in the Registration Statement, except in each case for changes or
decreases which the Registration Statement discloses have occurred or
may occur or which are described in such letter; and
(iv) They have performed certain procedures specified in their letter
for the purpose of determining whether certain financial information with
respect to the Company and its consolidated subsidiaries appearing or
incorporated by reference in the Registration Statement and specified in
said letter agrees with indicated amounts in the applicable financial
statements or accounting records of the Company and its subsidiaries.
<PAGE>
Exhibit A
to
Purchase
Agreement
(Pass Through Certificates, Series 1995-A1 and 1995-A2)
[Provisions of Opinion of
Vedder, Price, Kaufman & Kammholz]
United Air Lines, Inc.
Pass Through Certificates, Series 1995-A1 and 1995-A2
-----------------------------------------------------
(1) The Offered Certificates have been duly authorized, executed,
delivered and authenticated by the Trustee pursuant to the Designated
Agreements and constitute valid and binding obligations of the Trustee
enforceable against the Trustee in accordance with their terms; and
the holders of Offered Certificates are entitled to the benefits of
the relevant Designated Agreement.
(2) The Offered Certificates, the Designated Agreements and the other
Operative Documents conform in all material respects as to legal
matters to the descriptions thereof, if any, contained in the
Prospectus, and the description of the Offered Certificates conforms
in all material respects to the rights set forth in the instruments
defining the same.
(3) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(4) No authorization, approval, consent, order or license of or filing
with or notice to any government, governmental instrumentality or
court, domestic or foreign (other than under the 1933 Act, the 1939
Act and the securities or Blue Sky laws of the various states) on the
part of the Company, is required for the valid authorization,
issuance, sale and delivery of the Offered Certificates, the valid
authorization, execution, delivery and performance by the Company of
the Purchase Agreement, the Designated Agreements and the other
Operative Documents to which the Company is or is to be a party or the
consummation by the Company of the transactions contemplated by the
Purchase Agreement, the Designated Agreements and the other Operative
Documents to which the Company is or is to be a party, or, if so
required, all such authorizations, approvals, consents and licenses,
including filings under the Uniform Commercial Code as is in effect in
Massachusetts and Illinois, have been made
<PAGE>
2
or obtained and are in full force and effect, except for any
filings that may be required under the Aviation Act, as to which we
express no opinion.
(5) The statements made in the Prospectus under the headings "Federal
Income Tax Consequences" and "ERISA Considerations", to the extent
that they constitute matters of law or legal conclusions with respect
thereto, have been reviewed by us and fairly present the information
disclosed therein in all material respects.
(6) The Registration Statement has been declared effective under the 1933
Act; any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); the Basic Agreement has been duly
qualified under the 1939 Act; and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or are contemplated under the 1933 Act.
(7) The Registration Statement, the Prospectus and each amendment or
supplement thereto (except for the financial statements and other
financial or statistical data included therein or omitted therefrom
and the documents incorporated by reference in the Prospectus, as to
which we express no opinion), as of their respective effective or
issue dates, complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations, and the
Designated Agreements and the Statement of Eligibility on Form T-1
filed with the Commission as part of the Registration Statement
complied as to form in all material respects with the requirements of
the 1939 Act and the 1939 Act Regulations.
(8) The Financing Agreements and the Designated Agreements have each been
duly authorized, executed and delivered by the Company and each is a
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights generally and
by general principles of equity.
(9) The Leases and other Operative Documents to which the Company is, or
is to be, a party have been duly authorized and, at the Closing Time,
the related Leases and other Operative Documents to which the Company
is, or is to be, a party, upon due execution and delivery by the
Company, will each be a valid and binding obligation of the Company
enforceable against the Company in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting
<PAGE>
3
enforcement of creditors' rights generally and by general principles
of equity and, except, in the case of each Lease, as limited by
applicable laws which may affect the remedies provided in such Lease,
which laws, however, do not in such counsel's opinion make the
remedies provided in such Lease inadequate for the practical
realization of the rights and benefits provided thereby.
(10) The Trust created by each of the Designated Agreements would not be
classified as an association taxable as a corporation for federal
income tax purposes, but rather, would be classified as a grantor
trust under subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as amended, and each Certificate Owner should be treated
as the owner of a pro rata undivided interest in each of the Equipment
Notes or any other property held in such Trust.
(11) Upon consummation of the transactions contemplated by the Financing
Agreements, each Owner Trustee, as lessor under the related Lease, and
the Indenture Trustee, as assignee of the Owner Trustee's rights under
such Lease pursuant to the Indenture corresponding to such Lease, is
or will be entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the Aircraft initially delivered under such Lease
and subjected to the related Indenture; and Section 1110 of the
Bankruptcy Code conforms in all material respects to the description
thereof contained in "Description of the Equipment Notes" in the
Prospectus.
(12) None of the Trusts is required to be registered under the Investment
Company Act of 1940, as amended.
(13) Upon consummation of the transactions contemplated by the Financing
Agreements, assuming due authorization, execution and delivery by the
related Owner Trustee and due authentication by the Indenture Trustee,
the Equipment Notes will constitute valid and binding obligations of
such Owner Trustee, enforceable against such Owner Trustee in
accordance with their terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and by general principles
of equity; and the holders of the Equipment Notes will be entitled to
the benefits of the respective Indentures.
(14) Assuming due authorization, execution and delivery of the Designated
Agreements by the Trustee, each such Designated Agreement constitutes
the valid and binding obligation of the Trustee, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and by general principles
of equity.
<PAGE>
4
In connection with the preparation of the Registration Statement and
the Prospectus, such counsel has examined various documents and other papers,
including the documents incorporated by reference in the Registration Statement
and the Prospectus, and participated in conferences with representatives of the
Company and its independent accountants and with your representatives and your
counsel, at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed. Such counsel has not
participated in the preparation of the documents incorporated by reference in
the Registration Statement or the Prospectus; such counsel has not verified, are
not passing upon and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, or the documents incorporated by reference therein;
and such counsel has not made an independent investigation of facts for the
purpose of rendering this opinion. Such counsel confirms, however, that in the
course of our examination and during the above-mentioned conferences, no facts
came to such counsel's attention that cause such counsel to believe (A) that the
Registration Statement or any amendment thereto (except for the financial
statements and other financial or statistical data included therein or omitted
therefrom and the Statement of Eligibility on Form T-1, as to which such counsel
expresses no opinion), at the time the Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (B) that the Prospectus or any
amendment or supplement thereto (except for the financial statements and other
financial or statistical data included therein or omitted therefrom, as to which
we express no opinion), at the time the Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading or (C)
that the documents incorporated by reference in the Prospectus (except for the
financial statements and other financial or statistical data included therein or
omitted therefrom, as to which such counsel expresses no opinion), as of the
dates they were filed with the Commission, included an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
Such counsel notes that the "governing law" provisions of certain of
the documents as to which such counsel expresses an opinion provide that the
laws of the State of New York are to govern them. In such counsel's opinion, a
court applying Illinois conflict of laws rules should give effect to such choice
of New York law.
For purposes of its opinion set forth above, such counsel has (i)
assumed that a court would apply the substantive laws of New York with regard to
the documents referred to in the preceding paragraph and (ii) assumed that the
substantive laws of New York governing the interpretation and enforcement of
each provision of such documents do not differ in any material respect from the
substantive laws of Illinois.
<PAGE>
5
In rendering the opinion set forth above, such counsel has assumed
that each of the parties to each of the applicable documents, other than the
Company, has full power, authority and legal right to enter into such documents
and that each such document has been duly authorized, executed and delivered by
each of such parties. In addition, such counsel has relied, to the extent such
counsel has deemed necessary for purposes of rendering the opinion set forth in
paragraph 1 above, upon the opinions of counsel for the Trustee. In addition,
such counsel has relied upon the opinion of Crowe & Dunlevy, special counsel for
Aviation Act matters, as to all matters dealing with the Aviation Act.
<PAGE>
Exhibit B
to
Purchase
Agreement
(Pass Through Certificates, Series 1995-A1 and 1995-A2)
[Provisions of Opinion of General Counsel
of United Air Lines, Inc.]
United Air Lines, Inc.
Pass Through Certificates, Series 1995-A1 and 1995-A2
-----------------------------------------------------
(1) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus and
to perform its obligations under the Purchase Agreement, the
Designated Agreements and the other Operative Documents to which the
Company is or is to be a party and the Financing Agreements.
(2) The Company is duly qualified to transact business as a foreign
corporation and is in good standing in Illinois, except to the extent
that the failure to so qualify or be in good standing would not have a
material adverse effect on the Company and its subsidiaries,
considered as one enterprise.
(3) The Company is a "citizen of the United States" within the meaning of
Section 40102(a)(15) of Title 49 of the United States Code, as
amended, holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the
United States Code, as amended, for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more cargo. All of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable
and are owned by UAL, directly, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
(4) To the best of such counsel's knowledge, there are no statutes or
regulations, or any pending or threatened legal or governmental
proceedings, required under the 1933 Act to be described in the
Prospectus that are not described as required, nor any contracts or
documents of a character required to be described or referred to in
the Registration Statement or the Prospectus or to
<PAGE>
2
be filed as exhibits to the Registration Statement that are not
described, referred to or filed as required.
(5) The descriptions in the Prospectus of the statutes, regulations, legal
or governmental proceedings therein described are accurate in all
material respects and fairly summarize the information required to be
shown.
(6) To such counsel's knowledge, no event of default or event which with
the passage of time or the giving of notice or both would become such
an event of default has occurred under any agreement or instrument
under which indebtedness of the Company is outstanding or by which it
may be bound or any of its properties may be subject, and no default
exists in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material contract,
agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed as an exhibit to the
Registration Statement.
(7) The execution and delivery by the Company of the Purchase Agreement,
the Designated Agreements, and the other Operative Documents to which
the Company is or is to be a party and the Financing Agreements, the
issuance and sale of the Offered Certificates, the consummation by the
Company of the transactions contemplated in the Purchase Agreement, in
the Registration Statement, in the Designated Agreements, and in the
other Operative Documents to which the Company is or is to be a party
and in the Financing Agreements and compliance by the Company with the
terms of the Purchase Agreement, the Designated Agreements, and the
other Operative Documents to which the Company is or is to be a party
do not and will not result in any violation of the charter or by-laws
of the Company, and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (except for Permitted Liens) upon any property or assets
of the Company under (A) any indenture, mortgage, loan agreement,
note, lease or other agreement or instrument known to such counsel, to
which the Company is a party or by which it may be bound or to which
any of its properties may be subject (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise), (B) any
existing law, rule or regulation applicable to the Company (other than
the securities or Blue Sky laws of the various states, as to which
such counsel expresses no opinion), or (C) any judgment, order or
decree of any government, governmental instrumentality or court,
domestic or foreign, known to such counsel having jurisdiction over
the Company or any of its properties.
<PAGE>
3
(8) The documents incorporated by reference in the Prospectus (except for
the financial statements and other financial or statistical data
included or incorporated by reference therein or omitted therefrom, as
to which such counsel expresses no opinion), as of the dates they were
filed with the Commission, complied as to form in all material
respects with the requirements of the 1934 Act and the 1934 Act
Regulations.
Such counsel or lawyers under such counsel's supervision have
participated in the preparation of the Registration Statement, the Prospectus
and the documents incorporated by reference therein and no facts have come to
such counsel's attention to lead such counsel to believe (A) that the
Registration Statement or any amendment thereto (except for the financial
statements and other financial or statistical data included therein or omitted
therefrom and the Statement of Eligibility on Form T-1, as to which such counsel
expresses no opinion), at the time the Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (B) that the Prospectus or any
amendment or supplement thereto (except for the financial statements and other
financial or statistical data included therein or omitted therefrom, as to which
such counsel expresses no opinion), at the time the Prospectus was issued, at
the time any such amended or supplemented prospectus was issued or at the
Closing Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (C) that the documents incorporated by reference in the
Prospectus (except for the financial statements and other financial or
statistical data included therein or omitted therefrom, as to which such counsel
expresses no opinion), as of the dates they were filed with the Commission,
included an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
<PAGE>
S&S FINAL DRAFT
UNITED AIR LINES, INC.
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, National Association,
as Trustee
--------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of February 1, 1992,
As Amended And Restated
as of May 1, 1995
--------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
ARTICLE I
DEFINITIONS
1.01. Definitions........................................... 2
1.02. Compliance Certificates and Opinions.................. 11
1.03. Form of Documents Delivered to Trustee................ 11
1.04. Acts of Certificateholders............................ 12
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
2.01. Amount Unlimited; Issuable in Series.................. 14
2.02. Acquisition of Equipment Notes........................ 16
2.03. Acceptance by Trustee................................. 17
2.04. Limitation of Powers.................................. 18
ARTICLE III
THE CERTIFICATES
3.01. Form, Denomination and Execution of Certificates...... 18
3.02. Authentication of Certificates........................ 19
3.03. Temporary Certificates................................ 19
3.04. Registration of Transfer and Exchange of Certificates. 20
3.05. Mutilated, Destroyed, Lost or Stolen Certificates..... 20
3.06. Persons Deemed Owners................................. 21
3.07. Cancellation.......................................... 21
3.08. Limitation of Liability for Payments.................. 21
3.09. Book-Entry and Definitive Certificates................ 21
<PAGE>
ii
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
4.01. Certificate Account and Special Payments Account...... 24
4.02. Distributions from Certificate Account and Special
Payments Account..................................... 24
4.03. Statements to Certificateholders...................... 26
4.04. Investment of Special Payment Moneys.................. 26
ARTICLE V
THE COMPANY
5.01. Maintenance of Corporate Existence.................... 27
5.02. Consolidation, Merger, etc............................ 27
ARTICLE VI
DEFAULT
6.01. Events of Default..................................... 28
6.02. Incidents of Sale of Equipment Notes.................. 29
6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit............................... 29
6.04. Control by Certificateholders......................... 30
6.05. Waiver of Past Defaults............................... 30
6.06. Right of Certificateholders to Receive Payments
Not to Be Impaired................................... 31
6.07. Certificateholders May Not Bring Suit Except Under
Certain Conditions................................... 31
6.08. Remedies Cumulative................................... 32
ARTICLE VII
THE TRUSTEE
7.01. Notice of Defaults.................................... 32
7.02. Certain Rights of Trustee............................. 33
7.03. Not Responsible for Recitals or Issuance of
Certificates......................................... 34
7.04. May Hold Certificates................................. 34
7.05. Money Held in Trust................................... 34
7.06. Compensation and Reimbursement........................ 34
7.07. Corporate Trustee Required; Eligibility............... 35
7.08. Resignation and Removal; Appointment of Successor..... 36
<PAGE>
iii
7.09. Acceptance of Appointment by Successor................ 38
7.10. Merger, Conversion, Consolidation or Succession
to Business.......................................... 38
7.11. Maintenance of Agencies............................... 39
7.12. Money for Certificate Payments to Be Held in Trust.... 40
7.13. Registration of Equipment Notes in Trustee's Name..... 40
7.14. Representations and Warranties of Trustee............. 41
7.15. Withholding Taxes; Information Reporting.............. 41
7.16. Trustee's Liens....................................... 42
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders...................... 42
8.02. Preservation of Information; Communications to
Certificateholders................................... 43
8.03. Reports by Trustee.................................... 43
8.04. Reports by the Company................................ 43
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
9.01. Supplemental Agreements Without Consent of
Certificateholders................................... 44
9.02. Supplemental Agreements with Consent of
Certificateholders................................... 45
9.03. Documents Affecting Immunity or Indemnity............. 46
9.04. Execution of Supplemental Agreements.................. 46
9.05. Effect of Supplemental Agreements..................... 46
9.06. Conformity with Trust Indenture Act................... 46
9.07. Reference in Certificates to Supplemental Agreements.. 47
ARTICLE X
AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS
10.01. Amendments and Supplements to Indenture and Other Note
Documents........................................... 47
<PAGE>
iv
ARTICLE XI
TERMINATION OF TRUSTS
11.01. Termination of the Trusts............................ 47
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Limitation on Rights of Certificateholders........... 49
12.02. Certificates Nonassessable and Fully Paid............ 49
12.03. Notices.............................................. 49
12.04. Governing Law........................................ 50
12.05. Severability of Provisions........................... 51
12.06. Trust Indenture Act Controls......................... 51
12.07. Effect of Headings and Table of Contents............. 51
12.08. Successors and Assigns............................... 51
12.09. Benefits of Agreement................................ 51
12.10. Legal Holidays....................................... 51
12.11. Counterparts......................................... 51
Exhibit A - Form of Certificate
<PAGE>
This PASS THROUGH TRUST AGREEMENT, dated as of February 1, 1992, as amended
and restated as of May 1, 1995, between United Air Lines, Inc., a Delaware
corporation, and State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, as Trustee, is made with respect to
the formation from time to time of separate United Air Lines Pass Through
Trusts, and the issuance from time to time of separate series of Pass Through
Certificates representing fractional undivided interests in the respective
Trusts.
WITNESSETH:
WHEREAS, from time to time the Company (this and certain other defined
terms used herein are defined in Section 1.01) may enter into a Trust Supplement
with the Trustee named therein pursuant to which such Trustee shall declare the
creation of a separate Trust for the benefit of the Holders of the series of
Certificates to be issued in respect of such Trust, and the initial Holders of
the Certificates of such series, as the grantors of such Trust, by their
respective acceptances of the Certificates of such series, shall join in the
creation of such Trust with the Trustee;
WHEREAS, all Certificates to be issued in respect of each separate Trust
will be issued as a separate series pursuant to this Agreement, will evidence
fractional undivided interests in such Trust and will have no rights, benefits
or interests in respect of any other separate Trust or the property held
therein;
WHEREAS, from time to time, pursuant to the terms and conditions of this
Agreement with respect to each separate Trust formed hereunder, the Trustee on
behalf of such Trust shall purchase one or more issues of Equipment Notes having
the same interest rate as, and final maturity dates not later than the final
Regular Distribution Date of, the series of Certificates issued in respect of
such Trust and shall hold such Equipment Notes in trust for the benefit of the
Certificateholders of such Trust;
WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of
Equipment Notes by, the Trustee on behalf of each Trust created from time to
time pursuant to this Agreement, the Company has duly authorized the execution
and delivery of this Basic Agreement and each Trust Supplement as the "issuer",
as such term is defined in and solely for purposes of the Securities Act of
1933, as amended, of the Certificates to be issued in respect of each Trust and
as the "obligor", as such term is defined in and solely for purposes of the
Trust Indenture Act of 1939, as amended, with respect to all such Certificates
and is undertaking to perform certain administrative and ministerial duties
hereunder and is also undertaking to pay the fees and expenses of the Trustee;
WHEREAS, this Basic Agreement, as amended or supplemented from time to
time, is subject to the provisions of the Trust Indenture Act of 1939, as
amended, and shall, to the extent applicable, be governed by such provisions;
<PAGE>
2
WHEREAS, State Street Bank and Trust Company of Connecticut, National
Association ("State Street"), as Trustee, and United Air Lines, Inc. wish to
effect certain corrections and supplements, none of which are material or
adversely affect the interests of the Certificateholders of any series, to this
Basic Agreement as originally executed and delivered;
NOW THEREFORE, in consideration of the mutual agreements herein contained,
and of other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree (and agree that this Basic
Agreement is hereby amended and restated to read) as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Basic Agreement,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all references in this Basic Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Basic Agreement;
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Basic Agreement as a whole and not to any
particular Article, Section or other subdivision; and
(5) the term "this Agreement" (as distinguished from "this Basic
Agreement") refers, unless the context otherwise requires, to this Basic
Agreement as supplemented by the Trust Supplement creating a particular
Trust and establishing the series of Certificates issued or to be issued in
respect thereof, with reference to such Trust and each series of
Certificates, as this Basic Agreement as so supplemented may be further
supplemented with respect to such Trust and such series of Certificates.
<PAGE>
3
Act: With respect to any Certificateholder has the meaning specified
---
in Section 1.04.
Affiliate: With respect to any specified Person, means any other
---------
Person directly or indirectly controlling or controlled by or under direct
of indirect common control with such Person. For the purposes of this
definition, "control", when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
Aircraft: Means an aircraft, including engines therefor, owned by or
--------
leased to the Company and securing one or more Equipment Notes.
Authorized Agent: With respect to the Certificates of any series,
----------------
means any Paying Agent or Registrar for the Certificates of such series.
Basic Agreement: Means this Pass Through Trust Agreement, as the same
---------------
may from time to time be supplemented, amended or modified, but does not
include any Trust Supplement.
Book-Entry Certificates: With respect to the Certificates of any
-----------------------
series, means a beneficial interest in the Certificates of such series,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.09.
Business Day: With respect to the Certificates of any series, means
------------
any day other than a Saturday, a Sunday or a day on which commercial banks
are required or authorized to close in Chicago, Illinois, New York, New
York; and, so long as any such Certificate is outstanding, a city and state
in which the Trustee or any related Loan Trustee maintains its Corporate
Trust Office or receives and disburses funds.
Certificate: Means any one of the certificates executed and
-----------
authenticated by the Trustee, substantially in the form of Exhibit A
hereto.
Certificate Account: With respect to the Certificates or any series,
-------------------
means the account or accounts created and maintained for such series
pursuant to Section 4.01(a) and the related Trust Supplement.
Certificateholder or Holder: With respect to the Certificates of any
---------------------------
series, means the Person in whose name a Certificate of such series is
registered in the Register for Certificates of such series.
<PAGE>
4
Certificate Owner: With respect to the Certificates of any series,
-----------------
means, for purposes of Section 3.09, the Person who owns a Book Entry
Certificate of such series.
Clearing Agency: Means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
Clearing Agency Participant: Means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
Company: Means United Air Lines, Inc., a Delaware corporation, or its
-------
successor in interest pursuant to Section 5.02, or any other obligor with
respect to the Certificates (within the meaning of the Trust Indenture
Act).
Corporate Trust Office: With respect to the 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: With respect to the Certificates of any series, means
------------
the date designated as such in this Agreement.
Definitive Certificates: With respect to the Certificate of any
-----------------------
series, has the meaning specified in Section 3.09.
Direction: Has the meaning specified in Section 1.04(c).
---------
Equipment Note: With respect to the Certificates of any series, has
--------------
the meaning given to "Certificate" in the related Indenture.
ERISA: Means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor federal statute.
Escrow Account: With respect to the Certificates of any series, has
--------------
the meaning specified in Section 2.02(b).
Escrowed Funds: With respect to any Trust, has the meaning specified
--------------
in Section 2.02(b).
<PAGE>
5
Event of Default: Means, in respect of any Trust, the occurrence of
----------------
an Indenture Default under any Indenture pursuant to which Equipment Notes
held by such Trust were issued.
Fractional Undivided Interest: Means the fractional undivided
-----------------------------
interest in a Trust that is evidenced by a Certificate relating to such
Trust.
Indenture: With respect to any Trust, means each of the one or more
---------
separate trust indenture and security agreements or trust indentures and
mortgages or similar agreements described in, or on a schedule attached to,
this Agreement which relates to an issue of Equipment Notes to be held in
such Trust and an indenture having substantially the same terms and
conditions as such trust indenture and security agreement and which relates
to a Substitute Aircraft; as each such agreement may be amended or
supplemented in accordance with its respective terms; and Indentures means
----------
all of such agreements.
Indenture Default: With respect to any Indenture, means any Indenture
-----------------
Event of Default (as such term is defined in such Indenture).
Initial Regular Distribution Date: With respect to the Certificates
---------------------------------
of any series, means the first Regular Distribution Date on which a
Scheduled Payment is to be made.
Issuance Date: With respect to the Certificates of any series, means
-------------
the date of the issuance of such Certificates.
Lease: Means any lease between an Owner Trustee, as the lessor, and
-----
the Company, as the lessee, referred to in the related Indenture, as each
such lease may be amended or supplemented in accordance with its respective
terms; and Leases means all such Leases.
------
Letter of Representations: With respect to the Certificates of any
-------------------------
series, means the agreement among the Company, the Trustee and the initial
Clearing Agency substantially in the form attached as an Exhibit to the
related Trust Supplement.
Loan Trustee: With respect to any Equipment Note or the Indenture
------------
applicable thereto, means the bank or trust company designated as loan
trustee under such Indenture; and any successor to such Loan Trustee as
such trustee; and Loan Trustees means all of the Loan Trustees under the
-------------
Indentures.
<PAGE>
6
Note Documents: With respect to any Equipment Note, means the related
--------------
Indenture, Note Purchase Agreement, and if the related Aircraft is leased
to the Company, the related Lease and the related Owner Trustee's Purchase
Agreement.
Note Purchase Agreement: With respect to the Certificates of any
-----------------------
series, means any note purchase, participation or similar agreement
providing for, among other things, the purchase of Equipment Notes by the
Trustee on behalf of the relevant Trust; and Note Purchase Agreements means
------------------------
all such agreements.
Officer's Certificate: Means a certificate signed, (a) in the case of
---------------------
the Company, by (i) the Chairman of the Board of Directors, the President
or any Senior Vice President of the Company, signing alone or (ii) any Vice
President of the Company signing together with the Secretary, the Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company or, (b)
in the case of an Owner Trustee or a Loan Trustee, a Responsible Officer of
such Owner Trustee or such Loan Trustee, as the case may be.
Opinion of Counsel: Means a written opinion of legal counsel who (a)
------------------
in the case of counsel for the Company may be (i) a senior attorney in rank
of the officers of the Company a principal duty of which is furnishing
advice as to legal matters, (ii) Vedder, Price, Kaufman & Kammholz or (iii)
such other counsel designated by the Company and reasonably acceptable to
the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee
may be such counsel as may be designated by any of them whether or not such
counsel is an employee of any of them, and who shall be reasonably
acceptable to the Trustee.
Outstanding: With respect to Certificates of any series, means, as of
-----------
the date of determination, all Certificates of such series theretofore
authenticated and delivered under this Agreement, except:
(i) Certificates of such series theretofore cancelled by the
Registrar or delivered to the Trustee or the Registrar for
cancellation;
(ii) All of the Certificates of such series if money in the full
amount required to make the final distribution with respect to such
series pursuant to Section 11.01 hereof has been theretofore deposited
with the Trustee in trust for the Holders of the Certificates of such
series as provided in Section 4.01 pending distribution of such money
to such Certificateholders pursuant to such final distribution
payment; and
<PAGE>
7
(iii) Certificates of such series in exchange for or in lieu of
which other Certificates of such series have been authenticated and
delivered pursuant to this Basic Agreement.
Owner Participant: With respect to any Equipment Note, means the
-----------------
"Owner Participant", if any, as referred to in the Indenture pursuant to
which such Equipment Note is issued and any permitted successor or assign
of such Owner Participant; and Owner Participants at any time of
------------------
determination means all of the Owner Participants thus referred to in the
Indentures.
Owner Trustee: With respect to any Equipment Note, means the "Owner
-------------
Trustee", if any, as referred to in the Indenture pursuant to which such
Equipment Note is issued, not in its individual capacity but solely as
trustee; and Owner Trustees means all of the Owner Trustees party to any of
--------------
the respective Indentures.
Owner Trustee's Purchase Agreement: With respect to the certificates
----------------------------------
of any series, if the related Aircraft is leased to the Company, has the
meaning specified therefor in the related Lease.
Paying Agent: With respect to the Certificates of any series, means
------------
the paying agent maintained and appointed for the Certificates of such
series pursuant to Section 7.11.
Permitted Investments: Means obligations of the United States of
---------------------
America or agencies or instrumentalities thereof for the payment of which
the full faith and credit of the United States of America is pledged,
maturing in not more than 60 days or such lesser time as is necessary for
payment of any Special Payments on a Special Distribution Date.
Person: Means an person, including any individual, corporation,
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
Pool Balance: With respect to any Trust, means as of any date the
------------
aggregate unpaid principal amount of the Equipment Notes held in such Trust
on such date plus the amount of the principal payments on such Equipment
Notes held by the Trustee and not yet distributed plus the amount of any
moneys held in the related Escrow Account (other than earnings thereon).
The Pool Balance as of any Regular Distribution Date or Special
Distribution Date with respect to such Trust shall be computed after giving
effect to the payment of principal, if any, on such Equipment Notes and
distribution thereof to are made on that date.
<PAGE>
8
Pool Factor: With respect to any Trust, means as of any date the
-----------
quotient (rounded to the seventh decimal place) computed by dividing (i)
the Pool Balance as at such date by (ii) the aggregate original principal
amount of the Certificates of such Trust. The Pool Factor as of any
Regular Distribution Date or Special Distribution Date with respect to such
Trust shall be computed after giving effect to the payment of principal, if
any, on such Equipment Notes and distribution thereof to be made on that
date.
Postponed Notes: With respect to any Trust or the related series of
---------------
Certificates, means the Equipment Notes to be held in such Trust as to
which a Postponement Notice shall have been delivered pursuant to Section
2.02(b).
Postponement Notice: With respect to any Trust or the related series
-------------------
of Certificates, means an Officer's Certificate of the Company signed by an
officer of the Company (1) requesting that the Trustee temporarily postpone
purchase of the related Equipment Notes to a date later than the Issuance
Date of such series of Certificates, (2) identifying the amount of the
purchase price of each such Equipment Note and the aggregate purchase price
for all such Equipment Notes, (3) setting forth the reasons for such
postponement and (4) with respect to each such Equipment Note, either (a)
setting or resetting a new Transfer Date (which shall be on or prior to the
applicable Cut-off Date) for payment by the Trustee of such purchase price
and issuance of the related Equipment Note, or (b) indicating that such new
Transfer Date (which shall be on or prior to the applicable Cut-off Date)
will be set by subsequent written notice not less than one Business Day
prior to such new Transfer Date.
Record Date: With respect to any Trust or the related series of
-----------
Certificates, means (i) for Scheduled Payments to be distributed on any
Regular Distribution Date, other than the final distribution, with respect
to such series, the 15th day (whether or not a Business Day) preceding such
Regular Distribution Date, and (ii) for Special Payments to be distributed
on any Special Distribution Date, other than the final distribution, with
respect to such series, the 15th day (whether or not a Business Day)
preceding such Special Distribution Date.
Register and Registrar: With respect to the Certificates of any
----------------------
series, mean the register maintained and the registrar appointed for such
series pursuant to Sections 3.04 and 7.11.
Regular Distribution Date: With respect to distributions of Scheduled
-------------------------
Payments in respect of any series of Certificates, means each date
designated as such in this Agreement, until payment of all the Scheduled
Payments to be made under the Equipment Notes held in such Trust has been
made.
<PAGE>
9
Request: Means a request by the Company setting forth the subject
-------
matter of the request accompanied by an Officer's Certificate and an
opinion of Counsel as provided in Section 1.02 of this Basic Agreement.
Responsible Officer: With respect to any Trustee, any Loan Trustee
-------------------
and any Owner Trustee, means any officer in the Corporate Trust ?
Department of the Trustee, Loan Trustee or Owner Trustee or any other
officer customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject.
Scheduled Payment: With respect to any Equipment Note, means any
-----------------
payment (other than a Special Payment) of interest on or principal of and
interest on an Equipment Note due from the obligor thereon which
installment represents the installment of principal at the stated maturity
of such installment of principal on such Equipment Note or the payment of
regularly scheduled interest accrued on the unpaid principal amount of such
Equipment Note, or both.
SEC: Means the Securities and Exchange Commission, as from time to
---
time constituted or created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
Special Distribution Date: With respect to the Certificates of any
-------------------------
series, means each date on which a Special Payment is to be distributed as
specified in this Agreement.
Special Payment: With respect to a Special Distribution Date in
---------------
respect of the Certificates of any series, means (i) any payment of
principal of, premium, if any, and interest resulting from the redemption
or purchase of an Equipment Note held in the applicable Trust, (ii) any
payment of principal of and interest (including any interest accruing upon
default) on, or any other amount in respect of, any such Equipment Note
upon an Indenture Default in respect thereof or upon an acceleration under
the Indenture relating thereto, (iii) the amounts required to be
distributed in respect thereof pursuant to the last paragraph of Section
2.02(b), (iv) the amounts required to be distributed in respect thereof
pursuant to the penultimate paragraph of Section 2.02(b), (v) any Scheduled
Payment or any payment which is not in fact paid within five days of the
Regular Distribution Date applicable thereto or (vi) any proceeds from the
sale of any such Equipment Note by the Trustee pursuant to Article VI
hereof; and Special Payments means all of such Special Payments.
----------------
<PAGE>
10
Special Payments Account: With respect to the Certificates of any
------------------------
series, means the account or accounts created and maintained for such
series pursuant to Section 4.01(b) and the related Trust Supplement.
Specified Investments: With respect to any Trust, means, unless
---------------------
otherwise specified in the related Trust Supplement, (i) obligations of, or
guaranteed by, the United States Government or agencies thereof, (ii) open
market commercial paper of any corporation incorporated under the laws of
the United States of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or its
equivalent by Standard & Poor's Corporation, (iii) certificates of deposit
issued by commercial banks organized under the laws of the United States or
of any political subdivision thereof having a combined capital and surplus
in excess of $500,000,000 which banks or their holding companies have a
rating of A or its equivalent by Moody's Investors Service, Inc. or
Standard & Poor's Corporation; provided, however, that the aggregate amount
-------- -------
at an one time so invested in certificates of deposit issued by any one
bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S.
dollar denominated offshore certificates of deposit issued by, or offshore
time deposits with, any commercial bank described in (iii) or any
subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $500,000,000
with any of the obligations described in clauses (i) through (iv) as
collateral; provided further that if all of the above investments are
-------- -------
unavailable, the entire amounts to be invested may be used to purchase
Federal Funds from an entity described in clause (iii) above; and
provided further that no investment shall be eligible as a "Specified
-------- -------
Investment" unless the final maturity or date of return of such investment
is on or before the Special Distribution Date next following the Cut-off
Date for such Trust by more than 20 days.
Substitute Aircraft: With respect to any Trust, means any Aircraft of
-------------------
the type specified in this Agreement and, at the election of the Company,
substituted prior to the applicable Cut-off Date, pursuant to the terms of
this Agreement.
Transfer Date: Has the meaning assigned to that term or any of the
-------------
terms "Delivery Date", "Funding Date" or "Closing Date" in a Note Purchase
Agreement.
Trust: With respect to the Certificates of any series, means the
-----
trust under this Agreement.
Trustee: Means the institution executing this Basic Agreement as
-------
Trustee, or its successor in interest, and any successor or other trustee
appointed as provided herein; provided that if the same institution is not
--------
acting as the Trustee in respect of all series of Certificates, the phrase
"the Trustee" shall, unless the context otherwise
<PAGE>
11
requires, mean, as to any series of Certificates, the institution acting as
the Trustee in respect of such series.
Trust Indenture Act: Except as otherwise provided in Section 9.06,
-------------------
means the Trust Indenture Act of 1939 as in force at the date as of which
this Basic Agreement was executed.
Trust Property: With respect to any Trust, means the Equipment Notes
--------------
held as the property of such Trust and all monies at any time paid thereon
and all monies due and to become due thereunder, funds from time to time
deposited in the related Escrow Account, the related Certificate Account
and the related Special Payments Account and any proceeds from the sale by
the Trustee pursuant to Article VI hereof of any such Equipment Note.
Trust Supplement: Means an agreement supplemental hereto pursuant to
----------------
which (i) a separate Trust is created for the benefit of the Holders of the
Certificates of a series, (ii) the issuance of the Certificates of such
series representing fractional undivided interests in such Trust is
authorized and (iii) the terms of the Certificates of such series are
established.
Section 1.02. Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company, any Owner Trustee or any Loan Trustee to
the Trustee to take any action under any provision of this Basic Agreement or,
in respect of the Certificates of any series, this Agreement, the Company, such
Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the
Trustee an Officers' Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Basic Agreement or this
Agreement relating to the proposed action have been complied with and 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 request as to which the furnishing of such documents is
specifically required by any provision of this Basic Agreement or this Agreement
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Basic Agreement or, in respect of the
Certificates of any series, this Agreement (other than a certificate provided
pursuant to Section 8.04(d)) or any Trust Supplement shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Basic Agreement or this Agreement relating thereto;
<PAGE>
12
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Basic Agreement or, in respect of the Certificates of any
series, this Agreement, they may, but need not, be consolidated and form one
instrument.
Section 1.04. Acts of Certificateholders. (a) Any direction,
--------------------------
consent, waiver or other action provided by this Agreement in respect of the
Certificates of any series to be given or taken by Certificateholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Certificateholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of such Trust
Supplement and conclusive in favor of the Trustee, the Company and the related
Loan Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the
<PAGE>
13
Person executing such instrument acknowledged to him the execution thereof, or
by an affidavit of a witness to such execution sworn to before any such notary
or such other officer and where such execution is by an officer of a corporation
or association or a member of a partnership, on behalf of such corporation,
association or partnership, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other reasonable manner which the Trustee deems
sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates of any series Outstanding have
given any direction, consent or waiver (a "Direction"), under this Agreement,
Certificates owned by the Company, any related Owner Trustee, any related Owner
Participant or any Affiliate of any such Person shall be disregarded and deemed
not to be Outstanding for purposes of any such determination. In determining
whether the Trustee shall be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so disregarded.
Notwithstanding the foregoing, (i) if any such Person owns 100% of the
Certificates of any series Outstanding, such Certificates shall not be so
disregarded as aforesaid, and (ii) if any amount of Certificates of such series
so owned by any such Person have been pledged in good faith, such Certificates
shall not be disregarded as aforesaid if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Company, any related Owner Trustee,
any related Owner Participant or any Affiliate of any such Person.
(d) The Company may at its option by delivery of an Officers'
Certificate to the Trustee set a record date to determine the Certificateholders
in respect of the Certificates of any series entitled to give any consent
request, demand, authorization, direction, notice, waiver or other Act.
Notwithstanding Section 316(c) of the Trust Indenture Act, such record date
shall be the record date specified in such Officers' Certificate which shall be
a date not more than 30 days prior to the first solicitation of
Certificateholders in connection therewith. If such a record date is fixed,
such consent, request, demand, authorization, direction, notice, waiver or other
Act may be given before or after such record date, but only the
Certificateholders of record of the applicable series at the close of business
on such record date shall be deemed to be Certificateholders for the purposes of
determining whether Certificateholders of the requisite proportion of
Outstanding Certificates of such series have authorized or agreed or consented
to such consent, request, demand, authorization, direction, notice, waiver or
other Act, and for that purpose the Outstanding Certificates of such series
shall be computed as of such record date; provided that no such consent,
--------
request, demand, authorization, direction, notice, waiver or other act by the
Certificateholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Basic Agreement not later
than one year after the record date.
<PAGE>
14
(e) Any direction, consent, waiver or other action by the Holder of
any Certificate shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof, whether or not
notation of such action is made upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c), Certificates of
any series owned by or pledged to any Person shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Certificates of such
series.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Amount Unlimited; Issuable in Series. (a) The aggregate
------------------------------------
principal amount of Certificates which may be authenticated and delivered under
this Basic Agreement is unlimited. The Certificates may be issued from time to
time in one or more series and shall be designated generally as the "Pass
Through Certificates", with such further designations added or incorporated in
such title for the Certificates of each series as specified in the related Trust
Supplement. Each Certificate shall bear upon its face the designation so
selected for the series to which it belongs. All Certificates of the same
series shall be substantially identical except that the Certificates of a series
may differ as to denomination and as may otherwise be provided in the Trust
Supplement establishing the Certificates of such series. Each series of
Certificates issued pursuant to this Agreement will evidence fractional
undivided interests in the related Trust and will have no rights, benefits or
interests in respect of any other Trust or the Trust Property held therein. All
Certificates of the same series shall be in all respects equally and ratably
entitled to the benefits of this Agreement without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement.
(b) The following matters shall be established with respect to the
Certificates of each series issued hereunder by a Trust Supplement executed and
delivered by and between the Company and the Trustee:
(1) the formation of the Trust as to which the Certificates of such
series represent fractional undivided interests and its designation (which
designation shall distinguish such Trust from each other Trust created
under this Basic Agreement and a Trust Supplement);
<PAGE>
15
(2) the specific title of the Certificates of such series (which title
shall distinguish the Certificates of such series from each other series of
Certificates created under this Basic Agreement and a Trust Supplement);
(3) any limit upon the aggregate principal amount of the Certificates
of such series which may be authenticated and delivered (which limit shall
not pertain to Certificates authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Certificates of
the series pursuant to Sections 3.03, 3.04 and 3.05);
(4) the Cut-off Date with respect to the Certificates of such series;
(5) the Regular Distribution Dates applicable to the Certificates of
such series;
(6) the Special Distribution Dates applicable to the Certificates of
such series and the related Trust;
(7) if other than as provided in Section 7.11(b), the Registrar or the
Paying Agent for the Certificates of such series, including any Co-
Registrar or additional Paying Agent;
(8) if other than as provided in Section 3.01, the denominations in
which the Certificates of such series shall be issuable;
(9) the specific form of the Certificates of such series (including
the interest rate applicable thereto) and whether or not Certificates of
such series are to be issued as Book-Entry Certificates and, if such
Certificates are to be Book-Entry Certificates, the Form of Letter of
Representations, if any;
(10) a description of the Equipment Notes to be acquired and held in
the related Trust and of the related Aircraft and Note Documents;
(11) provisions with respect to the terms for which the definitions
set forth in Article I hereof or the terms of Section 11.01 hereof permit
or require further specification in the related Trust Supplement;
(12) any restrictions (including legends) in respect of ERISA; and
<PAGE>
16
(13) any other terms of the Certificates of such series (which of
such terms shall not be inconsistent with the provisions of the Trust
Indenture Act), including any terms which may be required or advisable
under United States laws or regulations or advisable in connection with the
marketing of Certificates of the series.
(c) At any time and from time to time after the execution and delivery
of this Basic Agreement and a Trust Supplement forming a Trust and establishing
the terms of Certificates of a series, Certificates of such series shall be
executed, authenticated and delivered by the Trustee to the Person or Persons
specified by the Company upon request of the Company and upon satisfaction of
any conditions precedent set forth in such Trust Supplement or in any other
document to which a Trustee is a party relating to the issuance of the
Certificates of such series.
Section 2.02 Acquisition of Equipment Notes. (a) Unless otherwise
------------------------------
specified in the related Trust Supplement, on or prior to the Issuance Date of
the Certificates of a series, the Trustee shall execute and deliver the related
Note Purchase Agreements in the form delivered to the Trustee by the Company.
The Trustee shall issue and sell such Certificates, in authorized denominations
and in such Fractional Undivided Interests, so as to result in the receipt of
consideration in an amount equal to the aggregate principal amount of such
Equipment Notes and, concurrently therewith, the Trustee shall purchase,
pursuant to the terms and conditions of the Note Purchase Agreements, the
Equipment Notes at a purchase price equal to the amount of such consideration so
received. Except as provided in Sections 3.03, 3.04 and 3.05 hereof, the
Trustee shall not execute, authenticate or deliver Certificates of such series
in excess of the aggregate amount specified in this paragraph. The provisions
of this Subsection (a) are subject to the provisions of Subsection (b) below.
(b) If on or prior to the Issuance Date with respect to a series of
Certificates the Company shall deliver to the Trustee a Postponement Notice
relating to one or more Postponed Notes, the Trustee shall postpone the purchase
of such Postponed Notes and shall deposit into an escrow account (as to such
Trust, the "Escrow Account") to be maintained as a part of the related Trust an
amount equal to the purchase price of such Postponed Notes (the "Escrowed
Funds"). The Escrowed Funds so deposited shall be invested by the Trustee at
the direction and risk of, and for the benefit of, the Company in Specified
Investments (i) maturing no later than any scheduled Transfer Date relating to
such series of Certificates or (ii) if no such Transfer Date has been scheduled,
maturing on the next Business Day, or (iii) if the Company has given notice to
the Trustee that any Postponed Notes will not be issued, with respect to the
portion of the Escrowed Funds relating to such Postponed Notes, maturing on the
next applicable Special Distribution Date, if such investments are reasonably
available for purchase. The Trustee shall make withdrawals from the Escrow
Account only as provided in this Agreement. Upon request of the Company on one
or more occasions and the satisfaction of the closing conditions specified in
the applicable Note Purchase Agreements on or prior to the related Cut-off Date,
the Trustee
<PAGE>
17
shall purchase the applicable Postponed Notes with the Escrowed Funds withdrawn
from the Escrow Account. The purchase price shall equal the principal amount of
such Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments (other than any earnings thereon) shall be reinvested by the Trustee
at the direction and risk of, and for the benefit of, the Company in Specified
Investments maturing as provided in the preceding paragraph.
Any earnings on Specified Investments received from time to time by
the Trustee shall be promptly distributed to the Company. The Company shall pay
to the Trustee for deposit to the relevant Escrow Account an amount equal to any
losses on such Specified Investments as incurred. On the Initial Regular
Distribution Date in respect of the Certificates of any series, the Company will
pay (in immediately available funds) to the Trustee an amount equal to the
interest that would have accrued on any Postponed Notes, if any, purchased after
the Issuance Date if such Postponed Notes had been purchased on the Issuance
Date, from the Issuance Date to, but not including, the date of the purchase of
such Postponed Notes by the Trustee.
If, in respect of the Certificates of any series, the Company notifies
the Trustee prior to the Cut-off Date that any Postponed Notes will not be
issued on or prior to the Cut-off Date for any reason, on the next Special
Distribution Date for such Certificates occurring more than 20 days following
the date of such notice (i) the Company shall pay to the Trustee for deposit in
the related Special Payments Account, in immediately available funds, an amount
equal to the interest that would have accrued on the Postponed Notes designated
in such notice at a rate equal to the interest rate applicable to such
Certificates from the Issuance Date to, but not including, such Special
Distribution Date and (ii) the Trustee shall transfer an amount equal to that
amount of Escrowed Funds that would have been used to purchase the Postponed
Notes designated in such notice and the amount paid by the Company pursuant to
the immediately preceding clause (i) to the related Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
If, on such Cut-off Date, an amount equal to less than all of the
Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the next
Special Distribution Date occurring more than 20 days following such Cut-off
Date (i) the Company shall pay to the Trustee for deposit in such Special
Payments Account, in immediately available funds, an amount equal to the
interest that would have accrued on such Postponed Notes contemplated to be
purchased with such unused Escrowed Funds (other than Escrowed Funds referred to
in the
<PAGE>
18
immediately preceding paragraph) but not so purchased at a rate equal to the
interest rate applicable to such Certificates from the Issuance Date to, but not
including, such Special Distribution Date and (ii) the Trustee shall transfer
such unused Escrowed Funds and the amount paid by the Company pursuant to the
immediately preceding clause (i) to such Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
Section 2.03. Acceptance by Trustee. The Trustee, upon the execution
---------------------
and delivery of a Trust Supplement creating a Trust and establishing a series of
Certificates, shall acknowledge its acceptance of all right, title and interest
in and to the Equipment Notes to be acquired pursuant to Section 2.02 hereof and
the Note Purchase Agreements and shall declare that the Trustee holds and will
hold such right, title and interest, together with all other property
constituting the Trust Property of such Trust, for the benefit of all then
present and future Certificateholders of such series, upon the trusts herein and
in such Trust Supplement set forth. By its payment for and acceptance of each
Certificate of such series issued to it under this Agreement, each initial
Certificateholder of such series as grantor of such Trust shall thereby join in
the creation and declaration of such Trust.
Section 2.04. Limitation of Powers. Each Trust shall be constituted
--------------------
solely for the purpose of making the investment in the Equipment Notes provided
for in the related Trust Supplement, and, except as set forth herein or in this
Agreement, the Trustee shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular, the Trustee
shall not be authorized or empowered to do anything that would cause such Trust
to fail to qualify as a "grantor trust" for federal income tax purposes
(including as subject to this restriction, acquiring the Aircraft (as defined in
the respective related Indentures) by bidding such Equipment Notes or otherwise,
or taking any action with respect to any such Aircraft once acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of Certificates. The
------------------------------------------------
Certificates shall be issued in registered form without coupons and shall be
substantially in the form attached hereto as Exhibit A, with such omissions,
variations and insertions as are permitted by this Agreement, and may have such
letters, numbers or other marks of identification and such legends or
endorsements printed, lithographed or engraved thereon, as may be required to
comply with the rules of any securities exchange on which such Certificates may
be listed or to conform to any usage in respect thereof, or as may, consistently
herewith, be prescribed by the Trustee or by the officer executing such
<PAGE>
19
Certificates, such determination by said officer to be evidenced by his signing
the Certificates.
Except as provided in Section 3.09, the definitive Certificates of
such series shall be printed, lithographed or engraved or produced by any
combination of these methods or may be produced in any other manner permitted by
the rules of any securities exchange on which the Certificates may be listed,
all as determined by the officer executing such Certificates, as evidenced by
his execution of such Certificates.
Except as otherwise provided in the related Trust Supplement, the
Certificates of each series shall be issued in minimum denominations of $1,000
or integral multiples thereof except that one Certificate of such series may be
issued in a denomination of less than $1,000.
The Certificates of such series shall be executed on behalf of the
Trustee by manual or facsimile signature of a Responsible Officer of the
Trustee. Certificates of any series bearing the manual or facsimile signature
of an individual who was, at the time when such signature was affixed,
authorized to sign on behalf of the Trustee shall be valid and binding
obligations of the Trustee, notwithstanding that such individual has ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such office at the date of such Certificates. No Certificate of
any series shall be entitled to any benefit under this Agreement, or be valid
for any purpose unless there appears on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit B hereto executed
by the Trustee by manual signature, and such certificate of authentication upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates of any series shall be dated on the date of their authentication.
Section 3.02. Authentication of Certificates. The Trustee shall duly
------------------------------
authenticate and deliver Certificates of each series in authorized denominations
equalling in the aggregate the aggregate principal amount of the Equipment Notes
to be purchased by the Trustee pursuant to the related Note Purchase Agreements
and evidencing the entire ownership of the related Trust.
Section 3.03. Temporary Certificates. Pending the preparation of
----------------------
definitive Certificates of any series, the Trustee may execute, authenticate and
deliver temporary Certificates of such series which are printed, lithographed,
typewritten, or otherwise produced, in any denomination, containing
substantially the same terms and provisions as set forth in Exhibit A hereto,
except for such appropriate insertions, omissions, substitutions and other
variations relating to their temporary nature as the officer executing such
temporary Certificates may determine, as evidenced by its execution of such
temporary Certificates.
<PAGE>
20
If temporary Certificates of any series are issued, the Company will
cause definitive Certificates of such series to be prepared without unreasonable
delay. After the preparation of definitive Certificates of such series, the
temporary Certificates shall be exchangeable for definitive Certificates upon
surrender of such temporary Certificates at the Corporate Trust Office of the
Trustee, or at the office or agency of the Trustee maintained in accordance with
Section 7.11, without charge to the holder. Upon surrender for cancellation of
any one or more temporary Certificates, the Trustee shall execute, authenticate
and deliver in exchange therefor definitive Certificates of like series, in
authorized denominations and of a like aggregate Fractional Undivided Interest.
Until so exchanged, such temporary Certificates shall in all respects be
entitled to the same benefits under this Agreement as definitive Certificates.
Section 3.04. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
The Trustee shall cause to be kept at the office or agency to be maintained by
it in accordance with the provisions of Section 7.11 a register (the "Register")
for each series of Certificates in which, subject to such reasonable regulations
as it may prescribe, the Trustee shall provide for the registration of
Certificates of such series and of transfers and exchanges of such Certificates
as herein provided. The Trustee shall initially be the registrar (the "
Registrar") for the purpose of registering Certificates of each series and
transfers and exchanges of such Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office or such other office or agency, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of like series, in authorized
denominations of a like aggregate Fractional Undivided Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of like series, in authorized denominations and of a like
aggregate Fractional Undivided Interest, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates that the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder thereof or its attorney duly authorized
in writing.
No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Trustee shall
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
<PAGE>
21
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and subsequently destroyed by the Trustee.
Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Registrar or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such destroyed, lost or stolen Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate or Certificates of like series, in authorized denominations and of
like Fractional Undivided Interest. In connection with the issuance of any new
Certificate under this Section 3.05, the Trustee shall require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee and the Registrar) connected therewith. Any duplicate Certificate
issued pursuant to this Section 3.05 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the related Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent of the Trustee may treat the person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.02 and for all other purposes whatsoever,
and none of the Trustee, the Registrar or any Paying Agent of the Trustee shall
be affected by any notice to the contrary.
Section 3.07. Cancellation. All Certificates surrendered for payment
------------
or transfer or exchange, if surrendered to any Person party hereto other than
the Registrar, shall be delivered to the Registrar for cancellation. No
Certificates shall be authenticated in lieu of or in exchange for any
Certificates cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by the Registrar
shall be destroyed and a certification of their destruction delivered to the
Trustee.
Section 3.08. Limitation of Liability for Payments. All payments
------------------------------------
distributions made to Certificateholders of any series under the related Trust
Supplement shall be made only from the Trust Property of the related Trust and
only to the extent that the Trustee shall have sufficient income or proceeds
from such Trust Property to make such payments in accordance with the terms of
Article IV of this Agreement. Each Certificateholder, by its acceptance of a
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Property of the related Trust to the extent available for distribution to
such Certificateholder as provided in this Agreement.
<PAGE>
22
Section 3.09. Book-Entry and Definitive Certificates. (a) Except
--------------------------------------
for one Certificate of each series that may be issued in a denomination of less
than $1,000, the Certificates of any series may be issued in the form of one or
more typewritten Certificates representing the Book-Entry Certificates of such
series, to be delivered to The Depository Trust Company, as the initial Clearing
Agency, by, or on behalf of, the Company. In such case, the Certificates of
such series delivered to The Depository Trust Company shall initially be
registered on the Register in the name of CEDE & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Certificates of such
series, except as provided above and in Subsection (d) below. As to the
Certificates of any series, except with respect to the one Certificate of such
series that may be issued in a denomination of less than $1,000, unless and
until definitive, fully registered Certificates (the "Definitive Certificates")
have been issued pursuant to Subsection (d) below:
(i) the provisions of this Section 3.09 shall be in full force and
effect;
(ii) the Company, the Paying Agent, the Registrar and the Trustee may
deal with the Clearing Agency for all purposes (including the making of
distributions on the Certificates) as the authorized representative of the
Certificate Owners;
(iii) to the extent that the provisions of this Section 3.09
conflict with any other provisions of this Agreement (other than the
provisions of any Trust Supplement amending this Section 3.09 as permitted
by this Basic Agreement), the provisions of this Section 3.09 shall
control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
Participants; and until Definitive Certificates are issued pursuant to
Subsection (d) below, the Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest and premium, if any, on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders of such series
holding Certificates of such series evidencing a specified percentage of
the Fractional Undivided Interests in the related Trust, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in Certificates of such
series and has delivered such instructions to the Trustee. The Trustee
shall have no
<PAGE>
23
obligation to determine whether the Clearing Agency has in fact received
any such instructions.
(b) Except with respect to the one Certificate of each series that may
be issued in a denomination of less than $1,000, whenever notice or other
communication to the Certificateholders of such series is required under this
Agreement, unless and until Definitive Certificates shall have been issued
pursuant to Subsection (d) below, the Trustee shall give all such notices and
communications specified herein to be given to Certificateholders of such series
to the Clearing Agency and/or the Clearing Agency Participants, and shall make
available additional copies as requested by such Clearing Agency Participants.
(c) Unless and until Definitive Certificates of a series are issued
pursuant to Subsection (d) below, on the Record Date prior to each applicable
Regular Distribution Date and Special Distribution Date, the Trustee will
request from the Clearing Agency a Securities Position Listing setting forth the
names of all Clearing Agency Participants reflected on the Clearing Agency's
books as holding interests in the Certificates on such Record Date. The Trustee
shall mail to each such Clearing Agency Participant the statements described in
Section 4.03 hereof.
(d) If with respect to the Certificates of any series (i) the Company
advises the Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities and the Trustee or the Company
is unable to locate a qualified successor, (ii) the Company at its option,
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Certificate Owners of Book-Entry Certificates of such series evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the related Trust, by Act of said Certificate Owners delivered to the Company
and the Trustee, advise the Company, the Trustee and the Clearing Agency through
the Clearing Agency Participants in writing that the continuation of a book-
entry system through the Clearing Agency is no longer in the best interests of
the Certificate Owners of such series, then the Trustee shall notify all
Certificate Owners of such series, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Certificates.
Upon surrender to the Trustee of all the Certificates of such series held by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration of Definitive Certificates in the names of Certificate
Owners of such series, the Trustee shall issue and deliver the Definitive
Certificates of such series in accordance with the instructions of the Clearing
Agency. None of the Company, the Registrar, the Paying Agent or the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such registration
instructions. Upon the issuance of Definitive Certificates of such series, the
Trustee shall recognize the Person in whose name the
<PAGE>
24
Definitive Certificates are registered in the Register as Certificateholders
hereunder. Neither the Company nor the Trustee shall be liable if the Trustee
or the Company is unable to locate a qualified successor Clearing Agency.
(e) Except as otherwise provided in the related Trust Supplement, the
Trustee shall enter into the applicable Letter of Representations with respect
to such series of Certificates and fulfill its responsibilities thereunder.
(f) The provisions of this Section 3.09 may be made inapplicable to
any series or may be amended with respect to any series in the related Trust
Supplement.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account. (a)
------------------------------------------------
The Trustee shall establish and maintain on behalf of the Certificateholders of
each series a Certificate Account as one or more non-interest-bearing accounts.
The Trustee shall hold the Certificate Account in trust for the benefit of the
Certificateholders of such series, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a Scheduled
Payment is made under the Indenture to the Trustee, as holder of the Equipment
Notes issued under such Indenture, the Trustee upon receipt shall immediately
deposit the aggregate amount of such Scheduled Payment in the applicable
Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders of each series a Special Payments Account as one or more
accounts, which shall be non-interest bearing except as provided in Section
4.04. The Trustee shall hold the Special Payments Account in trust for the
benefit of the Certificateholders of such series and shall make or permit
withdrawals therefrom only as provided in this Agreement. On each day when one
or more Special Payments (other than a Special Payment that represents the
proceeds of any sale pursuant to Article VI hereof by the Trustee of an
Equipment Note) are made under the Indenture to the Trustee, as holder of the
Equipment Notes issued under such Indenture or pursuant to the last two
paragraphs of Section 2.02(b), the Trustee upon receipt shall immediately
deposit the aggregate amounts of such Special Payments in such Special Payments
Account. Upon the sale of the Equipment Notes by the Trustee pursuant to
Article VI hereof and the realization of any proceeds thereof, the Trustee shall
deposit the aggregate amount of such proceeds as a Special Payment in the
applicable Special Payments Account.
<PAGE>
25
(c) The Trustee shall present to the Loan Trustee to which an
Equipment Note relates such Equipment Note on the date of its stated final
maturity or, in the case of any Equipment Note which is to be redeemed in whole
pursuant to the relevant Indenture, on the applicable redemption date under such
Indenture.
Section 4.02. Distributions from Certificate Account and Special
--------------------------------------------------
Payments Account. (a) On each Regular Distribution Date with respect to a
- ----------------
series of Certificates or as soon thereafter as the Trustee has confirmed
receipt of the payment of the Scheduled Payments due on the Equipment Notes held
in the related Trust on such date, the Trustee shall distribute out of the
applicable Certificate Account the entire amount deposited therein pursuant to
Section 4.01(a). There shall be so distributed to each Certificateholder of
record of such series on the Record Date with respect to such Regular
Distribution Date (other than as provided in Section 11.01 concerning the final
distribution) by check mailed to such Certificateholder, at the address
appearing in the Register, such Certificateholder's pro rata share (based on the
aggregate Fractional Undivided Interest in the related Trust held by such
Certificateholder) of the aggregate amount in the applicable Certificate Amount.
(b) On each Special Distribution Date with respect to any Special
Payment with respect to a series of Certificates or as soon thereafter as the
Trustee has confirmed receipt of the Special Payments due on the Equipment Notes
held in the related Trust or realized upon the sale of such Equipment Note, the
Trustee shall distribute out of the applicable Special Payments Account the
entire amount deposited therein pursuant to Section 4.01(b) of such Special
Payment. There shall be so distributed to each Certificateholder of record of
such series on the Record Date with respect to such Special Distribution Date
(other than as provided in Section 11.01 concerning the final distribution) by
check mailed to such Certificateholder, at the address appearing in the
Register, such Certificateholder's pro rata share (based on the aggregate
Fractional Undivided Interest in the related Trust held by such
Certificateholder) of the aggregate amount in the applicable Special Payments
Account on account of such Special Payment.
(c) The Trustee shall, at the expense of the Company, cause notice of
each Special Payment with respect to a series of Certificates to be mailed to
each Certificateholder of such series at his address as it appears in the
Register. In the event of redemption or purchase of Equipment Notes held in the
related Trust, such notice shall be mailed not less than 20 days prior to the
date any such Special Payment is scheduled to be distributed. In the case of
any other Special Payments, such notice shall be mailed as soon as practicable
after the Trustee has confirmed that it has received funds for such Special
Payment. Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor (except
as otherwise provided in Section 11.01),
<PAGE>
26
(ii) the amount of the Special Payment for each $1,000 face amount
Certificate (taking into account any payment to be made by the Company
pursuant to Section 2.02(b)) and the amount thereof constituting principal,
premium, if any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a Regular
Distribution Date for the Certificates of such series, the total amount to
be received on such date for each $1,000 face amount Certificate.
If the amount of premium, if any, payable upon the redemption or purchase of an
Equipment Note has not been calculated at the time that the Trustee mails notice
of a Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in any Trust is
cancelled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder of the related series at
its address as it appears on the Register.
Section 4.03. Statements to Certificateholders. (a) On each Regular
--------------------------------
Distribution Date and Special Distribution Date with respect to a series of
Certificates, the Trustee will include with each distribution to
Certificateholders of the related series a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date, as the case may be, setting forth the following information
(per a $1,000 face amount Certificate as to (i) and (ii) below):
(i) The amount of such distribution allocable to principal and the
amount allocable to premium, if any;
(ii) The amount of such distribution allocable to interest; and
(iii) The Pool Balance and the Pool Factor of the related Trust.
(b) Within a reasonable period of time after the end of each calendar
year but not later than the latest date permitted by law, the Trustee shall
furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the related
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar year, for the
applicable portion of such year, and such other items as are readily available
to the Trustee and which a
<PAGE>
27
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its Federal income tax returns.
Section 4.04. Investment of Special Payment Moneys. Any money
------------------------------------
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Investments by the Trustee pending
distribution of such Special Payment pursuant to Section 4.02. Any investment
made pursuant to this Section 4.04 shall be in such Permitted Investments having
maturities not later than the date that such moneys are required to be used to
make the payment required under Section 4.02 on the applicable Special
Distribution Date and the Trustee shall hold any such Permitted Investments
until maturity. The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by reason of the
willful misconduct or negligence of the Trustee. All income and earnings from
such investments shall be distributed on such Special Distribution Date as part
of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company, at
----------------------------------
its own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
- -------- -------
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
Section 5.02. Consolidation, Merger, etc. The Company shall not
---------------------------
consolidate with or merge into any other corporation or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
(i) be a citizen of the United States as defined in Section 40102(a)(15) of
Title 49 of the United States Code, as amended, and (ii) hold an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code, as amended,
for aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo;
<PAGE>
28
(b) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
execute and deliver to the Trustee applicable to the Certificates of each
series a duly authorized, valid, binding and enforceable agreement in form
and substance reasonably satisfactory to the Trustee containing an
assumption by such successor corporation or Person of the due and punctual
performance and observance of each covenant and condition of the Note
Documents and of this Agreement applicable to the Certificates of each
series to be performed or observed by the Company;
(c) immediately after giving effect to such transaction, no Event of
Default applicable to the Certificates of each series or event which is, or
after notice or passage of time, or both, would be, such an Event of
Default shall have occurred and be continuing; and
(d) the Company shall have delivered to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel of the Company
reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, conveyance, transfer or lease and the assumption
agreement mentioned in clause (b) above comply with this Section 5.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of the Company as an entirety in accordance
with this Section 5.02, the successor corporation or Person formed by such
consolidation or into which the Company is merged or 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 applicable
to the Certificates of each series with the same effect as if such successor
corporation or Person had been named as the Company herein. No such conveyance,
transfer or lease of substantially all of the assets of the Company as an
entirety shall have the effect of releasing the Company or any successor
corporation or Person which shall theretofore have become such in the manner
prescribed in this Section 5.02 from its liability in respect of any Note
Document and of this Agreement applicable to the Certificates of such series to
which it is a party.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. If, in respect of any Trust, any
-----------------
Indenture Default under any related Indenture shall occur and be continuing,
then, in each and every case, so long as such Event of Default shall be
continuing, the Trustee may (a) vote all
<PAGE>
29
Equipment Notes issued under the relevant Indenture held in such Trust, and upon
the direction of the Certificateholders holding Certificates evidencing
Fractional Undivided Interests in such Trust aggregating not less than a
majority in interest in such Trust, the Trustee shall vote not less than a
corresponding majority of such Equipment Notes in favor of directing the Loan
Trustee under such Indenture to declare the unpaid principal amount of the
Equipment Notes then outstanding to which such Event of Default relates and
accrued interest thereon to be due and payable under, and in accordance with the
provisions of, such Indenture, and (b) may in accordance with the provisions of
the relevant Indenture vote such Equipment Notes held in such Trust to direct
the Loan Trustee regarding the exercise of remedies provided in such Indenture.
In addition, after an Indenture Default shall have occurred and be
continuing with respect to any Equipment Note held in a Trust, the Trustee
therein may in its discretion, and upon the direction of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in such Trust shall, by such officer or agent
as it may appoint, sell, convey, transfer and deliver such Equipment Note,
without recourse to or warranty by the Trustee or any Certificateholder, to any
Person. In any such case, the Trustee shall sell, assign, contract to sell or
otherwise dispose of and deliver such Equipment Note or Equipment Notes in one
or more parcels at public or private sale or sales, at any location or locations
at the option of the Trustee, all upon such terms and conditions as it may
reasonably deem advisable and at such prices as it may reasonably deem
advisable, for cash. If the Trustee so decides or is required to sell or
otherwise dispose of any Equipment Note pursuant to this Section, the Trustee
shall take such of the actions described above as it may reasonably deem most
effectual to complete the sale or other disposition of such Equipment Note, so
as to provide for the payment in full of all amounts due on the related series
of Certificates. Notwithstanding the foregoing, any action taken by the Trustee
under this Section shall not, in the reasonable judgment of the Trustee, be
adverse to the best interests of the Certificateholders of such series.
Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of
------------------------------------
all or any part of the Equipment Notes made either under the power of sale given
under this Agreement or otherwise for the enforcement of this Agreement, the
following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment Notes. Any
-----------------------------------------------------------
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase any of the Equipment Notes, and
upon compliance with the terms of sale, may hold, retain, possess and
dispose of such Equipment Notes in its own absolute right without further
accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the
--------------------------------------------
Trustee or of the officer making such sale shall be a sufficient discharge
to any
<PAGE>
30
purchaser for his purchase money, and, after paying such purchase money and
receiving such receipt, such purchaser or its personal representative or
assigns shall not be obliged to see to the application of such purchase
money, or be in any way answerable for any loss, misapplication or non-
application thereof.
(3) Application of Moneys Received upon Sale. Any moneys collected by
----------------------------------------
the Trustee upon any sale made either under the power of sale given by this
Agreement or otherwise for the enforcement of this Agreement shall be
applied as provided in Section 4.02.
Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May
-------------------------------------------------------
Bring Suit. If there shall be a failure to make payment of the principal of,
- ----------
premium, if any, or interest on any Equipment Note, or if there shall be any
failure to pay Rent (as defined in the relevant Lease) under any Lease when due
and payable, then the Trustee, in its own name, and as trustee of an express
trust, as holder of such Equipment Notes, to the extent permitted by and in
accordance with the terms of the Note Documents, shall be entitled and empowered
to institute any suits, actions or proceedings at law, in equity or otherwise,
for the collection of the sums so due and unpaid on such Equipment Notes or
under such Lease and may prosecute any such claim or proceeding to judgment or
final decree with respect to the whole amount of any such sums so due and
unpaid.
Section 6.04. Control by Certificateholders. Subject to Section
-----------------------------
6.03, the Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
related Trust shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee with respect
to such Trust, or exercising any trust or power conferred on the Trustee under
this Agreement, including any right of the Trustee as holder of the Equipment
Notes, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Agreement and would not involve the Trustee in personal liability
or expense,
(2) the Trustee shall not determine that the action so directed would
be unjustly prejudicial to the Certificateholders of such series not taking
part in such direction,
(3) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(4) if an Indenture Default under a related Indenture shall have
occurred and be continuing, such direction shall not obligate the Trustee
to vote more than a corresponding majority of the related Equipment Notes
held by the Trust in favor of
<PAGE>
31
directing any action by the related Loan Trustee with respect to such
Indenture Default.
Section 6.05. Waiver of Past Defaults. The Certificateholders
-----------------------
holding Certificates of a Series evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the related Trust may on
behalf of all of the Certificateholders of such series waive any past Event of
Default hereunder or under the related Trust Supplement with respect to such
series and its consequences or may instruct the Trustee to waive any past
default under the related Indenture or this Agreement or the related Trust
Supplement with respect to such series and its consequences, except a default:
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates of such series, or
(2) in the payment of the principal of (premium, if any) or interest
on the Equipment Notes, or
(3) in respect of a covenant or provision hereof which under Article
IX hereof cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate of such series
affected.
Upon any such waiver, such default shall cease to exist with respect
to the Certificates of such series and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose in respect of such series
and any direction given by the Trustee on behalf of the Certificateholders of
such series to the relevant Loan Trustee shall be annulled with respect thereto;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Upon any such waiver, the
Trustee shall vote the Equipment Notes issued under the relevant Indenture to
waive the corresponding Indenture Default.
Section 6.06. Right of Certificateholders to Receive Payments Not to
------------------------------------------------------
Be Impaired. Anything in this Agreement to the contrary notwithstanding,
- -----------
including, without limitation, Section 6.07 hereof, the right of any
Certificateholder to receive distributions of payments required pursuant to
Section 4.02 hereof on the applicable Certificates when due, or to institute
suit for the enforcement of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be impaired or
affected without the consent of such Certificateholder.
Section 6.07. Certificateholders May Not Bring Suit Except Under
--------------------------------------------------
Certain Conditions. A Certificateholder of any series shall not have the right
- ------------------
to institute any suit, action or proceeding at law or in equity or otherwise
with respect to this Agreement, for the
<PAGE>
32
appointment of a receiver or for the enforcement of any other remedy under this
Agreement, unless:
(1) such Certificateholder previously shall have given written notice
to the Trustee of a continuing Event of Default;
(2) the Certificateholders holding Certificates of such series
evidencing Fractional Undivided Interests aggregating not less than 25% of
the related Trust shall have requested the Trustee in writing to institute
such action, suit or proceeding and shall have offered to the Trustee
indemnity as provided in Section 7.02(e);
(3) the Trustee shall have refused or neglected to institute an such
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by the
Certificateholders holding Certificates of such series evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the related Trust.
It is understood and intended that no one or more of the
Certificateholders of any series shall have any right in any manner whatsoever
hereunder or under the related Trust Supplement or under the Certificates of
such series to (i) surrender, impair, waive, affect, disturb or prejudice any
property in the Trust Property of the related Trust or the lien of any related
Indenture on any property subject thereto, or the rights of the
Certificateholders of such series or the holders of the related Equipment Notes,
(ii) obtain or seek to obtain priority over or preference with respect to any
other such Certificateholder of such series or (iii) enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all the Certificateholders of such series subject to the
provisions of this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given hereunder to
-------------------
the Trustee or to any of the Certificateholders of any series shall not be
exclusive of any other remedy or remedies, and every such remedy shall be
cumulative and in addition to every other remedy given hereunder or now or
hereafter given by statute, law, equity or otherwise.
<PAGE>
33
ARTICLE VII
THE TRUSTEE
Section 7.01. Notice of Defaults. As promptly as practicable after,
------------------
and in any event within 90 days after, the occurrence of any default (as such
term is defined below) hereunder, the Trustee shall transmit by mail to the
Company, any related Owner Trustees, the related Loan Trustees and the
Certificateholders holding Certificates of the related series in accordance with
Section 313(c) of the Trust Indenture Act, notice of such default hereunder
known to the Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the payment of the
- -------- -------
principal of (premium, if any) or interest on any Equipment Note, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interests of the Certificateholders of the related
series. For the purpose of this Section in respect of any Trust, the term
"default" means any event that is, or after notice or lapse of time or both
would become, an Event of Default in respect of that Trust.
Section 7.02. Certain Rights of Trustee. Subject to the provisions
-------------------------
of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture 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 or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request;
(c) whenever in the administration of this Agreement the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate of the Company, any
related Owner Trustee or any related Loan Trustee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in
<PAGE>
34
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction
of any of the Certificateholders pursuant to this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the cost, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the 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, direction, consent, order,
bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by
or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Certificateholders holding Certificates of any series evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the related Trust relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement; and
(i) the Trustee shall not be required to expend or risk its own funds
in the performance of any of its duties under this Agreement, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.03. Not Responsible for Recitals or Issuance of
-------------------------------------------
Certificates. The recitals contained herein and in the Certificates of each
- ------------
series, except the certificates of authentication, shall not be taken as the
statements of the Trustee, and the Trustee assumes no responsibility for their
correctness. Subject to Section 7.14, the Trustee makes no representations as
to the validity or sufficiency of this Basic Agreement or any Trust Supplement,
any Note Documents, any Note Purchase Agreement, any Equipment Notes or the
Certificates of any series, except that the Trustee hereby represents and
warrants that this Basic Agreement has been, and each Trust Supplement and each
Certificate of each series to
<PAGE>
35
which such Trustee is a party will be, executed and delivered by one of its
officers who is duly authorized to execute and deliver such document on its
behalf.
Section 7.04. May Hold Certificates. The Trustee, any Paying Agent,
---------------------
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity, may become the owner or pledgee of
Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act,
may otherwise deal with the Company, any Owner Trustees or the Loan Trustees
with the same rights it would have if it were not Trustee, Paying Agent,
Registrar or such other agent.
Section 7.05. Money Held in Trust. Money held by the Trustee or the
-------------------
Paying Agent in trust hereunder or under any Trust Supplement need not be
segregated from other funds except to the extent required herein or by law and
neither the Trustee nor the Paying Agent shall have any liability for interest
upon any such moneys except as provided for herein.
Section 7.06. Compensation and Reimbursement. The Company agrees:
------------------------------
(1) to pay, or cause to be paid, to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and
(2) except as otherwise expressly provided herein or in any Trust
Supplement, to reimburse, or cause to be reimbursed, the Trustee upon its
request for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Basic Agreement or any Trust Supplement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence, willful misconduct or bad faith or as may be incurred due
to the Trustee's breach of its representations and warranties set forth in
Section 7.14.
The Trustee shall be entitled to reimbursement from, and shall have a
lien prior to the Certificates of each series upon, all property and funds held
or collected by the Trustee in its capacity as Trustee with respect to such
series or the related Trust for any tax incurred without negligence, bad faith
or willful misconduct, on its part, arising out of or in connection with the
acceptance or administration of such Trust (other than any tax attributable to
the Trustee's compensation for serving as such), including any costs and
expenses incurred in contesting the imposition of any such tax. If the Trustee
reimburses itself from the Trust Property of such Trust for any such tax it,
will within 30 days mail a
<PAGE>
36
brief report setting forth the circumstances thereof to all Certificateholders
of such series as their names and addresses appear in the Register.
As security for the performance of the obligations of the Company
under this Section with respect to each Trust the Trustee shall have a lien
prior to the Certificates of the related series upon all property and funds held
or collected by the Trustee in its capacity as Trustee with respect to such
Certificates and the related Trust.
Section 7.07. Corporate Trustee Required; Eligibility. Each Trust
---------------------------------------
shall at all times have a Trustee which shall be eligible to act as a trustee
under Section 310(a) of the Trust Indenture Act and shall have a combined
capital and surplus of at least $75,000,000 (or having a combined capital and
surplus in excess of $5,000,000 (or, in respect of State Street Bank and Trust
Company of Connecticut, National Association as Trustee, $3,000,000) and the
obligations of which, whether now in existence or hereafter incurred, are fully
and unconditionally guaranteed by a corporation organized and doing business
under the laws of the United States, any State or Territory thereof or of the
District of Columbia and having a combined capital and surplus of at least
$75,000,000). If such corporation publishes reports of conditions at least
annually, pursuant to law or to the requirements of Federal, State, Territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section 7.07, 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 conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.07 to act as Trustee of any
Trust, the Trustee shall resign immediately as Trustee of such Trust in the
manner and with the effect specified in Section 7.08.
Section 7.08. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a successor
Trustee of any Trust pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.09.
(b) The Trustee may resign at any time as trustee of any or all Trusts
by giving written notice thereof to the Company, the Authorized Agents, the
related Owner Trustees and the related Loan Trustees. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Company,
the related Owner Trustees and the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time as trustee of any Trust by
Act of the Certificateholders of the related series holding Certificates of such
series evidencing
<PAGE>
37
Fractional Undivided Interests aggregating not less than a majority in interest
in such Trust delivered to the Trustee and to the Company, the related Owner
Trustees and the related Loan Trustees.
(d) If at any time in respect of any Trust:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act after written request therefor by the Company or by any
Certificateholder of the related series who has been a bona fide
Certificateholder for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.07 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder of the related series who has been a bona fide
Certificateholder for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee of such Trust.
(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax (as hereinafter defined) in respect of any Trust
which has been or is likely to be asserted, the Trustee shall promptly notify
the Company and shall, within 30 days of such notification, resign as Trustee of
such Trust hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The Company shall
promptly appoint a successor Trustee of such Trust in a jurisdiction where there
are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such
Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust
Property, (y) Certificateholders of such Trust or (z) the Trustee for which the
Trustee is entitled to seek reimbursement from the Trust Property of such Trust,
and (ii) which would be avoided if the Trustee were located in another state, or
jurisdiction within a state, within the United States. A tax shall not be an
Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall
agree to pay, and shall pay, such tax.
(f) If the Trustee shall resign, be removed or become incapable of
acting as trustee of any Trust, or if a vacancy shall occur in the office of the
Trustee of any Trust for any cause, the Company shall promptly appoint a
successor Trustee of such Trust. If, within one year after such resignation,
removal or incapability, or other occurrence of such
<PAGE>
38
vacancy, a successor Trustee of such Trust shall be appointed by Act of the
Certificateholders of the related series holding Certificates of such series
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in such Trust delivered to the Company, the related owner Trustees,
the related Loan Trustee and the retiring Trustee, then the successor Trustee so
appointed shall, with the approval of the Company, which approval shall not be
unreasonably withheld, forthwith upon its acceptance of such appointment, become
the successor Trustee of such Trust and supersede the successor Trustee of such
Trust appointed as provided above. If no successor Trustee shall have been so
appointed as provided above and accepted appointment in the manner hereinafter
provided, any Certificateholder who has been a bona fide Certificateholder of
the related series for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee of such Trust.
(g) The successor Trustee of a Trust shall give notice of the
resignation and removal of the Trustee and appointment of the successor Trustee
by mailing written notice of such event by first-class mail, postage prepaid, to
the Certificateholders of the related series as their names and addresses appear
in the Register. Each notice shall include the name of such successor Trustee
and the address of its Corporate Trust Office.
Section 7.09. Acceptance of Appointment by Successor. Every
--------------------------------------
successor Trustee appointed hereunder shall execute and deliver to the Company
and to the retiring Trustee with respect to any or all Trusts an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee with respect to such Trusts shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shall execute and deliver an instrument transferring to such successor Trustee
all such rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee in respect of such Trusts hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.06. Upon request of
any such successor Trustee, the Company, the retiring Trustee and such successor
Trustee shall execute and deliver any and all instruments containing such
provisions as shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Trustee all such rights,
powers and trusts.
If a successor Trustee is appointed with respect to one or more (but
not all) Trusts, the Company, the predecessor Trustee and each successor Trustee
with respect to any Trust shall execute and deliver a supplemental agreement
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
predecessor Trustee with respect to the Trusts as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and
<PAGE>
39
shall add to or change any of the provisions of this Basic Agreement and the
applicable Trust Supplements as shall be necessary to provide for or facilitate
the administration of the Trusts hereunder by more than one Trustee.
It is understood that nothing herein or in any supplemental agreement
or Trust Supplement shall constitute any Trustee a co-Trustee of the same Trust
and that each Trustee shall be the Trustee of one or more separate Trusts.
No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article.
Section 7.10. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the 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 Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
- --------
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates shall have been
executed or authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such successor Trustee had
itself executed or authenticated such Certificates.
Section 7.11. Maintenance of Agencies. (a) With respect to each
-----------------------
series of Certificates, there shall at all times be maintained an office or
agency in the location set forth in Section 12.03 hereof; (provided that such
office or agency shall, as to State Street Bank and Trust Company of
Connecticut, National Association, be at State Street Bank and Trust Company,
National Association, 61 Broadway, New York, New York 10006) where Certificates
of such series may be presented or surrendered for registration of transfer or
for exchange, and for payment thereof and where notices and demands to or upon
the Trustee in respect of such certificates or of the related Trust Supplement
may be served; provided, however, that, if it shall be necessary that the
-------- -------
Trustee maintain an office or agency in another location (e.g., the Certificates
shall be represented by definitive certificates and shall be listed on a
national securities exchange), the Trustee will make all reasonable efforts to
establish such an office. Written notice of the location of each such other
office or agency and of any change of location thereof shall be given by the
Trustee to the Company, any Owner Trustees, the Loan Trustees and the
Certificateholders of such series. In the event that no such office or agency
shall be maintained or no such notice of location or of change of location shall
be given, presentations and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
<PAGE>
40
(b) There shall at all times be a Registrar and a Paying Agent
hereunder with respect to the Certificates of each series. Each such Authorized
Agent shall be a bank or trust company, shall be a corporation organized and
doing business under the laws of the United States or any state, with a combined
capital and surplus of at least $75,000,000, or, if the Trustee shall be acting
as the Registrar or Paying Agent hereunder, a corporation the obligations of
which are guaranteed by a corporation organized and doing business under the
laws of the United States or any state, with a combined capital and surplus of
at least $75,000,000 (or having a combined capital and surplus in excess of
$5,000,000 (or, in respect of State Street Bank and Trust Company of
Connecticut, National Association as Trustee, $3,000,000)), and shall be
authorized under such laws to exercise corporate trust powers, subject to
supervision by Federal or state authorities. The Trustee shall initially be the
Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect
to the Certificates of each series. Each Registrar shall furnish to the
Trustee, at stated intervals of not more than six months, and at such other
times as the Trustee may request in writing, a copy of the Register maintained
by such Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company, any related Owner Trustees
and the related Loan Trustees. The Company may, and at the request of the
Trustee shall, at any time terminate the agency of any Authorized Agent by
giving written notice of termination to such Authorized Agent and to the
Trustee. Upon the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible under this
Section (when, in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed), the Company shall
promptly appoint one or more Qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the Authorized Agent
which has resigned or whose agency has been terminated or who shall have ceased
to be eligible under this Section. The Company shall give written notice of any
such appointment made by it to the Trustee, any related Owner Trustees and the
related Loan Trustees; and in each case the Trustee shall mail notice of such
appointment to all Certificateholders of the related series as their names and
addresses appear on the Register for such series.
<PAGE>
41
(e) The Company agrees to pay, or cause to be paid, from time to time
to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses.
Section 7.12. Money for Certificate Payments to Be Held in Trust.
--------------------------------------------------
All moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect to which such
money was deposited.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.13. Registration of Equipment Notes in Trustee's Name. The
-------------------------------------------------
Trustee agrees that all Equipment Notes, and Permitted Investments, if any,
shall be issued in the name of the Trustee as trustee for the applicable Trust
or its nominee and held by the Trustee, or, if not so held, the Trustee or its
nominee shall be reflected as the owner of such Equipment Notes or Permitted
Investments as the case may be, in the register of the issuer of such Equipment
Notes or Permitted Investments. In no event shall the Trustee invest in, or
hold, Equipment Notes or Permitted Investments in a manner that would cause the
Trustee not to have the ownership interest in such Equipment Notes or Permitted
Investments under the applicable provisions of the Uniform Commercial Code in
effect where the Trustee holds such Equipment Notes or Permitted Investments or
other applicable law then in effect.
Section 7.14. Representations and Warranties of Trustee. The Trustee
-----------------------------------------
hereby represents and warrants that:
(i) the Trustee is a national banking association or a bank or trust
company organized or chartered under the law of a state of the United
States and duly organized, validly existing and in good standing under the
laws of the United States or such state, as the case may be;
(ii) the Trustee has full power, authority and legal right to execute,
deliver, and perform this Basic Agreement and has taken all necessary
action to authorize the execution, delivery, and performance by it of this
Basic Agreement;
<PAGE>
42
(iii) the execution delivery and performance by the Trustee of this
Basic Agreement (a) will not violate any provision of United States federal
law or the law of the state of the United States where it is located
governing the banking and trust powers of the Trustee or any order, writ,
judgment, or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (b) will not violate any
provision of the articles of association or by-laws of the Trustee, or (c)
will not violate any provision of, or constitute, with or without notice or
lapse of time, a default under, or result in the creation or imposition of
any lien on any properties included in the Trust Property of any Trust
pursuant to the provisions of any mortgage, indenture, contract, agreement
or other undertaking to which it is a party, which violation, default or
lien could reasonably be expected to have an adverse effect on the
Trustee's performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or therein;
(iv) the execution, delivery and performance by the Trustee of this
Basic Agreement will not require the authorization, consent, or approval
of, the giving of notice to, the filing or registration with, or the taking
of any other action in respect of, any governmental authority or agency of
the United States or the State of the United States where it is located
regulating the banking and corporate trust activities of the Trustee; and
(v) this Basic Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid, and binding agreement of the
Trustee, enforceable against it in accordance with its terms, provided that
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and (ii) general principles of equity.
Section 7.15. Withholding Taxes; Information Reporting. As to the
----------------------------------------
Certificates of any series, the Trustee, as trustee of the related grantor trust
created by this Agreement, shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due under this
Agreement or under the Certificates of such series any and all withholding taxes
applicable thereto as required by law. The 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 Certificates of such series, to withhold such amounts
and timely pay the same to the appropriate authority in the name of and on
behalf of the Certificateholders of such series, that 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 such
Certificateholder appropriate documentation showing the payment thereof,
together with such additional documentary evidence as such Certificateholders of
such series may reasonably
<PAGE>
43
request from time to time. The Trustee agrees to file any other information
reports as it may be required to file under United States law.
Section 7.16. Trustee's Liens. The Trustee in its individual
---------------
capacity agrees that it will, in respect of each Trust created by this Agreement
at its own cost and expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance,
security interest or claim ("Trustee's Liens") on or with respect to the Trust
Property of such Trust which is attributable to the Trustee either (i) in its
individual capacity and which is unrelated to the transactions contemplated by
this Agreement, the related Note Purchase Agreements or the related Note
Documents, or (ii) as Trustee hereunder or in its individual capacity and which
arises out of acts or omissions which are not contemplated by this Agreement.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and Addresses
-------------------------------------------------------
of Certificateholders. The Company will furnish to the Trustee within 15 days
- ---------------------
after each Record Date with respect to a Scheduled Payment, and at such other
times as the Trustee may request in writing, within 30 days after receipt by the
Company of any such request, a list, in such form as the Trustee may reasonably
require, of all information in the possession or control of the Company as to
the names and addresses of the Certificateholders of such series, in each case
as of a date not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole Registrar for such
- -------- -------
series, no such list need be furnished; and provided further, however, that no
-------- ------- -------
such list need be furnished for so long as a copy of the Register is being
furnished to the Trustee pursuant to Section 7.11.
Section 8.02. Preservation of Information; Communications to
----------------------------------------------
Certificateholders. The Trustee shall preserve, in as current a form as is
- ------------------
reasonably practicable, the names and addresses of Certificateholders of each
series contained in the most recent list furnished to the Trustee as provided in
Section 7.11 or Section 8.01, as the case may be, and the names and addresses of
Certificateholders of each series received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.11 or Section 8.01, as the case may be, upon receipt of a
new list so furnished.
Section 8.03. Reports by Trustee. Within 60 days after May 15 of
------------------
each year commencing with the first full year following the issuance of any
series of Certificates, the Trustee shall transmit to the Certificateholders of
each series, as provided in Section 313(c)
<PAGE>
44
of the Trust Indenture Act, a brief report dated as of such May 15, if required
by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company shall:
----------------------
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the SEC, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Company is required to file with the SEC
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934, as amended; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with
the Trustee and the SEC, in accordance with rules and regulations
prescribed by the SEC, such of the supplementary and periodic information,
documents and reports which may be required pursuant to section 13 of the
Securities Exchange Act of 1934, as amended, in respect of a security
listed and registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with the Trustee and the SEC, in accordance with the rules
and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Agreement, as may be required
by such rules and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions of
independent public accountants;
(c) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such summaries
of any information, documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this Section 8.04 as may be
required by rules and regulations prescribed by the SEC; and
(d) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this Agreement
(it being understood that for purposes of this paragraph (d), such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
<PAGE>
45
Section 9.01. Supplemental Agreements Without Consent of
------------------------------------------
Certificateholders. Without the consent of the Certificateholders of any
------------------
series, the Company may, and the Trustee (subject to Section 9.03) shall,
at any time and from time to time, enter into one or more agreements
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(1) to provide for the formation of a Trust, the issuance of a series
of Certificates and the other matters contemplated by Section 2.01(b); or
(2) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein contained; or
(3) to add to the covenants of the Company for the benefit of the
Certificateholders of any series, or to surrender any right or power in
this Agreement conferred upon the Company; or
(4) to correct or supplement any provision in this Agreement which may
be defective or inconsistent with any other provision herein or in any
Trust Supplement or to modify any other provision with respect to matters
or questions arising under this Agreement, provided that any such action
--------
shall not adversely affect the interests of the Certificateholders of any
series; or to cure any ambiguity or correct any mistake; or
(5) to modify, eliminate or add to the provisions of this Agreement to
such extent as shall be necessary to continue the qualification of this
Agreement (including any supplemental agreement) under the Trust Indenture
Act or under any similar Federal statute hereafter enacted, and to add to
this Agreement such other provisions as may be expressly permitted by the
Trust Indenture Act, excluding, however, the provisions referred to in
Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of
which this instrument was executed or any corresponding provision in any
similar Federal statute hereafter enacted; or
(6) to evidence and provide for the acceptance of appointment under
this Agreement by the Trustee or a successor Trustee with respect to one or
more Trusts and to add to or change any of the provisions of this Agreement
as shall be necessary to provide for or facilitate the administration of
the Trusts hereunder and thereunder by more than one Trustee, pursuant to
the requirements of Section 7.09; or
(7) to provide the information required under Section 7.11 and Section
12.03 as to the Trustee; or
<PAGE>
46
(8) to make any other amendments or modifications hereto, provided
--------
such amendments or modifications shall only apply to Certificates of one or more
series to be thereafter issued.
Section 9.02. Supplemental Agreements with Consent of
---------------------------------------
Certificateholders. With respect to each separate Trust and the series of
- ------------------
Certificates relating thereto, with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in such Trust, by Act of said
Certificateholders delivered to the Company and the Trustee, the Company may
(with the consent of the Owner Trustee, if any, relating to such Certificates,
which consent shall not be unreasonably withheld), and the Trustee (subject to
Section 9.03) shall, enter into an agreement or agreements supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement to the extent applicable to
such Certificateholders or of modifying in any manner the rights and obligations
of such Certificateholders under this Agreement; provided, however, that no such
-------- -------
supplemental agreement shall, without the consent of the Certificateholder of
each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in such
Trust or distributions that are required to be made herein on any
Certificate of such series, or change any date of payment on any
Certificate of such series, or change the place of payment where, or the
coin or currency in which, any Certificate of such series is payable, or
impair the right to institute suit for the enforcement of any such payment
or distribution on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note in the Trust Property
of such Trust except as permitted by this Agreement, or otherwise deprive
such Certificateholder of the benefit of the ownership of the Equipment
Notes in such Trust; or
(3) reduce the percentage of the aggregate Fractional Undivided
Interests of such Trust which is required for any such supplemental
agreement, or reduce such percentage required for any waiver (of compliance
with certain provisions of this Agreement or certain defaults hereunder and
their consequences) provided for in this Agreement; or
(4) modify any of the provisions of this Section or Section 6.05,
except to increase any such percentage or to provide that certain other
provisions of this Agreement cannot be modified or waived without the
consent of the Certificateholder of each Certificate of such series
affected thereby.
<PAGE>
47
It shall not be necessary for any Act of such Certificateholders under
this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Act shall approve the substance
thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in the
-----------------------------------------
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or
indemnity in favor of the Trustee under this Basic Agreement or any Trust
Supplement, the Trustee may in its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements. In executing, or
------------------------------------
accepting the additional trusts created by, any supplemental agreement permitted
by this Article or the modifications thereby of the trusts created by this
Agreement, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental agreement is authorized or permitted by this Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the execution
---------------------------------
of any supplemental agreement under this Article, this Basic Agreement shall be
modified in accordance therewith, and such supplemental agreement shall form a
part of this Basic Agreement for all purposes; and every Certificateholder of
each series theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby to the extent applicable to such series.
Section 9.06. Conformity with Trust Indenture Act. Every
-----------------------------------
supplemental agreement executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
Section 9.07. Reference in Certificates to Supplemental Agreements.
----------------------------------------------------
Certificates of each series authenticated and delivered after the execution of
any supplemental agreement applicable to such series pursuant to this Article
may bear a notation in form approved by the Trustee as to any matter provided
for in such supplemental agreement; and, in such case, suitable notation may be
made upon Outstanding Certificates of such series after proper presentation and
demand.
<PAGE>
48
ARTICLE X
AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS
Section 10.01. Amendments and Supplements to Indenture and Other Note
------------------------------------------------------
Documents. In the event that the Trustee, as holder of any Equipment Notes in
- ---------
trust for the benefit of the Certificateholders of any series, receives a
request for a consent to any amendment, modification, waiver or supplement under
any related Indenture or other related Note Document or any related Note
Purchase Agreement, the Trustee shall forthwith send a notice of such proposed
amendment, modification, waiver or supplement to each Certificateholder of such
series registered on the Register as of such date. The Trustee shall request
from the Certificateholders of such series a direction as to (i) whether or not
to direct the Trustee to take or refrain from taking any action which a holder
of such Equipment Note has the option to direct, (ii) whether or not to give or
execute any waivers, consents, amendments, modifications or supplements as a
holder of such Equipment Note and (iii) how to vote the Equipment Notes if a
vote has been called for with respect thereto. Provided such a request for
Certificateholder Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any such Equipment
Notes, the Trustee shall vote or consent with respect to such Equipment Note in
the same proportion as the Certificates of such series were actually voted by
Acts of Certificateholders delivered to the Trustee prior to two Business Days
before the Trustee directs such action or casts such vote or gives such consent.
Notwithstanding the foregoing, but subject to Section 6.04, in the case that an
Event of Default hereunder with respect to such series shall have occurred and
be continuing, the Trustee may, in its own discretion and at its own direction,
consent and notify the relevant Loan Trustee of such consent to any amendment,
modification, waiver or supplement under the relevant Indenture or any other
related Note Document.
ARTICLE XI
TERMINATION OF TRUSTS
Section 11.01. Termination of the Trusts. In respect of each Trust
-------------------------
created by the Basic Agreement as supplemented by a related Trust Supplement,
the respective obligations and responsibilities of the Company and the Trustee
created under this Agreement and the Trust created hereby and such Trust shall
terminate upon the distribution to all Holders of the Certificates of the series
of such Trust and the Trustee of all amounts required to be distributed to them
pursuant to this Agreement and the disposition of all property held as part of
the Trust Property of the related series of such Trust; provided, however, that
-------- -------
in no event shall such Trust continue beyond the final expiration date
determined as provided in this Agreement.
<PAGE>
49
Notice of any termination of a Trust, specifying the applicable
Regular Distribution Date (or applicable Special Distribution Date, as the case
may be) upon which the Certificateholders of any series may surrender their
Certificates to the Trustee for payment of the final distribution and
cancellation, shall be mailed promptly by the Trustee to Certificateholders of
such series not earlier than the minimum number of days and not more than the
maximum number of days specified therefor in the related Trust Supplement
preceding such final distribution specifying (A) the Regular Distribution Date
(or Special Distribution Date, as the case may be) upon which the proposed final
payment of the Certificates of such series will be made upon presentation and
surrender of Certificates of such series at the office or agency of the Trustee
therein specified (B) the amount of any such proposed final payment, and (C)
that the Record Date otherwise applicable to such Regular Distribution Date (or
Special Distribution Date, as the case may be) is not applicable, payments being
made only upon presentation and surrender of the Certificates of such series at
the office or agency of the Trustee therein specified. The Trustee shall give
such notice to the Registrar at the time such notice is given to
Certificateholders of such series. Upon presentation and surrender of the
Certificates of such series, the Trustee shall cause to be distributed to
Certificateholders of such series amounts distributable on such Regular
Distribution Date (or Special Distribution Date, as the case may be) pursuant to
Section 4.02.
In the event that all of the Certificateholders of such series shall
not surrender their Certificates for cancellation within six months after the
date specified in the above-mentioned written notice, the Trustee shall give a
second written notice to the remaining Certificateholders of such series to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. In the event that any money held by the Trustee for the
payment of distributions on the Certificates of such series shall remain
unclaimed for two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to the escheat
period provided under applicable law) after the final distribution date with
respect thereto, the Trustee shall pay to each Loan Trustee the appropriate
amount of money relating to such Loan Trustee and shall give written notice
thereof to the related Owner Trustees and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The death
------------------------------------------
or incapacity of any Certificateholder of any series shall not operate to
terminate this Agreement or the related Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition
<PAGE>
50
or winding up of the Trust, nor otherwise affect the rights, obligations, and
liabilities of the parties hereto or any of them.
Section 12.02. Certificates Nonassessable and Fully Paid.
-----------------------------------------
Certificateholders of each series shall not be personally liable for obligations
of the related Trust, the Fractional Undivided Interests represented by the
Certificates of such series shall be nonassessable for any losses or expenses of
such Trust or for any reason whatsoever, and Certificates of such series upon
authentication thereof by the Trustee pursuant to Section 3.02 are and shall be
deemed fully paid. No Certificateholder of such series shall have any right
(except as expressly provided herein) to vote or in any manner otherwise
control the operation and management of the related Trust Property, the related
Trust, or the obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates of such series, be
construed so as to constitute the Certificateholders of such series from time to
time as partners or members of an association.
Section 12.03. Notices. (a) Unless otherwise specifically provided
-------
herein or the applicable Trust Supplement with respect to any Trust, all notices
required under the terms and provisions of this Basic Agreement or such Trust
supplement with respect to such Trust shall be in English and in writing, and
any such notice may be given by United States mail, courier service or telecopy,
and any such notice shall be effective when delivered or received or, if mailed,
three days after deposit in the United States mail with proper postage for
ordinary mail prepaid,
if to the Company, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Facsimile: (708) 952-7117
or if by overnight courier, to:
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Vice President and Treasurer
if to State Street Bank and Trust Company of Connecticut, National
Association, as Trustee, to:
<PAGE>
51
c/o State Street Bank and Trust Company of Connecticut,
National Association
225 Franklin Street IP-4
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Facsimile: (203) 244-1899
Telephone: (203) 244-1800
as to any series of Certificates, as specified in the Trust Supplement
related thereto.
(b) The Company or the Trustee as to any series of Certificates, by
notice to the other, may designate additional or different addresses for
subsequent notices or communications.
(c) Any notice or communication to Certificateholders of any series
shall be mailed by first-class mail to the addresses for Certificateholders of
such series shown on the Register kept by the Registrar and to addresses filed
with the Trustee for Certificate Owners of such series. Failure so to mail a
notice or communication or any defect in such notice or communication shall not
affect its sufficiency with respect to other Certificateholders of such series.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the
Certificateholders of such series, it shall mail a copy to the Trustee and to
each Paying Agent for such series at the same time.
(f) Notwithstanding the foregoing, all communications or notices to
the Trustee shall be deemed to be given only when received by a Responsible
Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy of any
demand, notice or written communication received by the Trustee hereunder from
any Certificateholder, Owner Trustee or Loan Trustee.
Section 12.04. Governing Law. THIS BASIC AGREEMENT HAS BEEN
-------------
DELIVERED IN THE STATE OF NEW YORK AND THE CERTIFICATES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
<PAGE>
52
AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.05. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or any Trust, or of the
Certificates of any series or the rights of the Certificateholders thereof.
Section 12.06. Trust Indenture Act Controls. This Agreement is
----------------------------
subject to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions.
Section 12.07. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.08. Successors and Assigns. All covenants, agreements,
----------------------
representations and warranties in this Agreement by the Trustee and the Company
shall bind and, to the extent permitted hereby, shall inure to the benefit of
and be enforceable by their respective successors and assigns, whether so
expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this Agreement or
---------------------
in the Certificates of any series, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the
Certificateholders of each series, any benefit or any legal or equitable right,
remedy or claim under this Agreement.
Section 12.10. Legal Holidays. In any case where any Regular
--------------
Distribution Date or Special Distribution Date relating to any Certificate of
any series shall not be a Business Day with respect to such series, then
(notwithstanding any other provision of this Agreement) payment need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on such Regular Distribution Date or Special
Distribution Date, and no interest shall accrue during the intervening period.
Section 12.12. Counterparts. For the purpose of facilitating the
------------
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
<PAGE>
53
IN WITNESS WHEREOF, the parties have caused this amended and restated
Basic Agreement to be duly executed by their respective officers.
UNITED AIR LINES, INC.
By ___________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, as
Trustee
By
___________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC") to Issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch the
registered owner hereof, Cede & Co., has an est herein.
UNITED AIR LINES _______ PASS THROUGH TRUST
Pass Through
Certificate, Series _______
Final Distribution Date: __________, ____
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by or leased
to United Air Lines, Inc.
Certificate
No. _______ $____________ Fractional Undivided Interest
representing .________% of the Trust per $1,000 face amount
THIS CERTIFIES THAT ______________________, for value received, is the
registered owner of a $____________ (________________ dollars) Fractional
Undivided Interest in the United Air Lines _______ Pass Through Trust (the
"Trust") created pursuant to a Pass Through Trust Agreement, dated as of
February 1, 1992, as amended and restated as of May 1, 1995 (the "Basic
Agreement"), as supplemented by Trust Supplement No. ___________________
thereto, dated ________, 199_ (collectively, the "Agreement"), between
___________ (the "Trustee") and United Air Lines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "Pass Through Certificates, Series _______" (herein
called the _______________________.
* This legend to appear on Book-Entry Certificates to be deposited with
the Depository Trust Company. One Certificate may be issued in a
denomination of less than $1,000 which shall not have this legend.
<PAGE>
A-2
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement, to which Agreement the
Certificateholder of this Certificate by virtue of the acceptance hereof assents
and by which such Certificateholder is bound. The property of the Trust
includes certain Equipment Notes (the "Trust Property"). Each issue of the
Equipment Notes is secured by a security interest in an aircraft leased to or
owned by the Company.
The Certificates represent fractional undivided interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement, from
funds then available to the Trustee, there will be distributed on each ________
and ____________ (a "Regular Distribution Date"), commencing on ________, 199_,
to the Person in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date, an amount in
respect of the Scheduled Payments on the Equipment Notes due on such Regular
Distribution Date, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Scheduled Payments. Subject
to and in accordance with the terms of the Agreement, in the event that Special
Payments on the Equipment Notes are received by the Trustee, from funds then
available to the Trustee, there shall be distributed on the applicable Special
Distribution Date, to the Person in whose name this Certificate is registered at
the close of business on the 15th day preceding the Special Distribution Date,
an amount in respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the immediately following Business Day with the
same force and effect as if made on such Regular Distribution Date or Special
Distribution Date and no interest shall accrue during the intervening period.
The Special Distribution Date, shall be the _____________ day of the month
determined as provided in the Agreement. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Person entitled thereto, without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Certificate will be made after notice mailed by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Trustee specified in such notice.
<PAGE>
A-3
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
Reference is hereby made to the further provisions of this Certificate
set forth in the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
UNITED AIR LINES
PASS THROUGH TRUST
By: _______________________, as
Trustee
By: _______________________
Title:
Dated:
<PAGE>
A-4
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
___________________________, as
Trustee
By: _______________________
Authorized Officer
<PAGE>
[Reverse of Certificate]
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
affiliate thereof. The Certificates are limited in right or payment, all as
more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Trust Property and only to the extent that the Trustee
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of the Agreement. Each Certificateholder
of this Certificate, by its acceptance hereof, agrees that it will look solely
to the income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Registrar, or
by any successor Registrar, in the Borough of Manhattan, the City of New York,
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof except that one Certificate may be in a denomination
of less than $1,000. As
<PAGE>
2
provided in the Agreement and subject to certain limitations therein set forth,
the Certificates are exchangeable for new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in the
Trust, as requested by the Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Trustee, the Registrar, nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
S&S FINAL DRAFT
TRUST SUPPLEMENT NO. 1995-A1
DATED AS OF MAY 1, 1995
TO
PASS THROUGH TRUST
AGREEMENT
DATED AS OF FEBRUARY 1, 1992
AS AMENDED AND RESTATED
AS OF MAY 1, 1995
===============================================
UNITED AIR LINES, INC.
AND
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
AS TRUSTEE
===============================================
$
% UNITED AIRLINES 1995-A1 Pass Through Trust
PASS THROUGH CERTIFICATES, SERIES 1995-A1
<PAGE>
TRUST SUPPLEMENT NO. 1995-A1
DATED AS OF MAY 1, 1995
Series 1995-A1 Pass Through Certificates
==========================
Table of Contents
==========================
Page
----
ARTICLE I
THE CERTIFICATES
Section 1.01. The Certificates.......................... 2
ARTICLE II
DEFINITIONS
Section 2.01. Definitions............................... 5
ARTICLE III
THE TRUSTEE
Section 3.01. The Trustee............................... 6
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Acceptance of Appointment Under and
Assumption and Ratification
of Basic Agreement........................ 6
Section 4.02. Governing Law............................. 6
Section 4.03. Execution in Counterparts................. 7
<PAGE>
This Trust Supplement No. 1995-A1, dated as of May 1, 1995 (herein
called the "Trust Supplement"), between United Air Lines Inc., a Delaware
corporation (the "Company"), and First Security Bank of Utah, National
Association (the "Trustee"), to the Pass Through Trust Agreement, dated as of
February 1, 1992, as amended and restated as of May 1, 1995, between the Company
and State Street Bank and Trust Company of Connecticut, National Association
(the "Basic Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Basic Agreement, unlimited as to the aggregate principal
amount of Certificates (unless otherwise specified herein, capitalized terms
used herein without definition having the respective meanings specified
heretofore in the Basic Agreement) which may be issued thereunder has heretofore
been executed and delivered;
WHEREAS, the Owner Trustee, acting on behalf of an Owner Participant,
will issue, on a non-recourse basis, Equipment Notes, among other things, to
refinance the outstanding debt portion of the purchase price of the aircraft
purchased by such Owner Trustee and leased to the Company pursuant to the
related Lease;
WHEREAS, pursuant to the terms and conditions of the Basic Agreement
as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall
purchase such Equipment Notes issued by such Owner Trustee of the same tenor as
the Certificates issued hereunder and shall hold such Equipment Notes in trust
for the benefit of the Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Trust (the
"1995-A1 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1995-A1 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1995-A1 Trust with
the Trustee;
WHEREAS, all of the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all respects
duly authorized;
WHEREAS, this Trust Supplement is subject to the provisions of the
Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be
governed by such provisions;
NOW THEREFORE, in consideration of the premises herein, it is agreed
between the Company and the Trustee as follows:
<PAGE>
2
ARTICLE I
THE CERTIFICATES
Section 1.01. The Certificates. There is hereby created a series of
----------------
Certificates to be issued under the Agreement to be distinguished and known as
"Pass Through Certificates, Series 1995-A1" (hereinafter defined as the "Series
1995-A1 Certificates"). Each Certificate represents a Fractional Undivided
Interest in the 1995-A1 Trust created hereby. The terms and conditions
applicable to the Series 1995-A1 Certificates are as follows:
1. The aggregate principal amount of the Series 1995-A1 Certificates
that shall be authenticated under the Agreement (except for Series 1995-A1
Certificates authenticated and delivered pursuant to Section 3.03, 3.04 and
3.05 of the Basic Agreement) upon their initial issuance is $ .
2. The Cut-off Date is June 30, 1995.
3. The Regular Distribution Dates with respect to any payment of
Scheduled Payments means each October 19 and April 19, commencing October
19, 1995 until payment of all of the Scheduled Payments to be made under
the Equipment Notes has been made.
4. The Scheduled Payments shall be as set forth in Exhibit C hereto.
5. The Special Distribution Dates are as follows: (i) when used with
respect to the redemption or purchase of any Equipment Notes, the day
(which shall be a Business Day) on which such redemption or purchase is
scheduled to occur pursuant to the terms of the applicable Indenture and
(ii) when used with respect to a Special Payment other than as described in
clause (i) above, 20 days after the last date on which the Trustee must
give notice pursuant to Section 4.02(c) of the Basic Agreement (or the next
Business Day after such 20th day if such date is not a Business Day).
6. The Series 1995-A1 Certificates shall be in the form attached
hereto as Exhibit A. The Series 1995-A1 Certificates shall be Book-Entry
Certificates and shall be subject to the conditions set forth in the Letter
of Representations between the Company and the Clearing Agency attached
hereto as Exhibit B.
7. The proceeds of the Series 1995-A1 Certificates shall be used to
purchase the Equipment Notes in the principal amount specified below:
<PAGE>
3
<TABLE>
<CAPTION>
Principal
Equipment Note Amount Maturity
- -------------- --------- --------
<S> <C> <C>
Series 1995 777 A-1 $________ _________ __, ____
Series 1995 777 B-1 $________ _________ __, ____
Series 1993 747 A-1 $________ _________ __, ____
</TABLE>
8. The Owner Trustee, acting on behalf of an Owner Participant, will
issue on a non-recourse basis, the Equipment Notes, the proceeds of which
shall be used, among other things, to refinance the outstanding debt
portion of the purchase price of the following Aircraft:
<TABLE>
<CAPTION>
U.S.
Registration Manufacturer's
Aircraft Number Serial Number
-------- ------------ --------------
<S> <C> <C>
1 Boeing 777-200 N777UA 26916
1 Boeing 777-200 N766UA 26917
1 Boeing 747-422 N189UA 26878
</TABLE>
9. The related Note Documents are as follows:
(a) Trust Indenture and Mortgage (1995 777 A), dated as of May 1,
1995;
(b) Lease Agreement (1995 777 A), dated as of May 1, 1995;
(c) Owner Trustee's Purchase Agreement and Assignment (1995 777 A),
dated as of May 1, 1995;
(d) Participation Agreement (1995 777 A), dated as of May 1, 1995;
(e) Trust Agreement (1995 777 A), dated as of May 1, 1995;
(f) Lease Supplement (1995 777 A), dated the relevant Transfer Date;
(g) Trust Supplement (1995 777 A), dated the relevant Transfer Date;
(h) Trust Indenture and Mortgage (1995 777 B), dated as of May 1,
1995;
(i) Lease Agreement (1995 777 B), dated as of May 1, 1995;
<PAGE>
4
(j) Owner Trustee's Purchase Agreement Assignment (1995 777 B), dated
as of May 1, 1995;
(k) Participation Agreement (1995 777 B), dated as of May 1, 1995;
(l) Trust Agreement (1995 777 B), dated as of May 1, 1995;
(m) Lease Supplement (1995 777 B), dated the relevant Transfer Date;
(n) Trust Supplement (1995 777 B), dated the relevant Transfer Date;
(o) Trust Indenture and Mortgage (1993 747 A) dated as of April 1,
1993, as supplemented, and as amended and restated by the First
Amended and Restated Trust Indenture and Mortgage (1993 747 A)
dated as of April 1, 1993, and as further amended and restated by
the Second Amended and Restated Trust Indenture and Mortgage
(1993 747 A), dated as of July 1, 1994, as amended by the First
Amendment to Second Amended and Restated Trust Indenture and
Mortgage (1993 747 A) dated September 27, 1994 and as further
amended and restated by the Third Amended and Restated Trust
Indenture and Mortgage (1993 747A), dated as of as of May 1, 1995
and effective as of the Effective Date;
(p) Lease Agreement (1993 747 A) dated as of April 1, 1993, as
supplemented, and as amended and restated by the First Amended
and Restated Lease Agreement (1993 747 A) dated as of April 1,
1993, as amended by the First Amendment to First Amended and
Restated Lease Agreement (1993 747 A), dated April 19, 1994,
Second Amendment to First Amended and Restated Lease Agreement
(1993 747 A) dated as of July 1, 1994, and the Third Amendment to
First Amended and Restated Lease Agreement (1993 747 A) dated
July 22, 1994 and as amended and restated by the Second Amended
and Restated Lease Agreement (1993 747 A) dated as of May 1, 1995
and effective as of the Effective Date;
(q) Owner Trustee's Purchase Agreement and Assignment (1993 747 A),
dated as of April 1, 1993;
(r) Participation Agreement (1993 747 A), dated as of April 1, 1993,
as amended by the First Amendment to Participation Agreement
(1993 747 A), dated as of December 1, 1993, Second Amendment to
Participation Agreement (1993 47 A) dated as of July 1, 1994, and
as
<PAGE>
5
amended and restated by the First Amended and Restated
Participation Agreement (1993 747 A), dated as of May 1, 1995 and
effective as of the Effective Date;
(s) Trust Agreement (1993 747 A), dated as of April 1, 1993, as
amended and restated by the First Amended and Restated Trust
Agreement (1993 747 A) dated as of May 1, 1995 and effective as
of the Effective Date;
(t) Lease Supplement (1993 747 A), dated April 20, 1993;
(u) Trust Supplement (1993 747 A), dated April 20, 1993; and
(v) Redemption and Refinancing Agreement (1993 747 A), dated as of
May 1, 1995 and effective as of the Effective Date.
ARTICLE II
DEFINITIONS
Section 2.01. Definitions. For all purposes of the Basic Agreement
-----------
as supplemented by this Trust Supplement, the following capitalized term has the
following meaning:
Effective Date: shall have the meaning specified therefor in the
--------------
lease.
Specified Investments: With respect to any Trust, means (i)
---------------------
obligations of, or guaranteed by, the United States Government or agencies
thereof, (ii) open market commercial paper of any corporation incorporated
under the laws of the United States of America or any State thereof rated
at least P-2 (or P-1, in the case of Escrowed Funds) or its equivalent by
Moody's Investors Service, Inc. or at least A-2 (or A-1, in the case of
Escrowed Funds) or its equivalent by Standard & Poor's Corporation, (iii)
certificates of deposit issued by commercial banks organized under the laws
of the United States or of any political subdivision thereof having a
combined capital and surplus in excess of $500,000,000 which banks or their
holding companies have a rating of A or its equivalent by Moody's
Investment Service, Inc. or Standard & Poor's Corporation; provided,
--------
however, that the aggregate amount at any one time so invested in
-------
certificates of deposit issued by any one bank shall not exceed 5% of such
bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (iii) or any subsidiary thereof and (v)
repurchase agreements with any financial institution having combined
capital and surplus of at least $500,000,000 with any of the obligations
described in clauses (i) through (iv) as collateral; provided further that
-------- -------
<PAGE>
6
if all of the above investments are unavailable, the entire amounts to be
invested may be used to purchase Federal Funds from an entity described in
clause (iii) above; and provided further that no investment shall be
-------- -------
eligible as a "Specified Investment" unless the final maturity or date of
return of such investment is on or before the Special Distribution Date
next following the Cut-Off Date for such Trust by more than 20 days.
ARTICLE III
THE TRUSTEE
Section 3.01. The Trustee. The Trustee shall not be responsible in
-----------
any manner whatsoever for or in respect of the validity or sufficiency of this
Trust Supplement or the due execution hereof by the Company, or for or in
respect of the recitals and statements contained herein, all of which recitals
and statements are made solely by the Company.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as fully to all intents as if the same were herein
set forth at length.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Basic Agreement Ratified. Except and so far as herein
------------------------
expressly provided, all of the provisions, terms and conditions of the Basic
Agreement are in all respects ratified and confirmed; and the Basic Agreement
and this Trust Supplement shall be taken, read and construed as one and the same
instrument.
Section 4.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES
-------------
1995-A1 CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
Section 4.03. Execution in Counterparts. This Trust Supplement may
-------------------------
be executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first written above.
UNITED AIR LINES, INC.
By:
----------------------------------
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
FORM OF CERTIFICATE
[Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC") to Issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner hereof,
Cede & Co., has an interest herein.]/*/
UNITED AIRLINES 1995-A1 PASS THROUGH TRUST
Pass Through
Certificate, Series 1995-A1
Issuance Date: ____________
Final Distribution Date: ____________
Evidencing A Fractional Undivided Interest In the 1995-A1 Trust, The
Property Of Which Includes Certain Equipment Notes Each Secured By An
Aircraft Leased To United Air Lines, Inc.
Certificate
No. _______ $ ____________ Fractional Undivided Interest representing 0.___%
of the Trust per $1,000 of Reference Principal Amount
THIS CERTIFIES THAT ______________________, for value received, is the
registered owner of a Fractional Undivided Interest in the amount of $__________
(the "Reference Principal Amount") in the United Airlines 1995-A1 Pass Through
Trust (the
- --------------
/*/ Not necessarily applicable in respect of one Certificate in a denomination
of less than $1,000.
<PAGE>
2
"Trust") created by First Security Bank of Utah, National Association, as
trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of
February 1, 1992, as amended and restated as of May 1, 1995, (the "Basic
Agreement"), between State Street Bank and Trust Company of Connecticut,
National Association and United Air Lines, Inc., as supplemented by Trust
Supplement No. 1995-A1 thereto, dated as of May 1, 1995 (collectively, the
"Agreement"), between the Trustee and United Air Lines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "Pass Through Certificates, Series 1995-A1" (herein
called the "Certificates"). This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Certificateholder of this Certificate by virtue of the acceptance hereof assents
and by which such Certificateholder is bound. The property of the Trust includes
certain Equipment Notes (the "Trust Property"). Each issue of the Equipment
Notes is secured by a security interest in an aircraft leased to the Company.
Each of the Certificates represents a Fractional Undivided Interest in
the Trust and the Trust Property and has no rights, benefits or interest in
respect of any other separate trust established pursuant to the terms of the
Basic Agreement for any other series of certificates issued pursuant thereto.
The undivided percentage interest in the Trust represented by each of this
Certificate (as specified above) and the other Pass Through Certificates, Series
1995-A1, was determined on the basis of (x) the aggregate of the Reference
Principal Amount of this Certificate (as specified above) and of the other Pass
Through Certificates, Series 1995-A1 and (y) the aggregate original principal
amounts of the Equipment Notes constituting the Trust Property.
Subject to and in accordance with the terms of the Agreement, from
funds then available to the Trustee, there will be distributed on each October
19 and April 19 (a "Regular Distribution Date"), commencing on October 19, 1995,
to the Person in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date, an amount in
respect of the Scheduled Payments on the Equipment Notes due on such Regular
Distribution Date, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Scheduled Payments. Subject
to and in accordance with the terms of the Agreement, in the event that Special
Payments on the Equipment Notes are received by the Trustee, from funds then
available to the Trustee, there shall be distributed on the applicable Special
Distribution Date, to the Person in whose name this Certificate is registered at
the close of business on the 15th day preceding the Special Distribution Date,
an amount in respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
<PAGE>
3
equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the immediately following Business Day with the
same force and effect as if made on such Regular Distribution Date or Special
Distribution Date and no interest shall accrue during the intervening period.
The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Certificate.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Person entitled thereto, without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Certificate will be made after notice mailed by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Trustee specified in such notice.
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
affiliate thereof. The Certificates are limited in right or payment, all as
more specifically set forth herein and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
<PAGE>
4
As provided in the Agreement and subject to certain limitations set
forth, the transfer of this Certificate is registrable in the Register upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar duly executed by
the Certificateholder hereof or such Certificateholder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in the
Trust will be issued to the designated transferee or transferees.
The Certificates (except one Certificate having a denomination of less
than $1,000) are issuable only as registered Certificates without coupons in
minimum denominations of $1,000 Fractional Undivided Interests and integral
multiples thereof. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Trustee, the Registrar, nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS
PROVISIONS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
UNITED AIRLINES
1995-A1 PASS THROUGH TRUST
By: FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------
Title:
<PAGE>
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
-------------------------------
Authorized Officer
<PAGE>
EXHIBIT B
---------
[FORM OF LETTER OF REPRESENTATIONS]
[TO COME]
<PAGE>
EXHIBIT C
---------
Regular Distribution Date Scheduled Payment
------------------------- -----------------
<PAGE>
S&S FINAL DRAFT
TRUST SUPPLEMENT NO. 1995-A2
DATED AS OF MAY 1, 1995
TO
PASS THROUGH TRUST
AGREEMENT
DATED AS OF FEBRUARY 1, 1992
AS AMENDED AND RESTATED
AS OF MAY 1, 1995
-----------------------------------------------
UNITED AIR LINES, INC.
AND
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
AS TRUSTEE
-----------------------------------------------
$
% UNITED AIRLINES 1995-A2 Pass Through Trust
PASS THROUGH CERTIFICATES, SERIES 1995-A2
<PAGE>
TRUST SUPPLEMENT NO. 1995-A2
DATED AS OF MAY 1, 1995
Series 1995-A2 Pass Through Certificates
--------------------------
Table of Contents
--------------------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE CERTIFICATES
<S> <C> <C>
Section 1.01. The Certificates.................................... 2
<CAPTION>
ARTICLE II
DEFINITIONS
<S> <C> <C>
Section 2.01. Definitions......................................... 5
<CAPTION>
ARTICLE III
THE TRUSTEE
<S> <C> <C>
Section 3.01. The Trustee......................................... 6
<CAPTION>
ARTICLE IV
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 4.01. Acceptance of Appointment Under and Assumption
and Ratification of Basic Agreement................ 6
Section 4.02. Governing Law....................................... 6
Section 4.03. Execution in Counterparts........................... 7
</TABLE>
<PAGE>
This Trust Supplement No. 1995-A2, dated as of May 1, 1995 (herein
called the "Trust Supplement"), between United Air Lines Inc., a Delaware
corporation (the "Company"), and First Security Bank of Utah, National
Association (the "Trustee"), to the Pass Through Trust Agreement, dated as of
February 1, 1992, as amended and restated as of May 1, 1995, between the Company
and State Street Bank and Trust Company of Connecticut, National Association
(the "Basic Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Basic Agreement, unlimited as to the aggregate principal
amount of Certificates (unless otherwise specified herein, capitalized terms
used herein without definition having the respective meanings specified
heretofore in the Basic Agreement) which may be issued thereunder has heretofore
been executed and delivered;
WHEREAS, the Owner Trustee, acting on behalf of an Owner Participant,
will issue, on a non-recourse basis, Equipment Notes, among other things, to
refinance the outstanding debt portion of the purchase price of the aircraft
purchased by such Owner Trustee and leased to the Company pursuant to the
related Lease;
WHEREAS, pursuant to the terms and conditions of the Basic Agreement
as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall
purchase such Equipment Notes issued by such Owner Trustee of the same tenor as
the Certificates issued hereunder and shall hold such Equipment Notes in trust
for the benefit of the Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Trust (the
"1995-A2 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1995-A2 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1995-A2 Trust with
the Trustee;
WHEREAS, all of the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all respects
duly authorized;
WHEREAS, this Trust Supplement is subject to the provisions of the
Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be
governed by such provisions;
NOW THEREFORE, in consideration of the premises herein, it is agreed
between the Company and the Trustee as follows:
<PAGE>
2
ARTICLE I
THE CERTIFICATES
Section 1.01. The Certificates. There is hereby created a series of
----------------
Certificates to be issued under the Agreement to be distinguished and known as
"Pass Through Certificates, Series 1995-A2" (hereinafter defined as the "Series
1995-A2 Certificates"). Each Certificate represents a Fractional Undivided
Interest in the 1995-A2 Trust created hereby. The terms and conditions
applicable to the Series 1995-A2 Certificates are as follows:
1. The aggregate principal amount of the Series 1995-A2 Certificates
that shall be authenticated under the Agreement (except for Series 1995-A2
Certificates authenticated and delivered pursuant to Section 3.03, 3.04 and
3.05 of the Basic Agreement) upon their initial issuance is $ .
2. The Cut-off Date is June 30, 1995.
3. The Regular Distribution Dates with respect to any payment of
Scheduled Payments means each October 19 and April 19, commencing October
19, 1995 until payment of all of the Scheduled Payments to be made under
the Equipment Notes has been made.
4. The Scheduled Payments shall be as set forth in Exhibit C hereto.
5. The Special Distribution Dates are as follows: (i) when used with
respect to the redemption or purchase of any Equipment Notes, the day
(which shall be a Business Day) on which such redemption or purchase is
scheduled to occur pursuant to the terms of the applicable Indenture and
(ii) when used with respect to a Special Payment other than as described in
clause (i) above, 20 days after the last date on which the Trustee must
give notice pursuant to Section 4.02(c) of the Basic Agreement (or the next
Business Day after such 20th day if such date is not a Business Day).
6. The Series 1995-A2 Certificates shall be in the form attached
hereto as Exhibit A. The Series 1995-A2 Certificates shall be Book-Entry
Certificates and shall be subject to the conditions set forth in the Letter
of Representations between the Company and the Clearing Agency attached
hereto as Exhibit B.
7. The proceeds of the Series 1995-A2 Certificates shall be used to
purchase the Equipment Notes in the principal amount specified below:
<PAGE>
3
<TABLE>
<CAPTION>
Principal
Equipment Note Amount Maturity
- -------------- --------- --------
<S> <C> <C>
Series 1995 777 A-1 $________ _________ __, ____
Series 1995 777 B-1 $________ _________ __, ____
Series 1993 747 A-1 $________ _________ __, ____
</TABLE>
8. The Owner Trustee, acting on behalf of an Owner Participant, will
issue on a non-recourse basis, the Equipment Notes, the proceeds of which
shall be used, among other things, to refinance the outstanding debt
portion of the purchase price of the following Aircraft:
<TABLE>
<CAPTION>
U.S.
Registration Manufacturer's
Aircraft Number Serial Number
-------- ------------ --------------
<S> <C> <C>
1 Boeing 777-200 N777UA 26916
1 Boeing 777-200 N766UA 26917
1 Boeing 747-422 N189UA 26878
</TABLE>
9. The related Note Documents are as follows:
(a) Trust Indenture and Mortgage (1995 777 A), dated as of May 1,
1995;
(b) Lease Agreement (1995 777 A), dated as of May 1, 1995;
(c) Owner Trustee's Purchase Agreement and Assignment (1995 777 A),
dated as of May 1, 1995;
(d) Participation Agreement (1995 777 A), dated as of May 1, 1995;
(e) Trust Agreement (1995 777 A), dated as of May 1, 1995;
(f) Lease Supplement (1995 777 A), dated the relevant Transfer Date;
(g) Trust Supplement (1995 777 A), dated the relevant Transfer Date;
(h) Trust Indenture and Mortgage (1995 777 B), dated as of May 1,
1995;
(i) Lease Agreement (1995 777 B), dated as of May 1, 1995;
<PAGE>
4
(j) Owner Trustee's Purchase Agreement Assignment (1995 777 B), dated
as of May 1, 1995;
(k) Participation Agreement (1995 777 B), dated as of May 1, 1995;
(l) Trust Agreement (1995 777 B), dated as of May 1, 1995;
(m) Lease Supplement (1995 777 B), dated the relevant Transfer Date;
(n) Trust Supplement (1995 777 B), dated the relevant Transfer Date;
(o) Trust Indenture and Mortgage (1993 747 A) dated as of April 1,
1993, as supplemented, and as amended and restated by the First
Amended and Restated Trust Indenture and Mortgage (1993 747 A)
dated as of April 1, 1993, and as further amended and restated by
the Second Amended and Restated Trust Indenture and Mortgage
(1993 747 A), dated as of July 1, 1994, as amended by the First
Amendment to Second Amended and Restated Trust Indenture and
Mortgage (1993 747 A) dated September 27, 1994 and as further
amended and restated by the Third Amended and Restated Trust
Indenture and Mortgage (1993 747A), dated as of as of May 1, 1995
and effective as of the Effective Date;
(p) Lease Agreement (1993 747 A) dated as of April 1, 1993, as
supplemented, and as amended and restated by the First Amended
and Restated Lease Agreement (1993 747 A) dated as of April 1,
1993, as amended by the First Amendment to First Amended and
Restated Lease Agreement (1993 747 A), dated April 19, 1994,
Second Amendment to First Amended and Restated Lease Agreement
(1993 747 A) dated as of July 1, 1994, and the Third Amendment to
First Amended and Restated Lease Agreement (1993 747 A) dated
July 22, 1994 and as amended and restated by the Second Amended
and Restated Lease Agreement (1993 747 A) dated as of May 1, 1995
and effective as of the Effective Date;
(q) Owner Trustee's Purchase Agreement and Assignment (1993 747 A),
dated as of April 1, 1993;
(r) Participation Agreement (1993 747 A), dated as of April 1, 1993,
as amended by the First Amendment to Participation Agreement
(1993 747 A), dated as of December 1, 1993, Second Amendment to
Participation Agreement (1993 47 A) dated as of July 1, 1994, and
as amended and restated by the First Amended and Restated
Participation Agreement (1993 747 A), dated as of May 1, 1995 and
effective as of the Effective Date;
<PAGE>
5
(s) Trust Agreement (1993 747 A), dated as of April 1, 1993, as
amended and restated by the First Amended and Restated Trust
Agreement (1993 747 A) dated as of May 1, 1995 and effective as
of the Effective Date;
(t) Lease Supplement (1993 747 A), dated April 20, 1993;
(u) Trust Supplement (1993 747 A), dated April 20, 1993; and
(v) Redemption and Refinancing Agreement (1993 747 A), dated as of
May 1, 1995 and effective as of the Effective Date.
ARTICLE II
DEFINITIONS
Section 2.01. Definitions. For all purposes of the Basic Agreement
-----------
as supplemented by this Trust Supplement, the following capitalized term has the
following meaning:
Effective Date: shall have the meaning specified therefor in the
--------------
lease.
Specified Investments: With respect to any Trust, means (i)
---------------------
obligations of, or guaranteed by, the United States Government or agencies
thereof, (ii) open market commercial paper of any corporation incorporated
under the laws of the United States of America or any State thereof rated
at least P-2 (or P-1, in the case of Escrowed Funds) or its equivalent by
Moody's Investors Service, Inc. or at least A-2 (or A-1, in the case of
Escrowed Funds) or its equivalent by Standard & Poor's Corporation, (iii)
certificates of deposit issued by commercial banks organized under the laws
of the United States or of any political subdivision thereof having a
combined capital and surplus in excess of $500,000,000 which banks or their
holding companies have a rating of A or its equivalent by Moody's
Investment Service, Inc. or Standard & Poor's Corporation; provided,
--------
however, that the aggregate amount at any one time so invested in
-------
certificates of deposit issued by any one bank shall not exceed 5% of such
bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (iii) or any subsidiary thereof and (v)
repurchase agreements with any financial institution having combined
capital and surplus of at least $500,000,000 with any of the obligations
described in clauses (i) through (iv) as collateral; provided further that
-------- -------
<PAGE>
6
if all of the above investments are unavailable, the entire amounts to be
invested may be used to purchase Federal Funds from an entity described in
clause (iii) above; and provided further that no investment shall be
-------- -------
eligible as a "Specified Investment" unless the final maturity or date of
return of such investment is on or before the Special Distribution Date
next following the Cut-Off Date for such Trust by more than 20 days.
ARTICLE III
THE TRUSTEE
Section 3.01. The Trustee. The Trustee shall not be responsible in
-----------
any manner whatsoever for or in respect of the validity or sufficiency of this
Trust Supplement or the due execution hereof by the Company, or for or in
respect of the recitals and statements contained herein, all of which recitals
and statements are made solely by the Company.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as fully to all intents as if the same were herein
set forth at length.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Basic Agreement Ratified. Except and so far as herein
------------------------
expressly provided, all of the provisions, terms and conditions of the Basic
Agreement are in all respects ratified and confirmed; and the Basic Agreement
and this Trust Supplement shall be taken, read and construed as one and the same
instrument.
Section 4.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES
-------------
1995-A2 CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
Section 4.03. Execution in Counterparts. This Trust Supplement may
-------------------------
be executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first written above.
UNITED AIR LINES, INC.
By:
--------------------------------
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
FORM OF CERTIFICATE
[Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC") to Issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner hereof,
Cede & Co., has an interest herein.]*
UNITED AIRLINES 1995-A2 PASS THROUGH TRUST
Pass Through
Certificate, Series 1995-A2
Issuance Date: ____________
Final Distribution Date: ____________
Evidencing A Fractional Undivided Interest In the 1995-A2 Trust, The
Property Of Which Includes Certain Equipment Notes Each Secured By An
Aircraft Leased To United Air Lines, Inc.
Certificate
No. _______ $ ____________ Fractional Undivided Interest representing 0.___%
of the Trust per $1,000 of Reference Principal Amount
THIS CERTIFIES THAT ______________________, for value received, is the
registered owner of a Fractional Undivided Interest in the amount of $__________
(the "Reference Principal Amount") in the United Airlines 1995-A2 Pass Through
Trust (the
- ------------
* Not necessarily applicable in respect of one Certificate in a denomination of
less than $1,000.
<PAGE>
2
"Trust") created by First Security Bank of Utah, National Association, as
trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of
February 1, 1992, as amended and restated as of May 1, 1995, (the "Basic
Agreement"), between State Street Bank and Trust Company of Connecticut,
National Association and United Air Lines, Inc., as supplemented by Trust
Supplement No. 1995-A2 thereto, dated as of May 1, 1995 (collectively, the
"Agreement"), between the Trustee and United Air Lines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "Pass Through Certificates, Series 1995-A2" (herein
called the "Certificates"). This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Certificateholder of this Certificate by virtue of the acceptance hereof assents
and by which such Certificateholder is bound. The property of the Trust includes
certain Equipment Notes (the "Trust Property"). Each issue of the Equipment
Notes is secured by a security interest in an aircraft leased to the Company.
Each of the Certificates represents a Fractional Undivided Interest in
the Trust and the Trust Property and has no rights, benefits or interest in
respect of any other separate trust established pursuant to the terms of the
Basic Agreement for any other series of certificates issued pursuant thereto.
The undivided percentage interest in the Trust represented by each of this
Certificate (as specified above) and the other Pass Through Certificates, Series
1995-A2, was determined on the basis of (x) the aggregate of the Reference
Principal Amount of this Certificate (as specified above) and of the other Pass
Through Certificates, Series 1995-A2 and (y) the aggregate original principal
amounts of the Equipment Notes constituting the Trust Property.
Subject to and in accordance with the terms of the Agreement, from
funds then available to the Trustee, there will be distributed on each October
19 and April 19 (a "Regular Distribution Date"), commencing on October 19, 1995,
to the Person in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date, an amount in
respect of the Scheduled Payments on the Equipment Notes due on such Regular
Distribution Date, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Scheduled Payments. Subject
to and in accordance with the terms of the Agreement, in the event that Special
Payments on the Equipment Notes are received by the Trustee, from funds then
available to the Trustee, there shall be distributed on the applicable Special
Distribution Date, to the Person in whose name this Certificate is registered at
the close of business on the 15th day preceding the Special Distribution Date,
an amount in respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
<PAGE>
3
equal to the sum of such Special Payments so received. If a Regular Distribution
Date or Special Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same force and effect as
if made on such Regular Distribution Date or Special Distribution Date and no
interest shall accrue during the intervening period. The Trustee shall mail
notice of each Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Distributions on this Certificate will be made by the Trustee by check
mailed to the Person entitled thereto, without the presentation or surrender of
this Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Certificate will be made after notice mailed by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Trustee specified in such notice.
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
affiliate thereof. The Certificates are limited in right or payment, all as
more specifically set forth herein and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
<PAGE>
4
As provided in the Agreement and subject to certain limitations set
forth, the transfer of this Certificate is registrable in the Register upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar duly executed by
the Certificateholder hereof or such Certificateholder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in the
Trust will be issued to the designated transferee or transferees.
The Certificates (except one Certificate having a denomination of less
than $1,000) are issuable only as registered Certificates without coupons in
minimum denominations of $1,000 Fractional Undivided Interests and integral
multiples thereof. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Trustee, the Registrar, nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
UNITED AIRLINES
1995-A2 PASS THROUGH TRUST
By: FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
-------------------------------
Title:
<PAGE>
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Trustee
By:
------------------------------
Authorized Officer
<PAGE>
EXHIBIT B
---------
[FORM OF LETTER OF REPRESENTATIONS]
[TO COME]
<PAGE>
EXHIBIT C
---------
Regular Distribution Date Scheduled Payment
------------------------- -----------------
<PAGE>
EXHIBIT 4.1
_______________________________________________
-----------------------------------------------
TRUST INDENTURE AND MORTGAGE
(1995 777 A)
Dated as of May 1, 1995
between
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except as expressly set forth herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Indenture Trustee
One Boeing 777-222 Aircraft N777UA
United Air Lines, Inc.
Series 1995 777 A Certificates
_______________________________________________
-----------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................................... 1
GRANTING CLAUSE............................................................ 2
HABENDUM CLAUSE............................................................ 5
ARTICLE 1 DEFINITIONS..................................................... 7
1.01. Definitions................................................... 7
ARTICLE 2 THE CERTIFICATES................................................ 19
2.01. Certificates; Title and Terms................................. 19
2.02. Execution and Authentication.................................. 20
2.03. Registrar and Paying Agent.................................... 20
2.04. Transfer and Exchange......................................... 21
2.05. Holder Lists; Ownership of Certificates....................... 21
2.06. Mutilated, Destroyed, Lost or Stolen Certificates............. 22
2.07. Cancellation.................................................. 22
2.08. Payment on Certificates; Defaulted Principal and Interest..... 22
2.09. Payment from Indenture Estate Only; Non-Recourse Obligations.. 24
2.10. Execution, Delivery and Dating of Certificates upon Original
Issuance..................................................... 25
ARTICLE 3 RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE......................... 25
3.01. [Reserved for Potential Future Use]........................... 25
3.02. Payment in Case of Redemption or Purchase of Certificates..... 25
3.03. Application of Rent When No Indenture Event of Default Is
Continuing................................................... 26
3.04. Application of Certain Payments in Case of Requisition or
Event of Loss................................................ 26
3.05. Payments During Continuance of Indenture Event of Default..... 27
3.06. Payments for Which Application Is Provided in Other Documents. 28
3.07. Payments for Which No Application Is Otherwise Provided....... 28
ARTICLE 4 COVENANTS OF OWNER TRUSTEE...................................... 29
4.01. Covenants of the Owner Trustee................................ 29
<PAGE>
ii
ARTICLE 5 DISPOSITION, SUBSTITUTION AND RELEASE OF PROPERTY
INCLUDED IN THE INDENTURE ESTATE DURING CONTINUATION OF
LEASE.................................................... 30
5.01. Disposition, Substitution and Release of Property Included in
the Indenture Estate During Continuation of Lease............ 30
ARTICLE 6 REDEMPTION OF CERTIFICATES...................................... 31
6.01. Redemption of Certificates upon Certain Events................ 31
6.02. Redemption or Purchase of Certificates upon Certain Indenture
Events of Default............................................ 33
6.03. Notice of Redemption to Holders............................... 34
6.04. Deposit of Redemption Price................................... 34
6.05. Certificates Payable on Redemption Date....................... 34
ARTICLE 7 MATTERS CONCERNING THE COMPANY.................................. 35
7.01. Repayment of Monies for Certificate Payments Held by the
Indenture Trustee............................................ 35
7.02. Change in Registration........................................ 35
7.03. Assumption of Obligations of Owner Trustee by the Company..... 36
ARTICLE 8 DEFAULTS AND REMEDIES........................................... 38
8.01. Indenture Events of Default................................... 38
8.02. Acceleration; Rescission and Annulment........................ 41
8.03. Other Remedies Available to Indenture Trustee................. 41
8.04. Waiver of Owner Trustee....................................... 49
8.05. Waiver of Existing Defaults................................... 49
8.06. Control by Majority........................................... 50
8.07. Limitation on Suits by Holders................................ 50
8.08. Rights of Holders to Receive Payment.......................... 51
8.09. Indenture Trustee May File Proofs of Claim.................... 51
ARTICLE 9 INDENTURE TRUSTEE............................................... 51
9.01. Duties of Indenture Trustee................................... 51
9.02. Rights of Indenture Trustee................................... 51
9.03. Individual Rights of Indenture Trustee........................ 52
9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments.................................................. 52
9.05. Notice of Defaults............................................ 53
9.06. Compensation and Indemnity.................................... 53
9.07. Replacement of Indenture Trustee.............................. 54
9.08. Successor Indenture Trustee, Agents by Merger, etc............ 55
<PAGE>
iii
9.09. Eligibility; Disqualification................................. 55
9.10. Trustee's Liens............................................... 56
9.11. Withholding Taxes; Information Reporting...................... 56
9.12. Additional Collateral......................................... 56
ARTICLE 10 SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS............................... 57
10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations............................... 57
10.02. Survival of Certain Obligations.............................. 59
10.03. Monies to Be Held in Trust................................... 59
10.04. Monies to Be Returned to Owner Trustee....................... 59
ARTICLE 11 AMENDMENTS AND WAIVERS......................................... 60
11.01. Amendments to this Agreement Without Consent of Holders...... 60
11.02. Amendments to this Agreement with Consent of Holders......... 61
11.03. Revocation and Effect of Consents............................ 62
11.04. Notation on or Exchange of Certificates...................... 62
11.05. Indenture Trustee Protected.................................. 62
11.06. Amendments, Waivers, etc. of Other Operative Documents....... 62
ARTICLE 12 MISCELLANEOUS.................................................. 65
12.01. Notices...................................................... 65
12.02. [Reserved for Potential Future Use].......................... 67
12.03. [Reserved for Potential Future Use].......................... 67
12.04. Rules by Indenture Trustee and Agents........................ 67
12.05. Non-Business Days............................................ 67
12.06. GOVERNING LAW................................................ 68
12.07. No Recourse Against Others................................... 68
12.08. Execution in Counterparts.................................... 68
ARTICLE 13 ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE.................. 68
13.01. Actions to Be Taken upon Termination of Lease................ 68
<PAGE>
iv
SIGNATURES................................................................. 70
Exhibit A-1 Form of Series 1995 777 A Installment
Certificates
Exhibit A-2 Form of Series 1995 777 A Serial
Certificates
Exhibit B Maturity Dates, Original Issue Prices,
Principal Amounts and
Interest Rates of Series 1995 777 A
Certificates
Exhibit B-1 Installment Payment Dates and Installment
Payment Percentages
Exhibit B-2 Issuance of Series 1995 777 A
Certificates
Exhibit C Form of Trust Agreement and Trust Indenture
and Mortgage Supplement
<PAGE>
TRUST INDENTURE AND MORTGAGE
This TRUST INDENTURE AND MORTGAGE (1995 777 A), dated as of May 1,
1995, between STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity except as otherwise expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (capitalized terms
used herein having the respective meanings specified therefor in Article 1), and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, as Indenture Trustee hereunder.
W I T N E S S E T H:
-------------------
WHEREAS, the Owner Participant and the Owner Trustee in its individual
capacity have entered into the Trust Agreement whereby, among other things, (i)
the Owner Trustee has established a certain trust for the use and benefit of the
Owner Participant, subject, however, to the Indenture Estate created pursuant
hereto for the use and benefit of, and with the priority of payment to, the
holders of the Certificates issued hereunder, and (ii) the Owner Trustee has
been authorized and directed pursuant to the Trust Agreement to execute and
deliver this Trust Indenture and Mortgage;
WHEREAS, all capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof;
WHEREAS, the parties desire by this Agreement, among other things, (i)
to provide for the issuance by the Owner Trustee of the Series 1995 777 A
Certificates evidencing the loans made by the Pass Through Trustees to finance
the Owner Trustee's payment of Lessor's Cost, 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, among other things, of certain of the Owner Trustee's right, title
and interest in and to the Aircraft and the Operative Documents and certain
payments and other amounts received hereunder or thereunder in accordance with
the terms hereof, as security for, among other things, the Owner Trustee's
obligations to the Indenture Trustee, for the ratable benefit and security of
the Holders;
WHEREAS, all things have been done to make the Certificates, when
executed by the Owner Trustee and authenticated and delivered by the Indenture
Trustee hereunder, the valid, binding and enforceable obligations of the Owner
Trustee; and
WHEREAS, all things necessary to make this Agreement the legal, valid
and binding obligation of the Owner Trustee and the Indenture Trustee, for the
uses and purposes
<PAGE>
2
herein set forth, in accordance with its terms, have been done and performed and
have happened;
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND MORTGAGE WITNESSETH, that, to
secure the prompt payment of the principal of, premium, if any, and interest on,
and all other amounts due with respect to, all Certificates from time to time
Outstanding and the performance and observance by the Owner Trustee of all the
agreements, covenants and provisions contained herein and in the Operative
Documents to which it is a party, for the benefit of the Holders, and for the
uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of other good and valuable
consideration the receipt and adequacy whereof are hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the Holders from time to
time, a 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,
rights, interests and privileges (which collectively, including all property
hereafter specifically subjected to the lien of this Agreement by any instrument
supplemental hereto, but excluding the Excluded Payments, are herein called the
"Indenture Estate"):
(1) the Airframe and Engines (each such Engine having 750 or more
rated take-off horsepower or the equivalent thereof) and all replacements
thereof and substitutions therefor in which the Owner Trustee shall from
time to time acquire an interest in accordance with the Lease, as more
particularly described in the Trust Supplement and the Lease Supplement
executed and delivered with respect to the Aircraft or any such
replacements or substitutions therefor, as provided in this Agreement and
the Lease;
(2) the Lease and all Rent thereunder, including, without limitation,
all amounts of Basic Rent, Supplemental Rent, and payments of any kind
required to be made by the Company thereunder; all amounts payable to the
Owner Trustee under the Participation Agreement that do not constitute
Excluded Payments; the Purchase Agreement (to the extent assigned by the
Owner Trustee's Purchase Agreement), the Owner Trustee's Purchase
Agreement, the Owner Trustee's Bill of Sale, the Owner Trustee's FAA Bill
of Sale and any and all contracts relating to the Airframe and Engines or
any rights or interest therein to which the Owner Trustee is now or may
hereafter be a party; including, without limitation, all rights of the
Owner Trustee to receive any payments or other amounts or to exercise any
election or option or to
<PAGE>
3
make any decision or determination or to give or receive any notice,
consent, waiver or approval or to take any other action under or in respect
of any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on the
part of the Owner Trustee, whether acting under any such document or by
statute or at law or in equity, or otherwise, arising out of any Lease
Event of Default (other than the rights of the Owner Trustee provided for
hereunder);
(3) all rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Lien of this
Agreement;
(4) all requisition 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) and all insurance proceeds with respect to the
Aircraft or any part thereof from insurance required to be maintained by
the Company under Section 11 of the Lease, but excluding any insurance
maintained by the Company and not required under Section 11 of the Lease;
(5) all moneys and securities 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
Document and held or required to be held by the Indenture Trustee
hereunder;
(6) all proceeds of the foregoing; and
(7) the Additional Collateral, if any.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest granted by this
Agreement all Excluded Payments;
(b) (i) whether or not a Lease Event of Default or 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 Excluded Payments and to commence an action at law
to obtain such Excluded Payments, (b) to adjust Basic Rent and the
percentages relating to Stipulated Loss Value and Termination Value, the
Special Termination Value Percentage and the EBO Percentages as provided in
Section 3(c) of the Lease and Section 18 of the Participation Agreement,
(c) 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,
<PAGE>
4
Excluded Payments, (d) to retain the rights of the "Lessor" with respect to
solicitations of bids, and the election to retain the Aircraft pursuant to
Section 9 of the Lease, (e) to exercise the right of "Lessor" to determine
the fair market rental value or fair market sales value pursuant to Section
19 of the Lease, (f) to exercise all rights with respect to insurance
maintained for its own account which Section 11(e) of the Lease
specifically confers on the "Lessor" and (g) to exercise, to the extent
necessary to enable it to exercise its rights under Section 8.03(e)(i)
hereof, the rights of the "Lessor" under Section 21 of the Lease;
(ii) whether or not a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee and the Indenture
Trustee shall each have the right separately but not to the exclusion of
the other, (a) to receive from the Company all notices, certificates,
reports, filings, Opinions of Counsel, copies of all documents and all
information which the Company 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 Document, (b) to exercise inspection rights pursuant to
Section 12 of the Lease, (c) to maintain separate insurance pursuant to
Section 11(e) of the Lease and to retain all rights with respect to such
insurance maintained for its own account, (d) to give any notice of default
under Section 15 of the Lease and to declare the Lease in default in
respect thereof, (e) to cause the Company to take any action and execute
and deliver such documents and assurances as the "Lessor" may from time to
time reasonably request pursuant to Section 16 of the Lease; (f) to consent
(with the concurrent consent of the other such party to the extent such
consent is required) to changes to the list of countries on Exhibit F or G
to the Lease and (g) to purchase an engine pursuant to Section 5(e) of the
Lease;
(iii) so long as no Indenture Event of Default shall have occurred
and be continuing (but subject to the provisions of Section 11.06), the
Owner Trustee shall retain the right, to the exclusion of the Indenture
Trustee, to exercise the following rights of the "Lessor" under the Lease:
(a) the right to approve as satisfactory any accountants, engineers or
counsel to render services for or issue opinions to the Owner Trustee
pursuant to express provisions of the Operative Documents, (b) the right to
waive the opinion required pursuant to Section 8(e)(ii)(C) of the
Participation Agreement and (c) in connection with an Event of Loss
relating only to one or more Engines, the right to elect (or not to elect)
under Section 10(b) of the Lease to require the Company to pay the amounts
set forth in clauses (A) and (B) of Section 10(b);
(c) the leasehold interest granted to the Company by the Lease shall
not be subject to the security interest granted by this Agreement, and
nothing in this Agreement shall affect the rights of the Company under the
Lease so long as no Lease Event of Default has occurred and is continuing;
and
<PAGE>
5
(d) as between the Owner Trustee and the Indenture Trustee, nothing
contained in this Granting Clause shall prevent the Owner Trustee, as the
"Lessor" under the Lease, from seeking specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and from
maintaining separate insurance with respect to the Aircraft to the extent
permitted by Section 11 of the Lease.
None of the payments and rights described in the foregoing clauses (a)
through (d) shall be included in the Indenture Estate.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, in trust for the benefit and
security of the Indenture Trustee and the Holders from time to time, without any
priority of any one Certificate over any other, and for the uses and purposes
and subject to the terms and provisions set forth in this Agreement.
1. The Owner Trustee agrees that this Agreement creates and grants
and is intended to and shall create and grant a security interest in the
Aircraft to the Indenture Trustee, which security interest shall attach on the
Delivery Date. The security interest created by this Agreement and granted to
the Indenture Trustee hereunder in the Indenture Estate other than in the
Aircraft shall attach upon the delivery of this Agreement.
2. It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Documents to which it is a party to perform all of its obligations
assumed by it thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Indenture Trustee and the Holders shall have no
obligation or liability under any of the Operative Documents to which the Owner
Trustee is a party by reason of or arising out of the assignment hereunder, nor
shall the Indenture Trustee (except as to the Indenture Trustee, if the
Indenture Trustee shall have become the "Lessor" under the Lease) or the Holders
be required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of the Operative Documents to which the Owner
Trustee is a party, or, except as herein expressly provided, 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.
3. The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of
<PAGE>
6
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 moneys and claims for moneys due and to become due to the Owner
Trustee (other than Excluded Payments) under or arising out of the Lease
(subject to Section 11.06(b)(1)), the Purchase Agreement and the Owner Trustee's
Purchase Agreement, to endorse any checks or other instruments or orders in
connection therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable in
the premises. The Owner Trustee has directed the Company to make all payments
of Rent (other than Excluded Payments) payable to the Owner Trustee by the
Company and all other amounts 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 as the Indenture Trustee shall specify, for application as provided
in this Agreement. The Owner Trustee agrees that promptly on receipt thereof,
it will transfer to the Indenture Trustee any and all moneys from time to time
received by it constituting part of the Indenture Estate, for distribution by
the Indenture Trustee pursuant to this Agreement, except that the Owner Trustee
shall accept for distribution pursuant to the Trust Agreement any amounts
distributed to it by the Indenture Trustee as expressly provided in this
Agreement and any Excluded Payments.
4. 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
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 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 and 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 pursuant to any Operative Document.
5. The Owner Trustee does hereby warrant and represent that it has
not assigned or pledged, and hereby covenants that it will not assign or pledge,
so long as the assignment hereunder shall remain in effect, any of its right,
title or interest hereby assigned, to any Person other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement amending
or supplementing any of the Operative Documents, execute any waiver or
modification of, or consent under the terms of any of the Operative Documents,
settle or compromise any claim (other than claims in respect of Excluded
Payments) against the Company arising under any of the Operative Documents, or
submit or consent to the
<PAGE>
7
submission of any dispute, difference or other matter arising under or in
respect of any of the Operative Documents, to arbitration thereunder.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this Agreement,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article 1 have the meanings assigned to
them in this Article 1, and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States;
(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(4) all references in this Agreement to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following capitalized
terms have the following respective meanings:
"Actual Knowledge" means, (i) as it applies to the Owner Trustee or
----------------
Indenture Trustee, as the case may be, actual knowledge of a responsible officer
in the Corporate Trust Department or the Corporate Trust Office, as the case may
be, and (ii) as it applies to the Owner Participant, actual knowledge of a Vice
President or more senior officer of the Owner Participant or other officer of
the Owner Participant in each case having responsibility for the transactions
contemplated by the Operative Documents; provided that each of the Owner
Trustee, the Indenture Trustee and the Owner Participant shall be deemed to have
"Actual Knowledge" of any matter as to which it has been given notice by any of
Lessee, the Owner Participant, any Holder, the Owner Trustee or the Indenture
Trustee, such notice having been given pursuant to and in accordance with
Section 12.01.
<PAGE>
8
"Additional Collateral" means any property in addition to the
---------------------
collateral listed in clauses (1) through (5) of the Granting Clause which may be
added to the Indenture Estate from time to time by the Owner Participant in
accordance with Section 9.12 hereof for so long as such property is to be
included in the Indenture Estate in accordance with the grant made in said
Section 9.12.
"Affiliate" with respect to a specified Person, means any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control"
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
-----
"Aircraft" shall have the meaning specified therefor in the Lease.
--------
"Airframe" shall have the meaning specified therefor in the Lease.
--------
"Appraiser" means a Person engaged in the business of making
---------
appraisals and, in the case of the Aircraft, familiar with commercial aviation
equipment.
"Bankruptcy Code" shall have the meaning specified therefor in the
---------------
Lease
"Basic Rent" shall have the meaning specified therefor in the Lease.
----------
"Business Day" shall have the meaning specified therefor in the Lease.
------------
"Certificate" or "Certificates" means any Certificate issued under
----------- ------------
this Agreement, including the Series 1995 777 A Certificates issued hereunder
substantially in the form of Exhibits A-1 and A-2 hereto as such form may be
varied pursuant to the terms hereof and any and all Certificates issued in
replacement or exchange therein in accordance with the provisions hereof.
"Certificate Holder" shall have the meaning specified for the term
------------------
"Holder" hereunder.
"Citizen of the United States" shall have the meaning specified
----------------------------
therefor in the Lease.
"Commencement Date" shall have the meaning specified therefor in the
-----------------
Lease.
<PAGE>
9
"Commencement Date Cash Interest" when used with respect to a
-------------------------------
Certificate, shall be such Certificate's pro rata portion of the aggregate
--- ----
commencement date cash interest as determined on the basis of the data included
in Exhibit B.
"Company" means United Air Lines, Inc., a Delaware corporation, and,
-------
subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company executed on
---------------
its behalf by a Responsible Company Officer.
"Co-Registrar" shall have the meaning specified therefor in Section
------------
2.03.
"Debt" shall mean any liability for borrowed money, or any liability
----
for the payment of money in connection with any letter of credit transaction, or
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"Defaulted Installment" shall have the meaning specified therefor in
---------------------
Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor in
------------------
Section 2.08.
"Delivery Date" shall have the meaning specified therefor in the
-------------
Lease.
"EBO Date" shall have the meaning specified therefor in the Lease.
--------
"Engine" shall have the meaning specified therefor in the Lease.
------
"Event of Loss" shall have the meaning specified therefor in the
-------------
Lease.
"Excess Amount" shall have the meaning specified therefor in the
-------------
Lease.
"Excluded Payments" means (i) any right, title or interest of the
-----------------
Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective successors, permitted assigns,
directors, officers, employees, servants and agents to any payment which by the
terms of Section 7(b) or 7(c) of the Participation Agreement, Section 5.03 or
7.01 of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3(d) of the Lease is payable to such Person,
(ii) any insurance proceeds payable under insurance maintained by the Owner
Trustee in its individual capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu thereof)
payable to the Owner Trustee in its individual
<PAGE>
10
capacity or to the Owner Participant, or to their respective Affiliates,
successors, permitted assigns, directors, officers, employees, servants and
agents, under any liability insurance maintained by the Company pursuant to
Section 11 of the Lease or by any other Person (or proceeds of governmental
indemnities in lieu thereof), (iv) any rights of the Owner Participant or the
Owner Trustee to demand, collect, sue for, or otherwise receive and enforce
payment of the foregoing amounts (including interest thereon to the extent
provided in the applicable provisions of the Operative Documents) and the right
to declare an Event of Default under the Lease in respect of any of the
foregoing amounts, but not including the right to exercise any remedies under
the Lease except for those specifically provided for in this clause (iv), (v)
payments to the Owner Participant by the Owner Trustee pursuant to Section 2 of
the Participation Agreement and any funds held by the Owner Trustee or payable
to the Owner Participant pursuant to any funding letter entered into in lieu of
the provisions of Section 2 of the Participation Agreement, (vi) if the Lessee
has assumed the obligations of the Owner Trustee in respect of the Certificates
in accordance with Section 7.03 hereof and Section 8(r) of the Participation
Agreement, the amount payable as purchase price pursuant to Section 19(b) of the
Lease, (vii) Transaction Expenses or other amounts or expenses paid or payable
to, or for the benefit of, the Owner Participant pursuant to the Participation
Agreement, (viii) the respective rights of the Owner Trustee in its individual
capacity or the Owner Participant to the proceeds of the foregoing and (ix) any
right to demand, collect or otherwise receive and enforce the payment of any
amount described in clauses (i) through (viii) above.
"Federal Aviation Act" shall have the meaning specified therefor in
--------------------
the Lease.
"Federal Aviation Administration" and "FAA" shall have the meaning
------------------------------- ---
specified therefor in the Lease.
"Holder" means a person in whose name a Certificate is registered on
------
the Register including, so long as it holds any Certificate issued hereunder,
the respective Pass Through Trustee under each Pass Through Trust Agreement.
"Indenture Default" means any event which is, or after notice or
------------------
passage of time, or both, would be, an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified therefor in the
----------------
Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified therefor
---------------------------
in Article 8.
<PAGE>
11
"Indenture Trustee" means First Security Bank of Utah, National
-----------------
Association and each other Person which may from time to time be acting as
Indenture Trustee in accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, Appraiser or
-----------
other expert, means an engineer, Appraiser or other expert who (i) is in fact
independent, (ii) does not have any direct financial interest or any material
indirect financial interest in the Company or any Affiliate of the Company, and
(iii) is not connected with the Company or any Affiliate of the Company as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Investment Banker" shall mean an independent investment
-----------------------------
banking institution of national standing appointed by (i) the Company on behalf
of the Owner Trustee or (ii) in the case of a redemption or purchase of the
Certificates under Section 6.01(b) pursuant to Section 8.03(e)(ii), the Owner
Trustee; provided that, if the Indenture Trustee shall not have received written
--------
notice of such an appointment at least 10 days prior to the relevant Redemption
Date or if a Lease Event of Default shall have occurred and be
continuing,"Independent Investment Banker" shall mean such an institution
- -----------------------------------------
appointed by the Indenture Trustee.
"Installment Certificate" shall mean a Certificate substantially in
-----------------------
the form of Exhibit A-1, should any such Certificate be issued hereunder.
"Installment Payment Amount" means, with respect to each Installment
--------------------------
Certificate, the amount of the installment payment of principal due and payable
on each Installment Payment Date, which amount shall be equal to the product of
the original principal amount of such Certificate and the Installment Payment
Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an installment
------------------------
payment of principal is due and payable on any Installment Certificate, as set
forth in Exhibit B-1.
"Installment Payment Percentage" means, with respect to each
------------------------------
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-1;
provided that, after the occurrence of any partial redemption or redemptions
- --------
pursuant to clause (ii) of Section 6.01(a), the "Installment Payment Percentage"
------------------------------
for each Installment Payment Date subsequent to the applicable Redemption Date
shall be equal to the percentage obtained from the following calculation:
(p - n) x y
-----------
p x s
<PAGE>
12
where, for Installment Certificates maturing on the same Maturity Date:
p = the sum of the original principal amounts of all Installment
Certificates maturing on such Maturity Date as reflected on
Exhibit B hereto;
n = the sum of the principal amounts paid to all holders of
Installment Certificates maturing on such Maturity Date as a
result of all such partial redemptions (excluding any Installment
Payment Amounts paid on a Redemption Date as a result of any such
Redemption Date occurring on an Installment Payment Date) and all
payments of principal paid on Installment Payment Dates on or
prior to the applicable Redemption Date;
y = the Installment Payment Percentage set forth in such Exhibit B-1
applicable to the Installment Payment Date for which this
calculation is being performed; and
s = the sum of the Installment Payment Percentages for Installment
Payment Dates related to such Installment Certificates maturing
on such Maturity Date and subsequent to the applicable Redemption
Date.
"Interest Payment Date" means each October 19 and April 19, commencing
----------------------
on the Commencement Date.
"Lease" means the Lease Agreement (1995 777 A), dated as of May 1,
------
1995, between the Owner Trustee, as lessor, and the Company, as lessee, as such
Lease Agreement may from time to time be further supplemented, amended or
modified in accordance with the terms thereof and this Agreement. The term
"Lease" shall also include each Lease Supplement entered into pursuant to the
- ------
terms of the Lease.
"Lease Event of Default" shall have the meaning specified for the term
----------------------
"Event of Default" in the Lease.
"Lease Loss Payment Date" shall have the meaning specified for the
-----------------------
term "Loss Payment Date" in the Lease.
"Lease Supplement" shall have the meaning specified therefor in the
----------------
Lease.
"Lease Termination Date" shall have the meaning specified for the term
-----------------------
"Termination Date" in the Lease.
<PAGE>
13
"Lessor Liens" shall have the meaning specified therefor in the Lease.
------------
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
----
exercise of rights, security interest or claim.
"Loan Certificate" shall have the meaning specified for the term
-----------------
"Certificate" hereunder.
"Maturity Date" means each of the dates specified in Exhibit B as a
-------------
maturity date of one or more of the Certificates.
"Officers' Certificate" means a certificate signed, in the case of the
---------------------
Company, by (i) the Chairman of the Board of Directors, the President, or any
Senior Vice President of the Company, signing alone, or (ii) any Vice President
signing together with the Secretary, any Assistant Secretary, the Treasurer or
any Assistant Treasurer of the Company or, in the case of the Owner Trustee, a
Responsible Officer of the Owner Trustee.
"Operative Documents" means this Agreement, the Participation
-------------------
Agreement, the Lease, the Tax Indemnity Agreement, the Consent and Agreement,
the Owner Trustee's Bill of Sale, the Owner Trustee's FAA Bill of Sale, the
Acceptance Certificate, the Purchase Agreement (to the extent assigned by the
Owner Trustee's Purchase Agreement), the Owner Trustee's Purchase Agreement, the
Certificates, the Trust Agreement and the Trust Supplement.
"Opinion of Counsel" means a written opinion of legal counsel, who in
------------------
the case of counsel for the Company may be (i) the senior attorney employed by
the Company, (ii) Vedder, Price, Kaufman & Kammholz or (iii) other counsel
designated by the Company and who shall be reasonably satisfactory to the
Indenture Trustee or, in the case of legal counsel for the Owner Trustee, may be
(x) Bingham, Dana & Gould or (y) other counsel designated by the Owner Trustee
and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Issue Price", when used with respect to a Certificate, shall
--------------------
be such Certificate's pro rata portion of the aggregate original issue price as
--- ----
determined on the basis of the data included in Exhibit B hereto.
"Outstanding", when used with respect to Certificates, means, as of
-----------
the date of determination, all Certificates theretofore executed and delivered
under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to Section
2.07 or otherwise;
<PAGE>
14
(ii) Certificates for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Indenture Trustee
in trust for the Holders of such Certificates; provided that if such
--------
Certificates are to be redeemed, notice of such redemption has been duly
given pursuant to this Agreement or provision therefor satisfactory to the
Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, declaration, direction, notice, consent or
waiver, only Certificates which the Indenture Trustee knows to be so owned or so
pledged shall be disregarded. Certificates owned by the Company, or the Owner
Trustee or the Owner Participant, which have been pledged in good faith may be
regarded as Outstanding if the Company, or the Owner Trustee or the Owner
Participant, as the case may be, establishes to the satisfaction of the
Indenture Trustee the pledgee's right to act with respect to such Certificates
and that the pledgee is not the Company, or the Owner Trustee or the Owner
Participant or any Affiliate thereof.
"Owner Participant" shall be the party specified as the "Owner
-----------------
Participant" in the Participation Agreement, its successors and, to the extent
permitted by Article VIII of the Trust Agreement and Section 8(l) of the
Participation Agreement, its permitted successors and assigns.
"Owner Trustee" means State Street Bank and Trust Company, a
-------------
Massachusetts trust company, not in its individual capacity, but solely as
trustee under the Trust Agreement, and each other Person which may from time to
time be acting as Owner Trustee in accordance with the provisions of the
Operative Documents.
"Owner Trustee's Purchase Agreement" shall have the meaning specified
----------------------------------
therefor in the Lease.
"Participation Agreement" shall have the meaning specified therefor in
-----------------------
the Lease.
"Parts" shall have the meaning specified therefor in the Lease.
-----
<PAGE>
15
"Pass Through Certificates" means any of the Pass Through Certificates
-------------------------
issued pursuant to any of the Pass Through Trust Agreements.
"Pass Through Trust" means each pass through trust created pursuant to
------------------
the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means the Pass Through Trust Agreement
-----------------------------
dated as of February 1, 1992, as amended and restated as of May 1, 1995, between
the Company and the Pass Through Trustee as supplemented by each of the two Pass
Through Trust Supplements Nos. 1995- A1 and 1995-A2, each dated as of May __,
1995, as the same may from time to time be further amended, supplemented or
otherwise modified.
"Pass Through Trust Supplement" shall have the meaning specified for
-----------------------------
the term "Trust Supplement" in the Pass Through Trust Agreement.
"Pass Through Trustee" means First Security Bank of Utah, National
--------------------
Association in its capacity as trustee under each Pass Through Trust Agreement,
and such other Person that may from time to time be acting as successor trustee
under any such Pass Through Trust Agreement.
"Paying Agent" means any person acting as Paying Agent hereunder
------------
pursuant to Section 2.03.
"Permitted Investment" means each of (i) obligations of, or guaranteed
--------------------
by, the United States Government or agencies thereof, (ii) open market
commercial paper of any corporation incorporated under the laws of the United
States of America or any State thereof rated at least P-2 or its equivalent by
Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard &
Poor's Corporation, (iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any political subdivision
thereof having a combined capital and surplus in excess of $500,000,000 which
banks or their holding companies have a rating of A or its equivalent by Moody's
Investors Service or Standard & Poor's Corporation; provided, however, that the
-------- -------
aggregate amount at any one time so invested in certificates of deposit issued
by any one bank shall not exceed 5% of such bank's capital and surplus, (iv)
U.S. dollar denominated offshore certificates of deposit issued by, or offshore
time deposits with, any commercial bank described in clause (iii) or any
subsidiary thereof and (v) repurchase agreements with any financial institution
having combined capital and surplus of at least $500,000,000 with any of the
obligations described in clauses (i) through (iv) as collateral.
"Permitted Lien" shall have the meaning specified therefor in the
--------------
Lease.
<PAGE>
16
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pre-Commencement Date Period" means, with respect to any Certificate,
----------------------------
the period commencing on the date of the original issuance of such Certificate
and ending on and including the day immediately preceding the Commencement Date.
"Premium" or "premium" shall have the meaning specified in Section
------- -------
6.01(b) hereto.
"Premium Termination Date" means, with respect to a Certificate, the
------------------------
date set forth below opposite the Maturity Date of such Certificate:
<TABLE>
<CAPTION>
Premium
Certificates Maturity Date Termination Date
- ---------------- ------------- ----------------
<S> <C> <C>
Series 777A-1
Certificate [_________] [_________]
Series 777 A-2
Certificate [_________] [_________]
</TABLE>
"Purchase Agreement" shall have the meaning specified therefor in the
------------------
Lease.
"Purchase Option Date" shall have the meaning specified therefor in
--------------------
the Lease.
"Record Date" for the interest or Installment Payment Amount payable
------------
on any Certificate on any Interest Payment Date or Installment Payment Date
(other than the Maturity Date) for such Certificate, as the case may be, means
the calendar day (whether or not a Business Day) which is 15 calendar days prior
to the related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are to be
---------------
redeemed or purchased pursuant to Section 6.01 or Section 6.02, as the case may
be, as specified in the notice delivered pursuant to Section 6.03 hereof.
"Redemption Price" means the price at which the Certificates are to be
----------------
redeemed or purchased, determined as of the applicable Redemption Date, pursuant
to Section 6.01 or Section 6.02, as the case may be; provided, however, that in
-------- -------
the case of a Certificate which is issued at a discount which shall become due
and payable (upon redemption, acceleration or otherwise) and shall be paid or
shall be purchased during the Pre-Commencement Date Period, the Redemption Price
or purchase price therefor shall be the amount payable upon such Certificate
becoming due and payable and being paid during the Pre-Commencement Date Period
as specified therein.
<PAGE>
17
"Refinancing Date" shall mean the date designated by the Lessee as the
----------------
date for a refinancing of the Certificates in accordance with Section 17 of the
Participation Agreement.
"Register" shall have the meaning specified therefor in Section 2.03.
--------
"Registrar" means any person acting as Registrar hereunder pursuant to
---------
Section 2.03.
"Rent" shall have the meaning specified therefor in the Lease.
----
"Replacement Airframe" shall have the meaning specified therefor in
--------------------
the Lease.
"Replacement Engine" shall have the meaning specified therefor in the
------------------
Lease.
"Responsible Company Officer" means, with respect to the Company, its
---------------------------
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President, the Treasurer or any other management
employee (a) working under the direct supervision of such Chairman of the Board,
President, Senior Vice President, Chief Financial Officer, Vice President or
Treasurer and (b) whose responsibilities include the administration of the
transactions and agreements, including the Lease, contemplated by the
Participation Agreement.
"Responsible Officer", with respect to the Owner Trustee or the
-------------------
Indenture Trustee, shall mean any officer in its Corporate Trust Administration
Department or any officer of the Owner Trustee or the Indenture Trustee, as the
case may be, customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with a particular subject.
"SEC" means the Securities and Exchange Commission.
---
"Series 1995 777 A Certificate" means any Certificate issued by the
-----------------------------
Owner Trustee under this Agreement substantially in the form of Exhibit A-1 or
A-2, and any and all of the Series 1995 777 A Certificates issued in replacement
or exchange thereof in accordance with the provisions hereof.
"Special Purchase Option Date" shall have the meaning specified
----------------------------
therefor in the Lease.
"Stipulated Loss Value" shall have the meaning specified therefor in
---------------------
the Lease.
"Supplemental Rent" shall have the meaning specified therefor in the
-----------------
Lease.
<PAGE>
18
"Tax Indemnity Agreement" shall have the meaning specified therefor in
-----------------------
the Lease.
"Termination Value" shall have the meaning specified therefor in the
-----------------
Lease.
"Treasury Yield" means, with respect to each Certificate to be
--------------
redeemed or purchased, (x) in the case of a Certificate having a maturity less
than one year after the applicable redemption or purchase date, the average
yield to stated maturity on a government bond equivalent basis of the applicable
United States Treasury Bill due the week of the maturity of such Certificate or
(y) in the case of a Certificate having a maturity of one year or more after the
applicable redemption or purchase date, the average yield to stated maturity of
the most comparable United States Treasury Notes or Bonds as identified by an
independent investment banker, corresponding in maturity to the Remaining
Weighted Average Life (as defined below) of such Certificate (or, if there is no
maturity corresponding to such Remaining Weighted Average Life, an interpolation
of maturities by such independent investment banker), in each case under (x) and
(y) above determined by such independent investment banker based on the average
of the yields to stated maturity determined from the bid prices on the fourth
Business Day preceding the applicable redemption on purchase date. For purposes
hereof, "Remaining Weighted Average Life" means, for any Certificate, at the
redemption or purchase date of such Certificate, the number of years obtained by
dividing (a) the sum of the products obtained by multiplying (i) the amount of
each then remaining scheduled payment of principal, including the payment due on
the maturity date of such Certificate, by (ii) the number of years (calculated
to the nearest one-twelfth) which will elapse between the redemption or purchase
date and the regular distribution dates as of such scheduled payments of
principal; by (b) the then outstanding principal amount (including accretion of
discount) of such Certificate.
"Trust Agreement" shall have the meaning specified therefor in the
---------------
Lease.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trust Indenture and Mortgage" or "this Agreement" means this Trust
---------------------------- --------------
Indenture and Mortgage (1995 777 A), as the same may from time to time be
supplemented, amended or modified.
"Trust Indenture Estate" shall have the meaning specified for the term
----------------------
"Indenture Estate" hereunder.
"Trust Office" shall mean the principal corporate trust office of the
------------
Owner Trustee located at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust Department, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
<PAGE>
19
"Trust Supplement" means a supplement to the Trust Agreement and this
----------------
Agreement in the form of Exhibit C hereto.
"Trustee's Liens" shall have the meaning specified therefor in Section
---------------
9.10.
"United States" or "U.S." means the United States of America.
------------- ----
"U.S. Government Obligations" means securities that are direct
---------------------------
obligations of the United States or agencies or instrumentalities thereof for
the payment of which the full faith and credit of the United States are pledged
which are not callable or redeemable, and shall also include a depository
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt so long as such custodian is not authorized
to make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of the
U.S. Government Obligation evidenced by such depository receipt.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. The Certificates issued
-----------------------------
hereunder shall be designated as Series 1995 777 A Certificates. The
Installment Certificates and the Serial Certificates shall be substantially in
the form set forth in Exhibit A-1 or A-2, respectively. The Certificates
originally issued hereunder shall be dated the date of issuance thereof and
shall be issued in the maturities and principal amounts and at the Original
Issue Prices, shall provide for Commencement Date Cash Interest, if any, and
shall bear interest during and after the Pre-Commencement Date Period at the
rates per annum, in each case as specified in or determined pursuant to Exhibit
B. The principal of each Certificate, other than Installment Certificates,
shall be payable in full on the Maturity Date for such Certificate. The
principal of each Installment Certificate shall be payable in installments, on
each Installment Payment Date, in amounts equal to the Installment Payment
Amount for such Installment Payment Date. Each Certificate shall be issued to
the Pass Through Trustee under each of the Pass Through Trust Agreements, as set
forth in Exhibit B-2.
The Certificates shall be issued in registered form only. The
Certificates shall be issued in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that is
not an integral multiple of $1,000.
<PAGE>
20
The Certificates are not redeemable or subject to purchase prior to
maturity except as provided in this Agreement. Interest accrued on the
Certificates shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.02. Execution and Authentication. (a) Certificates shall
----------------------------
be executed on behalf of the Owner Trustee by the manual or facsimile signature
of its President, a senior vice president, a vice president, an assistant vice
president, its treasurer, its secretary, an assistant secretary or an assistant
treasurer.
(b) If any officer of the Owner Trustee executing the Certificates no
longer holds that office at the time the Certificate is executed on behalf of
the Owner Trustee, the Certificate shall be valid nevertheless.
(c) At any time and from time to time after the execution of the
Certificates, the Owner Trustee may deliver such Certificates to the Indenture
Trustee for authentication and, subject to the provisions of Section 2.10, the
Indenture Trustee shall authenticate the Certificates by manual signature upon
written orders of the Owner Trustee. Certificates shall be authenticated on
behalf of the Indenture Trustee by any authorized officer or signatory of the
Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for any purpose or
entitled to any security or benefit hereunder until executed on behalf of the
Owner Trustee by the manual or facsimile signature of an officer of the Owner
Trustee as provided in Section 2.02(a) and until authenticated on behalf of the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee as provided in Section 2.02(c). Such signatures shall
be conclusive evidence that such Certificate has been duly executed,
authenticated and issued under this Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture Trustee
--------------------------
shall maintain an office or agency where the Certificates may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where (subject to Sections 2.04 and 2.08) the Certificates may be
presented for payment or for exchange (the "Paying Agent"). The Registrar shall
keep a register (the "Register") with respect to the Certificates and to their
transfer and exchange and the payments of Installment Payment Amounts thereon,
if any. The Indenture Trustee may appoint one or more co-registrars (the "Co-
Registrars") and one or more additional Paying Agents for the Certificates and
the Indenture Trustee may terminate the appointment of any Co-Registrar or
Paying Agent at any time upon written notice. The term "Registrar" includes any
Co-Registrar. The term "Paying Agent" includes any additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and Paying
Agent.
<PAGE>
21
Section 2.04. Transfer and Exchange. At the option of the Holder
---------------------
thereof, Certificates may be exchanged for an equal aggregate principal amount
of other Certificates of the same maturity and type and of any authorized
denominations or transferred upon surrender of the Certificates to be exchanged
or transferred at the principal corporate trust office of the Indenture Trustee,
or at any office or agency maintained for such purpose pursuant to Section 2.03.
Whenever any Certificates are so surrendered for exchange, the Owner Trustee
shall execute, and the Indenture Trustee shall authenticate and deliver, the
replacement Certificates, dated the same date as the Certificate or Certificates
being replaced which the Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or exchange
of Certificates shall be the valid obligations of the Owner Trustee, evidencing
the same obligations, and entitled to the same security and benefits under this
Agreement, as the Certificates surrendered upon such registration of transfer or
exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Certificates, but the Registrar may, as a condition to
any transfer or exchange hereunder, require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates.
The Registrar shall not be required to register the transfer of or to
exchange any Certificate called for redemption or purchase pursuant to such
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (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, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semi-annually on or before each
Interest Payment Date, and 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.
(b) Ownership of the Certificates shall be proved by the Register kept
by the Registrar. Prior to due presentment for registration of transfer of any
Certificate, the
<PAGE>
22
Owner Trustee, the Owner Participant, the Company, the Indenture Trustee, the
Paying Agent and the Registrar may deem and treat the Person in whose name any
Certificate is registered as the absolute owner of such Certificate for the
purpose of receiving payment of principal (including, subject to the provisions
herein regarding the applicable Record Dates, Installment Payment Amounts) of,
premium, if any, and interest on such Certificate and for all other purposes
whatsoever, whether or not such Certificate is overdue, and none of the Owner
Trustee, the Indenture Trustee, the Paying Agent or the Registrar shall be
affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
any Certificate shall become mutilated, destroyed, lost or stolen, the Owner
Trustee shall, upon the written request of the Holder of such Certificate, issue
and execute, and the Indenture Trustee shall authenticate and deliver, in
replacement thereof, as applicable, a new Certificate of the same type and
having the same maturity, payable to the same Holder in the same principal
amount and dated the same date as the Certificate so mutilated, destroyed, lost
or stolen. If the Certificate being replaced has become mutilated, such
Certificate shall be surrendered to the Indenture Trustee. If the Certificate
being replaced has been destroyed, lost or stolen, the Holder of such
Certificate shall furnish to the Owner Trustee and the Indenture Trustee such
security or indemnity as may be required by it to save the Owner Trustee and the
Indenture Trustee harmless and evidence satisfactory to the Owner Trustee and
the Indenture Trustee of the destruction, loss or theft of such Certificate and
of the ownership thereof.
Section 2.07. Cancellation. The Registrar and any Paying Agent shall
------------
forward to the Indenture Trustee all Certificates surrendered to them for
replacement, redemption, registration of transfer, exchange or payment. The
Indenture Trustee shall cancel all Certificates surrendered for replacement,
redemption, registration of transfer, exchange, payment or cancellation and
shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal and
------------------------------------------------
Interest. (a) The Indenture Trustee will arrange directly with any Paying Agent
- --------
for the payment, or the Indenture Trustee will make payment, all pursuant to
Section 2.09, of the principal of, premium, if any, and interest on the
Certificates at the principal corporate trust office of the Indenture Trustee or
at any office or agency maintained for such purpose to Section 2.03 hereof. All
payments in respect of the Certificates shall be made in such coin or currency
of the United States as at the time of payment in legal tender for payment of
public and private debts. Payments (other than on the Maturity Date therefor or
on the Redemption Date in respect of the redemption in whole thereof) on
Certificates shall be made to the Holder thereof at the close of business on the
relevant Record Date; provided, however, that the Paying Agent will, at the
-------- -------
request of the Indenture Trustee and may, at its option, pay such interest,
premium or principal by check mailed to such Holder's address as it appears on
the Register. Principal of Certificates and premium, if any, with respect
thereto, shall (except as
<PAGE>
23
provided pursuant to the immediately preceding sentence) be payable only against
presentation and surrender thereof at the principal corporate trust office of
the Indenture Trustee or at the office of the Paying Agent maintained for such
purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right with
respect to, the Indenture Estate when and if the principal amount of, premium,
if any, and interest on all Certificates held by such Holder and all other sums
payable to such Holder hereunder, under such Certificates and under the
Participation Agreement shall have been paid in full.
(b) Any Installment Payment Amount payable on an Installment Payment
Date (other than the Maturity Date with respect to a Certificate) or any
interest payable on an Interest Payment Date on any Certificate which is not
punctually paid on such Installment Payment Date or such Interest Payment Date,
as the case may be (herein called, respectively, a "Defaulted Installment" and
"Defaulted Interest"), shall forthwith cease to be payable to the Holder on the
relevant Record Date by virtue of his having been such Holder; and such
Defaulted Installment or Defaulted Interest may be paid by the Indenture
Trustee, at its election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make payment of any Defaulted
Installment or Defaulted Interest, as the case may be, to the person in
whose name any Certificate is registered at the close of business on a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be fixed in the
following manner. The Indenture Trustee shall notify the Paying Agent in
writing of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date of
the proposed payment, and at the same time the Indenture Trustee shall make
arrangements to set aside an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Installment or Defaulted
Interest, as the case may be, prior to the date of the proposed payment, to
be held in trust for the benefit of the Persons entitled to such Defaulted
Installment or Defaulted Interest, as the case may be, as this clause
provides and shall fix a special record date for the payment of such
Defaulted Installment or Defaulted Interest, as the case may be, which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and shall
cause notice of the proposed payment of such Defaulted Installment or
Defaulted Interest, as the case may be, and the special record date therefor
to be mailed, first class postage prepaid, to each Holder at its address as
it appears in the Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Installment
or Defaulted Interest, as the case may be, and the special record date
therefor having been mailed, as aforesaid, such Defaulted Installment or
Defaulted
<PAGE>
24
Interest, as the case may be, shall be paid to the Persons in whose names
the applicable Certificates are registered on such special record date and
shall no longer be payable pursuant to the following clause (2).
(2) The Indenture Trustee may make, or cause to be made, payment of
any Defaulted Installment or Defaulted Interest, as the case may be, in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which Certificates may be listed, and upon such notice as may be
required by such exchange, if such payment shall be deemed practicable by
the Indenture Trustee.
(c) The Indenture Trustee shall require each Paying Agent to agree in
writing that such Paying Agent will hold in trust, for the benefit of the
Holders of the Certificates and the Indenture Trustee, all money held by the
Paying Agent for the payment of the principal of, premium, if any, or interest
and shall give to such Indenture Trustee notice of any default in the making of
any such payment upon the Certificates. The Indenture Trustee at any time may
require a Paying Agent to repay to the Indenture Trustee all money held by it.
Upon so doing the Paying Agent shall have no further liability for the money so
paid.
Section 2.09. Payment from Indenture Estate Only; Non-Recourse
------------------------------------------------
Obligations. All amounts payable by the Indenture Trustee and the Owner Trustee
- -----------
under the Certificates and this Agreement shall be made only from the income and
proceeds of the Indenture Estate. Each Holder of a Certificate, by its
acceptance of such Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate for the payment of such amounts, to
the extent available for distribution to it as herein provided, and (b) none of
the Owner Trustee, the Owner Participant or the Indenture Trustee is or shall be
personally liable to the Holder of any Certificate for any amount payable under
such Certificate or this Agreement or, except as expressly provided in this
Agreement in the case of the Owner Trustee and the Indenture Trustee, for any
liability thereunder.
State Street Bank and Trust Company is entering into this Agreement
solely as Owner Trustee under the Trust Agreement and not in its individual
capacity, and in no case whatsoever shall State Street Bank and Trust Company
(or any entity acting as successor trustee under the Trust Agreement) be
personally liable for, or for any loss in respect of, any statements,
representations, warranties, agreements or obligations hereunder or thereunder;
provided that State Street Bank and Trust Company shall be liable hereunder in
- --------
its individual capacity, (i) for the performance of its agreements in its
individual capacity under Section 8 of the Participation Agreement, (ii) for its
own willful misconduct or gross negligence and (iii) for the failure to use
ordinary care in the disbursement of funds. If a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement and the
Participation Agreement, such successor Owner Trustee shall, without any further
act, succeed to all of the rights, duties, immunities and obligations hereunder,
and its predecessor
<PAGE>
25
Owner Trustee and State Street Bank and Trust Company shall be released from all
further duties and obligations hereunder, without prejudice to any claims
against State Street Bank and Trust Company or such predecessor Owner Trustee
for any default by State Street Bank and Trust Company or such predecessor Owner
Trustee, respectively, in the performance of its obligations hereunder prior to
such appointment.
Section 2.10. Execution, Delivery and Dating of Certificates upon
---------------------------------------------------
Original Issuance. The Owner Trustee shall issue and execute, and the Indenture
- -----------------
Trustee shall authenticate and deliver, the Certificates for original issuance
upon payment to the Indenture Trustee of an amount equal to its Original Issue
Price. Each Certificate shall (except for those issued pursuant to Section 2.04
or Section 2.06) be dated the date of its issuance.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption or Purchase of
--------------------------------------------
Certificates. Except as otherwise provided in Section 3.05, in the event the
- ------------
Certificates are redeemed or purchased in accordance with the provisions of
Section 6.01 or 6.02, the Indenture Trustee will apply on the Redemption Date
any amounts then held by it in the Indenture Estate and received by it from or
on behalf of the Company or the Owner Trustee in the following order of
priority:
first, so much thereof as was received by the Indenture Trustee with
-----
respect to the amounts due to it pursuant to Section 9.06 shall be applied
to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay an
------
amount equal to the Redemption Price on the Outstanding Certificates
pursuant to Section 6.01 or 6.02, as the case may be, on the Redemption Date
shall be applied to the redemption or purchase of the Certificates on the
Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall be
-----
distributed to the Owner Trustee to be held or distributed to the Owner
Participant in accordance with the terms of the Trust Agreement.
Section 3.03. Application of Rent When No Indenture Event of Default
------------------------------------------------------
Is Continuing. Except as otherwise provided in Section 3.02, 3.04, 3.05 or
- -------------
3.06, each amount
<PAGE>
26
of Excess Amount or Rent received by the Indenture Trustee from the Owner
Trustee or the Company, together with any amount received by the Indenture
Trustee pursuant to Section 8.03(e) shall be distributed by the Indenture
Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required to pay in
-----
full the interest, principal of, premium (to the extent received by the
Indenture Trustee from the Company as Supplemental Rent), if any, then due
on, all Outstanding Certificates shall be distributed to the Persons
entitled thereto; and in case such payments or amounts shall be insufficient
to pay in full the whole amount so due and unpaid, then to the payment of
such interest, principal and premium, if any, without any preference or
priority of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal and premium, if any, at the date fixed
by the Indenture Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
------
required to pay any amount due the Indenture Trustee pursuant to Section
9.06 shall be applied to pay the Indenture Trustee such amounts; and
third, the balance, if any, of such aggregate amount remaining
-----
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement.
Section 3.04. Application of Certain Payments in Case of Requisition
------------------------------------------------------
or Event of Loss. Except as otherwise provided in Section 3.05, any amounts
- ----------------
received directly or otherwise pursuant to the Lease from any governmental
authority or other party pursuant to Section 10 of the Lease with respect to the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe as the result of an Event of Loss, to the extent that such amounts are
not at the time required to be paid to the Company pursuant to said Section 10,
and any amounts of insurance proceeds for damage to the Indenture Estate
received directly or otherwise pursuant to the Lease from any insurer pursuant
to Section 11 of the Lease with respect thereto as the result of an Event of
Loss, to the extent such amounts are not at the time required to be paid to the
Company pursuant to said Section 11, shall, except as otherwise provided in the
next sentence, be applied by the Indenture Trustee on behalf of the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the Lease
and the remainder, if any, shall, except as provided in the next sentence, be
distributed to the Owner Trustee to be held or distributed in accordance with
the terms of the Lease. Any portion of any such amount referred to in the
preceding sentence which is not required to be so paid to the Company pursuant
to the Lease, solely because a Lease Event of Default shall have occurred and be
continuing, shall be held by the Indenture Trustee on behalf of the Owner
Trustee as security for the obligations of the Company under the Lease and at
<PAGE>
27
such time as there shall not be continuing any Lease Event of Default or such
earlier time as shall be provided for in the Lease, such portion shall be paid
to the Owner Trustee to be held or distributed in accordance with the terms of
the Lease, unless the Indenture Trustee (as assignee from the Owner Trustee of
the Lease) shall have theretofore declared the Lease to be in default pursuant
to Section 15 thereof, in which event such portion shall be distributed
forthwith upon such declaration in accordance with the provisions of Section
3.05 hereof.
Section 3.05. Payments During Continuance of Indenture Event of
-------------------------------------------------
Default. All payments (except Excluded Payments) received and amounts held or
- -------
realized by the Indenture Trustee after an Indenture Event of Default shall have
occurred and be continuing (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as all
payments or amounts then held or thereafter received by the Indenture Trustee as
part of the Indenture Estate while such Indenture Event of Default shall be
continuing, shall be 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 the Indenture Trustee all amounts then due it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much of such payments or amounts remaining as shall be
------
required to pay the expenses incurred (including unbilled expenses in
respect of property delivered or contracted for or services rendered or
contracted for if the amount of such expenses is liquidated) in using,
operating, storing, leasing, controlling or managing the Indenture Estate,
and of all maintenance, insurance, repairs, replacements, alterations,
additions and improvements of and to the Indenture Estate and to make all
payments which the Indenture Trustee may be required or may elect to make,
if any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the Lease,
the Company), all in accordance with Section 8.03(c), shall be applied for
such purposes;
third, so much of such payments or amounts remaining as shall be
-----
required to pay the principal of, premium, if any, to the extent payable by
the Owner Trustee pursuant to Section 6.0l(b)(ii) or to the extent received
by the Indenture Trustee from the Company as Supplemental Rent, and accrued
interest, on all Certificates Outstanding, whether by declaration of
acceleration pursuant to Section 8.02 or otherwise, shall be applied to the
payment of such interest, principal and premium, if any, and in case such
payments or amounts shall be insufficient to pay in full the whole amount so
due and unpaid, then to the payment of such interest principal and premium,
if any, without any preference or priority of one Certificate over another,
<PAGE>
28
ratably according to the aggregate amount so due for interest, principal and
premium, if any, at the date fixed by the Indenture Trustee for the
distribution of such payments or amounts; and
fourth, the balance, if any, of such payments or amounts remaining
------
thereafter shall be held by the Indenture Trustee as collateral security for
the obligations secured hereby until such time as no Indenture Event of
Default shall be continuing hereunder or the Certificates have been
accelerated and all amounts due thereon have been paid, at which time such
payments or amounts shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement; provided that at such time as one or more
--------
Lease Events of Default shall have occurred and any such Lease Event of
Default shall have continued for a period of 180 days during which time the
Certificates could, but shall not, have been accelerated pursuant to Section
8.02, such amounts shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement so long as no Indenture Event of Default
exists other than by virtue of such Lease Event of Default.
Section 3.06. Payments for Which Application Is Provided in Other
---------------------------------------------------
Documents. Except as otherwise provided in this Agreement, any payment received
- ---------
by the Indenture Trustee for which provision as to the application thereof is
made in the Lease or any other Operative Document shall be distributed to the
Person for whose benefit such payments were made. The Indenture Trustee shall
be obligated to distribute any Excluded Payments received by the Indenture
Trustee promptly upon receipt thereof by the Indenture Trustee to the Person
entitled thereto.
Section 3.07. Payments for Which No Application Is Otherwise
----------------------------------------------
Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for which no
provision as to the application thereof is made elsewhere in this Agreement,
and
(b) any payment received and amounts realized by the Indenture Trustee
with respect to the Aircraft to the extent received or realized at any time
after the conditions set forth in Article 10 for the satisfaction and
discharge of this Agreement or for the defeasance of the Certificates shall
have been satisfied, as well as any other amounts remaining as part of the
Indenture Estate after such satisfaction shall be distributed by the
Indenture Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required to pay
-----
the Indenture Trustee all amounts then due it pursuant to Section 9.06 shall
be applied to pay the Indenture Trustee such amounts; and
<PAGE>
29
second, the balance if any, of such aggregate amount remaining
------
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Trust Agreement.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner Trustee
------------------------------
hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually pay the principal of,
premium, if any, and interest on and other amounts due under the
Certificates, provided it or the Indenture Trustee has funds in the Trust
Estate for this purpose;
(ii) the Owner Trustee will, in its individual capacity, not directly
or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it in its individual capacity with respect to any of the
properties or assets of the Indenture Estate;
(iii) in the event an officer in the Corporate Trust Department of the
Owner Trustee shall have Actual Knowledge of an Indenture Event of Default
or Indenture Default or an Event of Loss, the Owner Trustee will give prompt
written notice of such Indenture Event of Default or Indenture Default or
Event of Loss to the Indenture Trustee, the Owner Participant and the
Company;
(iv) except as contemplated by the Operative Documents, the Owner
Trustee will not contract for, create, incur, assume or permit to exist 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 be
or become contingently liable, directly or indirectly, in connection with
the Debt of any other Person; and
(v) the Owner Trustee will not enter into any business or other
activity other than owning the Aircraft, the leasing thereof to the Company
and the carrying out of the transactions contemplated hereby and by the
Participation Agreement, the Trust Agreement and the other Operative
Documents.
<PAGE>
30
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of Property
-------------------------------------------------
Included in the Indenture Estate During Continuation of Lease. So long as the
- -------------------------------------------------------------
Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and modifications
-----
in and additions to the Aircraft shall, to the extent required or specified
by the Lease, become subject to the lien of this Agreement and be leased to
the Company under the Lease; provided that, to the extent permitted by and
--------
as provided in the Lease, the Company shall have the right, at any time and
from time to time, without any release from or consent by the Owner Trustee
or the Indenture Trustee, to remove, replace and pool Parts and to make
alterations, improvements and modifications in, and additions to, the
Aircraft. The Indenture Trustee agrees that, to the extent permitted by and
as provided in the Lease, title to any such Part shall vest in the Company.
The Indenture Trustee shall from time to time execute an appropriate written
instrument or instruments to confirm the release of the security interest of
the Indenture Trustee in any Part as provided in this Section 5.01, in each
case upon receipt by the Indenture Trustee of a Company Request stating that
said action was duly taken by the Company in conformity with this Section
5.01 and that the execution of such written instrument or instruments is
appropriate to evidence such release of a security interest under this
Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss Occurring to
---------------------------------------------------------------
Airframe or Engines or upon Voluntary Termination of Lease with Respect to
--------------------------------------------------------------------------
Engines. Upon (i) the occurrence of an Event of Loss occurring to the
-------
Airframe or an Engine, or (ii) a voluntary termination of the Lease with
respect to an Engine, the Company, in accordance with the Lease, may, in the
case of an Event of Loss which has occurred to the Airframe, or shall,
except as provided in Section 10(b) of the Lease, in the case of an Event of
Loss which has occurred to or termination of the Lease with respect to an
Engine, substitute an airframe or engine, as the case may be, in which case,
upon satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of its
right, interest and lien in and to the Airframe or such Engine in accordance
with the provisions of the following two sentences. The Indenture Trustee
shall execute and deliver to the Owner Trustee an instrument releasing its
lien in and to the Airframe or such Engine and shall execute for recording
in public offices, at the expense of the Owner Trustee (if requested by the
Owner Trustee) or the Company (if requested by the Company), such
instruments in writing as the Owner Trustee or the Company shall reasonably
<PAGE>
31
request and as shall be reasonably acceptable to the Indenture Trustee in
order to make clear upon public records that such lien has been released
under the laws of the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and all
rights existing or that may be acquired to any penalties, forfeit or damages
from or against the Indenture Trustee for failure to execute and deliver any
document in connection with the release of a lien or to file any certificate in
compliance with any law or statute requiring the filing of the same in
connection with the release of a lien, except for failure by the Indenture
Trustee to execute and deliver any document or to file any certificate as may be
specifically requested in writing by the Owner Trustee or the Company.
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain Events. (a)
----------------------------------------------
(i) If there shall be an Event of Loss to the Aircraft and the Aircraft is not
replaced pursuant to Section 10(a)(ii) of the Lease, each Outstanding
Certificate shall be redeemed in whole at a Redemption Price equal to 100% of
the outstanding principal amount of such Certificate plus accrued and unpaid
interest thereon to but excluding the applicable Redemption Date.
(ii) If there shall be an Event of Loss to any Engine under
circumstances in which there has not occurred an Event of Loss with respect to
the Airframe and, as a result of such an Event of Loss, Lessor elects to receive
payment for such Engine from Lessee pursuant to Section 10(b) of the Lease and
Lessee shall not have elected to replace such Engine notwithstanding such
election by Lessor, a portion of the principal of each Outstanding Certificate
equal to the product obtained by multiplying the unpaid principal amount of such
Certificate on the Redemption Date applicable to such partial redemption
(assuming, only for the purposes of this calculation, that, if such Redemption
Date is coincident with a Maturity Date or an Installment Payment Date, the
scheduled principal payment due on such Redemption Date is paid prior to the
time the Redemption Price is calculated pursuant to this Section 6.0l(a)(ii) and
applied to principal in accordance with Section 3.03 hereof) by
_________________. The Redemption Price for each such Certificate shall be the
sum of such portion of principal being redeemed plus the amount of interest
accrued and unpaid to such Redemption Date on the principal amount of such
Certificate to be redeemed on such Redemption Date (assuming, only for the
purposes of this calculation, that, if, such Redemption Date is coincident with
an Interest Payment Date, the interest due on such Interest Payment Date is paid
prior to the time such Redemption Price is calculated pursuant to this Section
6.0l(a)(ii) and applied to interest in accordance with Section 3.03 hereof);
provided that each Certificate shall receive, as to the principal thereof,
- --------
<PAGE>
32
the same portion of such Redemption Price as the principal value of such
Certificate at such Redemption Date represents of the total principal value of
all Certificates Outstanding at such Redemption Date. Upon the occurrence of
any partial redemption or redemptions pursuant to the preceding sentence the
principal amount of each Outstanding Certificate shall be adjusted to take
account of any such partial redemption or redemptions, and the Installment
Payment Percentages applicable to any Installment Certificates issued hereunder
shall be adjusted as provided for in the definition thereof. The Redemption Date
for Certificates to be redeemed pursuant to this Section 6.01(a) shall be the
Lease Loss Payment Date.
(b) If (i) the Lease shall be terminated by the Company at its option
pursuant to Section 9(b) of the Lease or upon the purchase of the Aircraft by
the Company at its option on a Special Purchase Option Date or the EBO Date
pursuant to Section 19(b) of the Lease (unless the Company shall have elected to
assume the rights and obligations of the Owner Trustee hereunder to the extent
and as provided for in Section 8(r) of the Participation Agreement) or (ii) the
Owner Trustee or the Owner Participant shall have given notice of redemption or
purchase to the Indenture Trustee pursuant to Section 8.03(e)(ii) at any time
after one or more Lease Events of Default shall have occurred and be continuing
for a period of 180 days or more but less than one year (or a period of less
than 180 days if any such Lease Event of Default shall be a Lease Event of
Default under Section 14(a) of the Lease) and the Certificates shall not have
been accelerated, each Outstanding Certificate shall be redeemed or purchased in
whole on the Redemption Date and at the Redemption Price determined below.
Prior to the Premium Termination Date applicable to such Certificate, the
Redemption Price applicable to a redemption or purchase pursuant to this Section
6.01(b) shall be equal to an amount which an Independent Investment Banker (or,
in the case of the deposit of estimated premium pursuant to Section 8.03(e)(ii),
the Owner Trustee) determines to be equal to the greater of (x) the unpaid
principal amount of such Certificate as at such Redemption Date together
(assuming, only for the purposes of this calculation, that, if such Redemption
Date is coincident with an Interest Payment Date, the interest due on such
Interest Payment Date is paid prior to the time such Redemption Price is
calculated pursuant to this Section 6.01(b) and applied to interest in
accordance with Section 3.03 hereof) with an amount equal to the interest
accrued thereon from the immediately preceding Interest Payment Date to such
Redemption Date and (y) the present value (computed in accordance with generally
accepted financial practices on a semiannual basis at a discount rate equal to
the Treasury Yield applicable to such Certificate as of such Redemption Date) as
at such Redemption Date of (A) the regularly scheduled future payments of
interest on such Certificate as required by the terms thereof and of this
Agreement and (B) the regularly scheduled future payments of principal payable
on such Certificate (the excess, if any, of the amount referred to in clause (y)
of this sentence over the amount referred to in clause (x) constituting a
"premium" or a "Premium"), plus, in either case, interest on the principal of
such Certificate accrued as at the immediately preceding Interest Payment Date
and unpaid as of such Redemption Date. On or after the Premium Termination Date
applicable to such Certificate, the Redemption Price applicable to a redemption
or purchase pursuant to this
<PAGE>
33
Section 6.01(b) shall equal the unpaid principal amount of such Certificate as
at such Redemption Date together with an amount equal to the interest accrued
thereon from the immediately preceding Interest Payment Date to such Redemption
Date plus interest on the principal of such Certificate accrued as at the
immediately preceding Interest Payment Date and unpaid as of such Redemption
Date and, in the case of either of the two immediately preceding sentences (but
without duplication), if such Redemption Date is coincident with an Interest
Payment Date, the regularly scheduled interest payment due on such Interest
Payment Date. The Redemption Date for Certificates to be redeemed or purchased
(x) pursuant to clause (i) of this Section 6.01(b) shall be (A) in the case of a
termination of the Lease pursuant to Section 9(b) thereof, the third Business
Day following the Lease Termination Date, if any, or, in the case of purchase of
the Aircraft by the Company pursuant to Section 19(b) of the Lease, the
applicable Special Purchase Option Date or EBO Date and (y) pursuant to clause
(ii) of this Section 6.01(b), shall be the same date as if the redemption had
occurred pursuant to Section 6.02. If the Owner Trustee elects to purchase the
Certificates under Section 8.03(e)(ii), nothing herein, including use of the
terms "Redemption Date" and "Redemption Price" shall be deemed to result in a
redemption of the Certificates.
(c) Certificates may be redeemed if the Company shall have requested
the Owner Trustee and the Owner Participant to effect a redemption thereof
pursuant to Section 17 of the Participation Agreement as part of a refunding or
refinancing, and if all the conditions to such refunding or refinancing set
forth in such Section 17 of the Participation Agreement shall have been
satisfied. In such event, each Outstanding Certificate may be so redeemed at a
Redemption Price determined in accordance with the procedures described above in
Section 6.01(b); provided, however, that the applicable Redemption Date for
-------- -------
Certificates to be redeemed pursuant to this Section 6.01(c) shall be the
applicable Refinancing Date under Section 17 of the Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates upon Certain
---------------------------------------------------
Indenture Events of Default. If the Owner Trustee or the Owner Participant
- ---------------------------
shall have given notice of redemption or purchase to the Indenture Trustee
pursuant to Section 8.03(e)(ii) at any time after the Certificates shall have
been accelerated pursuant to Section 8.02 or after one or more Lease Events of
Default shall have occurred and be continuing for a period of one year or more
(or a period of 180 days or more if any such Lease Event of Default shall be a
Lease Event of Default under Section 14(a) of the Lease) and the Certificates
shall not have been accelerated, each Outstanding Certificate shall be redeemed
or purchased in whole at a Redemption Price equal to 100% of its principal
amount plus accrued and unpaid interest thereon to but excluding the applicable
Redemption Date as determined below. The Redemption Date for Certificates to be
redeemed or purchased pursuant to this Section 6.02 shall be the date specified
in the notice given by the Owner Trustee to the Indenture Trustee pursuant to
Section 8.03(e)(ii). If the Owner Trustee elects to purchase the Certificates
<PAGE>
34
under Section 8.03(e)(ii), nothing herein, including use of the terms
"Redemption Date" and "Redemption Price" shall be deemed to result in a
redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. Notice of redemption
-------------------------------
or purchase shall be given by first-class mail, postage prepaid, mailed not less
than 25 nor more than 60 days prior to the Redemption Date, to each Holder of
Certificates to be redeemed or purchased, at such Holder's address appearing in
the Register; provided that, in the case of a redemption pursuant to Section
--------
6.01(b)(1) related to Lessee's exercise of its option pursuant to Section 9(b)
of the Lease, such notice shall be revocable and shall be deemed revoked in the
event the Lease does not in fact terminate on the related Lease Termination
Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption Price,
(3) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Certificate, and that interest on Certificates
shall cease to accrue on and after such Redemption Date, and
(4) the place or places where such Certificates are to be surrendered
for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
Section 6.04. Deposit of Redemption Price. On or before the
---------------------------
Redemption Date, the Owner Trustee (or any person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 noon in immediately available
funds the Redemption Price of the Certificates to be redeemed or purchased on
the Redemption Date.
Section 6.05. Certificates Payable on Redemption Date. Notice of
---------------------------------------
redemption or purchase having been given as aforesaid (and not deemed revoked as
contemplated in the proviso to Section 6.03), the Certificates shall, on the
applicable Redemption Date, become due and payable at the principal corporate
trust office of the Indenture Trustee or at any office or agency maintained for
such purposes pursuant to Section 2.03, and from and after such Redemption Date
(unless there shall be a default in the payment of the Redemption Price) any
Certificates then Outstanding shall cease to bear interest. Upon surrender of
any
<PAGE>
35
such Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price.
If any Certificate called for redemption or purchase shall not be so
paid upon surrender thereof for redemption or purchase, the principal amount
thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments Held by
----------------------------------------------------
the Indenture Trustee. Any money held by the Indenture Trustee or any Paying
- ---------------------
Agent in trust for any payment of the principal of, premium, if any, or interest
on any Certificate, including without limitation any money deposited pursuant to
Article 10 and remaining unclaimed for two years and eleven months after the due
date for such payment, shall be paid to the Owner Trustee; and the Holders of
any Outstanding Certificates shall thereafter, as unsecured general creditors,
look only to the Company on behalf of the Owner Trustee for payment thereof, and
all liability of the Indenture Trustee or any such Paying Agent with respect to
such trust money shall thereupon cease; provided that the Indenture Trustee or
--------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be mailed to each such Holder notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of mailing, any unclaimed balance of such
money then remaining will be repaid to the Owner Trustee as provided herein.
Section 7.02. Change in Registration. The Indenture Trustee shall,
----------------------
upon the request of the Company, consent to the deregistration of the Aircraft
under the laws of the jurisdiction in which it is at the time registered and the
registration of the Aircraft under the laws of another jurisdiction (herein
called a "change in registration") provided that the following conditions are
met:
(a) such change in registration complies with the provisions of the
Participatioin Agreement or the Lease;
(b) no Lease Event of Default and no event which, with lapse of time
or notice, or both, would become a Lease Event of Default shall have
occurred and be continuing at the date of such request or at the effective
date of the change in registration, provided that it shall not be necessary
to comply with this condition (b) if the change in registration results in
the registration of the Aircraft under the laws of
<PAGE>
36
the United States or if the Indenture Trustee in its discretion believes the
change in registration would be advantageous to the Holders; and
(c) the Indenture Trustee shall have received an opinion of counsel
reasonably satisfactory to the Indenture Trustee to the effect that:
(i) after giving effect to the change in registration, the Lien on
the Aircraft and the other property included in the Indenture Estate
shall continue as a fully perfected lien and that all filing,
recording or other action necessary to perfect and protect the lien of
this Indenture has been accomplished (or if such opinion cannot be
given at the time by which the Indenture Trustee has been requested to
consent to a change in registration, (x) the opinion shall detail what
filing, recording or other action is necessary and (y) the Indenture
Trustee shall have received a certificate from the Company that all
possible preparations to accomplish such filing, recording and other
action shall have been done, and such filing, recording and other
action shall be accomplished and a supplemental opinion to that effect
shall be delivered to the Indenture Trustee on or prior to the
effective date of the change in registration); and
(ii) the terms of the Lease and this Agreement (including the
governing law clauses) being legal, valid and binding and enforceable
in such jurisdiction, 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 and except as limited by applicable laws which may affect
the remedies provided in the Lease and this Agreement, respectively,
which laws, however, do not in the opinion of such counsel make the
remedies provided in the Lease and this Agreement, respectively,
inadequate for the practical realization of the rights and benefits
provided thereby.
The Indenture Trustee shall execute such documents as the Company or the Owner
Trustee shall reasonably request in order to satisfy the above conditions and
upon satisfaction of such conditions to effect the change in registration.
Section 7.03. Assumption of Obligations of Owner Trustee by the
-------------------------------------------------
Company. In the event that the Company shall have elected to assume all of the
- -------
rights and obligations of the Owner Trustee under this Agreement in respect of
the Certificates in connection with the purchase by the Company of the Aircraft
pursuant to Section 8(r) of the Participation Agreement and, if on or prior to
the Purchase Option Date:
(a) the Company shall have delivered to the Indenture Trustee a
certificate, dated the Purchase Option Date, of a Responsible Company
Officer stating that the
<PAGE>
37
Company has paid to the Owner Trustee all amounts required to be paid to the
Owner Trustee pursuant to Section 19(b) of the Lease in connection with such
purchase and assumption;
(b) no event which constitutes or, with the lapse of time or notice,
or both, would become, an Event of Default under this Agreement after giving
effect to the indenture supplement referred to below shall have occurred and
be continuing immediately subsequent to such purchase or assumption and the
Indenture Trustee shall have received a certificate, dated the Purchase
Option Date, of a Responsible Company Officer to such effect;
(c) the Indenture Trustee shall have received, on or prior to the
Purchase Option Date, evidence of all filings, recordings and other action
referred to in the Opinion or Opinions of Counsel referred to below;
(d) the Indenture Trustee shall have received an Opinion or opinions
of Counsel for the Company, dated the Purchase Option Date, which without
unusual qualification shall be to the effect that, after giving effect to
the indenture supplement referred to below:
(i) this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company 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, and except as limited by applicable laws
which may affect the remedies provided for in this Agreement, which
laws, however, do not in the opinion of such counsel make the remedies
provided for in this Agreement inadequate for the practical
realization of the rights and benefits provided for in this Agreement;
(ii) the Aircraft is duly registered in compliance with applicable
law;
(iii) the Lien on the Aircraft constitutes a fully perfected Lien
and all filing, recording or other action (specifying the same)
necessary to perfect and protect the Lien of this Agreement has been
accomplished;
(iv) the Indenture Trustee would be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to the Aircraft;
provided that such opinion may contain qualifications of the tenor
--------
contained in the opinion of special counsel for the Company delivered
pursuant to Section 4(a)(xi)(b) of the Participation Agreement on the
Delivery Date; and
<PAGE>
38
(v) no Holder will be required to recognize gain or loss for tax
purposes in connection with such assumption; and
(e) an indenture supplement reasonably satisfactory to the Indenture
Trustee, dated the Purchase Option Date, shall have been executed by the
Indenture Trustee and any other parties necessary thereto and shall have
been delivered to the Indenture Trustee;
then, automatically and without the requirement of further action by any Person,
effective as of the Purchase Option Date, the Owner Trustee shall be released
from all of its obligations under the Agreement in respect of the Certificates
or otherwise (other than any obligations or liabilities of the Owner Trustee in
its individual capacity incurred on or prior to the Purchase Option Date or
arising out of or based upon events occurring on or prior to the Purchase Option
Date, which obligations and liabilities shall remain the sole responsibility of
the Owner Trustee).
If, concurrent with an assumption pursuant to this Section 7.03, the
Aircraft is being reregistered the Company must comply with the provisions of
Section 7.02 hereof.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following events
---------------------------
shall constitute "Indenture Events of Default" under this Agreement (whether any
such event 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) and each such Indenture Event of Default shall be deemed to
exist so long as, but only so long as, it shall not be remedied:
(a) any amount of interest upon any Certificate or of principal of any
Certificate or of premium, if any, in respect of any Certificate shall not
be paid when due and payable (whether upon redemption or purchase, final
maturity, acceleration or otherwise) and such default in payment shall
continue for more than 10 days after such amount shall have become due and
payable; or
(b) any failure by the Owner Trustee, in its individual capacity or as
Owner Trustee, as the case may be, to observe or perform in any material
respect any covenant or obligation required pursuant to Article 4 or clauses
1-5 under the Habendum Clause hereof or Section 8(b), 8(c), 8(g), 8(n) or 10
of the Participation Agreement or the failure by the Owner Participant to
observe or perform in any
<PAGE>
39
material respect any covenant or obligation of it required pursuant to
Section 8(b), 8(g) or 10 of the Participation Agreement, or, to the extent
that the interest of the Indenture Trustee or any Holder of an Outstanding
Certificate is adversely affected by such failure, in Section 4.01(a) of the
Trust Agreement or the termination or revocation by the Owner Participant of
the trust created by the Trust Agreement without the Indenture Trustee's
prior written consent if, but only if, such failure or termination or
revocation is not remedied within a period of 30 days after there has been
given to the Owner Trustee and the Owner Participant by registered or
certified mail, a written notice specifying such failure and requiring it to
be remedied and stating that such notice is a "Notice of Default" hereunder,
by the Indenture Trustee or by the Holders of at least 25% in principal
amount of Outstanding Certificates; provided that no Indenture Event of
--------
Default shall arise under this Section 8.01(b) solely as a result of a
failure by the Owner Participant or the Owner Trustee to observe or perform
any covenant contained in Section 8(g) of the Participation Agreement if all
action necessary to discharge all Lessor Liens referred to in such Section
shall have been taken and the Indenture Trustee and the Indenture Estate
shall have been compensated for all claims, losses and expenses arising from
the failure of the Owner Trustee or the Owner Participant, as the case may
be, to observe and perform any such covenant; or
(c) any failure by the Owner Trustee, in its individual capacity or as
Owner Trustee, to observe or perform any other covenant or obligation of the
Owner Trustee contained in this Agreement or in the Participation Agreement
or any failure by the Owner Participant to observe or perform any other
covenant or obligation of the Owner Participant contained in the
Participation Agreement which failure, in any case and either individually
or together with other then existing failures, shall have a material adverse
effect on the rights and interests of the Holders and is not remedied within
a period of 30 days after there has been given to the Owner Trustee and the
Owner Participant by registered or certified mail, a written notice
specifying such failure and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder, by the Indenture Trustee or
by the Holders of at least 25% in principal amount of Outstanding
Certificates; provided, however, that, if the Owner Trustee, in its
-------- -------
individual capacity or as Owner Trustee, or the Owner Participant shall have
undertaken to cure any such failure and, notwithstanding the reasonable
diligence of any of them in attempting to cure such failure, such failure is
not cured within said 30 day period but is curable with future due
diligence, there shall exist no Indenture Event of Default as a consequence
of such failure so long as the Owner Trustee in its individual capacity or
as Owner Trustee or the Owner Participant is proceeding with due diligence
to cure such failure, there exists no adverse effect on the Lien of this
Agreement and such failure is in fact cured within a further period of 30
days; or
<PAGE>
40
(d) any material representation or warranty made by the Owner Trustee,
in its individual capacity or as Owner Trustee, or by the Owner Participant
under the Participation Agreement, or by the Owner Trustee hereunder, or by
the Owner Trustee, in its individual capacity or as Owner Trustee, or by the
Owner Participant in any document or certificate furnished to the Indenture
Trustee in connection herewith or therewith or pursuant hereto or hereto,
shall prove at any time to have been incorrect in any material respect as of
the date made and such incorrectness shall remain material at the date of
the notice referred to below and such incorrectness shall continue
unremedied for a period of 30 days after there has been given to the Owner
Trustee and the Owner Participant by registered or certified mail, a written
notice specifying such incorrectness and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, by the
Indenture Trustee or by the Holders of at least 25% in principal amount of
Outstanding Certificates; or
(e) there shall be a Lease Event of Default other than any such Lease
Event of Default arising by reason of nonpayment of any Excluded Payments
when due; provided that any Lease Event of Default shall be deemed to exist
--------
and continue so long as, but only so long as, it shall not be remedied; or
(f) either the Indenture Estate or the Owner Trustee with respect
thereto (and not in its individual capacity) or the Owner Participant, as
the case may be, shall (i) file, or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of itself or any substantial part of its property; provided that an
-------- ----
event referred to in this Section 8.01(f) with respect to the Owner
Participant shall not constitute an Indenture Event of Default if (A) an
order, judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and non-
appealable or has not been stayed pending any appeal, or (B) an opinion of
counsel satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust Estate
created by the Trust Agreement (except for the Owner Participant's
beneficial interest in such Trust Estate) and no right, title or interest
under the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to the
bankruptcy, insolvency or liquidation of the Owner Participant referred to
in this Section 8.01(f); or
(g) a court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by the Indenture Estate or the
Owner Trustee with respect thereto (and not in its individual capacity) or
the Owner Participant, as
<PAGE>
41
the case may be, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of
its property, or constituting an order for relief or approving a petition
for relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Indenture Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant, as the case may be, and any
such order or petition is not dismissed or stayed within 90 days after the
earlier of the entering of any such order or the approval of any such
petition; provided that an event referred to in this Section 8.01(g) with
--------
respect to the Owner Participant shall not constitute an Indenture Event of
Default if (A) an order, judgment or decree shall be entered in a proceeding
by a court or a trustee, custodian, receiver or liquidator which is either
final and non-appealable or has not been stayed pending an appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be provided
by Owner Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner Participant's
beneficial interest in such Trust Estate) and no right, title or interest
under the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant referred to
in this Section 8.01(g).
Section 8.02. Acceleration; Rescission and Annulment. If an
--------------------------------------
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee, the Owner Trustee and the Owner
Participant, may declare the principal of all the Certificates to be due and
payable. Upon such declaration, the principal of all Certificates together with
accrued interest thereon from the date in respect of which interest was last
paid hereunder to the date payment of such principal has been made or duly
provided for, shall be immediately due and payable. At any time after such
declaration and prior to the sale or disposition of the Indenture Estate, the
Holders of a majority in aggregate principal amount of all of the Outstanding
Certificates, by notice to the Indenture Trustee, the Company, the Owner Trustee
and the Owner Participant, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal on any
Certificates which have become due otherwise than by such declaration and any
interest thereon and interest due or past due, if any, and all sums due and
payable to the Indenture Trustee have been deposited with the Indenture Trustee,
(ii) the rescission would not conflict with any judgment or decree and (iii) all
existing Indenture Defaults and Indenture Events of Default under this Agreement
have been cured or waived except nonpayment of principal of, or interest on, the
Certificates that has become due solely because of such acceleration.
<PAGE>
42
Section 8.03. Other Remedies Available to Indenture Trustee. (a)
---------------------------------------------
After an Indenture Event of Default shall have occurred and so long as such
Indenture Event of Default shall be continuing, then and in every such case the
Indenture Trustee, as trustee of an express trust and as assignee hereunder of
the Lease or as holder of a security interest in the Aircraft or Engines or
otherwise, may, and when required pursuant to the provisions of Article 9 shall,
exercise, subject to Sections 8.03(b), 8.03(e), 8.03(f) and 8.03(h), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8, may
recover judgment in its own name as Indenture Trustee against the Indenture
Estate and may take possession of all or any part of the Indenture Estate and
may exclude the Owner Trustee and the Owner Participant and all persons claiming
under any of them wholly or partly therefrom.
(b) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, subject to Sections
8.03(e), 8.03(f) and 8.03(h), the Indenture Trustee may, if at the time such
action may be lawful and always subject to compliance with any mandatory legal
requirements, either with or without taking possession, and either before or
after taking possession and without instituting any legal proceedings
whatsoever, and having first given notice of such sale by registered mail to the
Owner Trustee, the Owner Participant and the Company once at least 30 days prior
to the date of such sale, and any other notice which may be required by law,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public auction to the highest bidder, in one lot as an entirety or
in separate lots, and either for cash or on credit and on such terms as the
Indenture Trustee may determine, and at any place (whether or not it be the
location of the Indenture Estate or any part thereof) and time designated in the
notice above referred to; provided, however, that, notwithstanding any provision
-------- -------
herein to the contrary, the Indenture Trustee may not provide the notice
provided for above of its intention to sell any of the Indenture Estate,
exercise remedies under the Lease or exercise other remedies against the
Indenture Estate seeking to deprive the Owner Trustee or the Owner Participant
of its rights therein unless a declaration of acceleration has been made
pursuant to Section 8.02 or the Certificates have otherwise theretofore become
due and payable through redemption or otherwise. Any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
notice, and the Indenture Trustee and the Holder or Holders of any Certificates,
or any interest therein, may bid and become the purchaser at any such sale. No
such sale may be consummated if the Owner Trustee shall, prior to the
consummation thereof, have given notice pursuant to and made the deposit
required by Section 8.03(e)(ii). The Indenture Trustee may exercise such right
without possession or production of the Certificates or proof of ownership
thereof, and as representative of the Holders may exercise such right without
notice to the Holders or including the Holders as parties to any suit or
proceeding relating to foreclosure of any property in the Indenture Estate. The
Owner Trustee hereby irrevocably constitutes the Indenture Trustee the true and
lawful attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee
or otherwise)
<PAGE>
43
for the purpose of effectuating any sale, assignment, transfer or delivery for
enforcement of the lien created under this Agreement, whether pursuant to
foreclosure or power of sale or otherwise, to execute and deliver all such bills
of sale, assignments and other instruments as the Indenture Trustee may consider
necessary or appropriate, with full power of substitution, the Owner Trustee
hereby ratifying and confirming all that such attorney or any substitute shall
lawfully do by virtue hereof. 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.
(c) Subject to Sections 8.03(e) and 8.03(f), if an Indenture Event of
Default has occurred and is continuing, the Owner Trustee shall, at the request
of the Indenture Trustee, promptly execute and deliver to the Indenture Trustee
such instruments of title or other documents as the Indenture Trustee may 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. If the Owner Trustee shall for any
reason fail to execute and deliver such instruments and documents after such
request by the Indenture Trustee, the Indenture Trustee shall be entitled, in a
proceeding to which the Owner Trustee will be a necessary party, to a judgment
for specific performance of the covenants contained in the foregoing sentence,
conferring upon the Indenture Trustee the right to immediate possession and
requiring the Owner Trustee to execute and deliver such instruments and
documents to the Indenture Trustee. The Indenture Trustee shall also be
entitled to pursue all or any part of the Indenture Estate wherever it may be
found and may enter any of the premises of the Owner Trustee or any other Person
wherever the Indenture Estate may be or be supposed to be and search for the
Indenture Estate and take possession of any item of the Indenture Estate
pursuant to this Section 8.03(c). The Indenture Trustee may, from time to time,
at the expense of the Indenture Estate, make all such expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Indenture Estate, as it may deem proper. In each
such case, the Indenture Trustee shall have the right to use, operate, store,
lease, control or manage the Indenture Estate, and to exercise all rights and
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control or
management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, pursuant to this Section 8.03(c).
The Indenture Trustee may, from time to time, at the expense of the Indenture
Estate, make all such expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the Indenture
Estate, as it may deem proper. In each such case, the Indenture Trustee shall
have the right to use, operate, store, lease, control or manage the Indenture
Estate, and to exercise all rights and
<PAGE>
44
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control or
management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, revenues and other income of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Agreement to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. In accordance with the terms of this Section 8.03(c), such
tolls, rents (including Rent), issues, profits, products, revenues and other
income shall be applied to pay the expenses of using, operating, storing,
leasing, controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect to
make, if any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate or any part thereof (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, to the extent permitted by the Lease, the
Company), and all other payments which the Indenture Trustee may be required or
authorized to make under any provision of this Agreement, including this Section
8.03(c), as well as just and reasonable compensation for the services of the
Indenture Trustee, and of all persons properly engaged and employed by the
Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and the
Indenture Trustee shall have obtained possession of or title to the Aircraft,
the Indenture Trustee shall not be obligated to use or operate the Aircraft or
cause the Aircraft to be used or operated directly or indirectly by itself or
through agents or other representatives or to lease, license or otherwise permit
or provide for the use or operation of the Aircraft by any other Person unless
(i) the Indenture Trustee shall have been able to obtain insurance in kinds, at
rates and in amounts satisfactory to it in its discretion to protect the
Indenture Estate and the Indenture Trustee, as trustee and individually, against
any and all liability for loss or damage to the Aircraft and for public
liability and property damage resulting from use or operation of the Aircraft
and (ii) funds are available in the Indenture Estate to pay for all such
insurance or, in lieu of such insurance, the Indenture Trustee is furnished with
indemnification from the Holders or any other Person upon terms and in amounts
satisfactory to the Indenture Trustee in its discretion to protect the Indenture
Estate and the Indenture Trustee, as trustee and individually, against any and
all such liabilities.
(d) Subject to Sections 8.03(b), 8.03(e) and 8.03(f), the Indenture
Trustee may proceed to protect and enforce this Agreement and the Certificates
by suit or suits or proceedings in equity, at law or in bankruptcy, and whether
for the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted; or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Indenture Estate or any
part thereof, or for the recovery of judgment for the indebtedness
<PAGE>
45
secured by the Lien created under this Agreement or for the enforcement of any
other proper, legal or equitable remedy available under applicable law.
(e) (i) If the Company shall fail to make any payment of Basic Rent
under the Lease when the same shall become due, and if such failure of the
Company to make such payment of Basic Rent shall not constitute the fourth
consecutive such failure or the seventh or subsequent cumulative such failure,
then as long as no Indenture Event of Default (other than arising from a Lease
Event of Default not involving any failure to make any payments to which the
Indenture Trustee or any Holder is entitled hereunder when due) shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the day which is
the later of (x) the 11th day subsequent to notice of such failure by the
Indenture Trustee to the Owner Trustee or the Owner Participant and (y) the
sixth day subsequent to the expiration of the grace period provided for in
Section 14(a) of the Lease with respect to the payment of Basic Rent (and the
Indenture Trustee shall not (without the prior written consent of the Owner
Trustee) declare the Lease in default pursuant to Section 15 thereof or exercise
any of the rights, powers or remedies pursuant to such Section 15 or this
Section 8 prior to the occurrence of such later date), an amount equal to the
full amount of such payment of Basic Rent, together with any interest due
thereon on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure as of the date of such payment any Indenture Event of Default which
arose from such failure of the Company (including any Lease Event of Default
arising from the Lessee's failure to pay interest in respect of such overdue
Basic Rent for the period commencing on the date of such payment), but such cure
shall not relieve the Company of any of its obligations. If the Company shall
fail to perform or observe any covenant, condition or agreement to be performed
or observed by it under the Lease, and if (but only if) the performance or
observance thereof can be effected by the payment of money alone (it being
understood that actions such as the obtaining of insurance and the procurement
of maintenance services can be so effected), then as long as no other Indenture
Event of Default (other than those arising from a Lease Event of Default) shall
have occurred and be continuing, the Owner Participant or the Owner Trustee may
(but need not) pay to the Indenture Trustee (or to such other person as may be
entitled to receive the same), at any time prior to the day which is the later
of (x) the 11th day subsequent to notice of such failure by the Indenture
Trustee to the Owner Trustee or the Owner Participant and (y) the sixth day
subsequent to the expiration of the grace period, if any, provided with respect
to such failure on the part of the Company in Section 14 of the Lease (and the
Indenture Trustee shall not (without the prior written consent of the Owner
Trustee) declare the Lease in default pursuant to Section 15 thereof or exercise
any of the rights, powers or remedies pursuant to such Section 15 or this
Section 8 prior to the occurrence of such later date), all sums necessary to
effect the performance or observance of such covenant or agreement of the
Company, together with any interest due thereon on account of the delayed
payment thereof to the date of such payments and such payment by the Owner
Participant or the Owner Trustee shall be deemed to cure as of the
<PAGE>
46
date of such payment any Indenture Event of Default which arose from such
failure of the Company (including any Lease Event of Default arising from the
Lessee's failure to pay interest in respect of such overdue payment for the
period commencing on the date of such payment), but such cure shall not relieve
the Company of any of its obligations. Upon any payment of Basic Rent by the
Owner Participant or the Owner Trustee in accordance with the first sentence of
this Section 8.03(e)(i), or upon any payment of any other sums by the Owner
Participant or the Owner Trustee in accordance with the second sentence of this
Section 8.03(e)(i), the Owner Participant or the Owner Trustee shall, to the
extent of their respective payments, be subrogated, in the case of any such
payment in accordance with such first sentence, to the rights of the Indenture
Trustee, as assignee hereunder of the Owner Trustee, or, in the case of any such
payment in accordance with such second sentence, to the rights of the Indenture
Trustee or such other person as the case may be, which actually received such
payment, to receive such payment of Basic Rent or such other payment, as the
case may be (and any interest due thereon on account of the delayed payment
thereof), and shall be entitled to receive such payment upon its receipt by the
Indenture Trustee or such other person, as aforesaid (but in each case only if
all amounts of principal of, and interest at the time due and payable on, the
Certificates together with interest due thereon on account of the delayed
payment thereof shall have been paid in full); provided that neither the Owner
--------
Participant nor the Owner Trustee shall attempt to recover any such amount paid
by it on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of the Company payment of such amount or by proceeding by appropriate
court action against the Company to enforce the payment of such amount pursuant
to Section 15(f), but only said Section 15(f), of the Lease.
(ii) In the event that (A) at any time one or more Lease Events of
Default shall have occurred and be continuing for a period of 180 days or more
but less than one year (or a period of less than 180 days if any such Lease
Event of Default shall be a Lease Event of Default under Section 14(a) of the
Lease) and the Certificates shall not have been accelerated or (B) the
Certificates shall have been accelerated pursuant to Section 8.02 or after one
or more Lease Events of Default shall have occurred and be continuing for a
period of one year or more (or a period of 180 days or more, if such Lease Event
of Default shall be a Lease Event of Default under Section 14(a) of the Lease),
the Owner Trustee or the Owner Participant may, at its option, give at least 30
days' prior irrevocable notice to the Indenture Trustee that the Owner Trustee
or the Owner Participant will redeem or purchase all Certificates then
outstanding on the Business Day specified in such notice and, concurrently with
such notice, the Owner Trustee or the Owner Participant will deposit with the
Indenture Trustee an amount sufficient to redeem or purchase at the applicable
Redemption Price determined consistently with the applicable provisions of
Article 6 all Certificates then outstanding (including, if Section 6.01(b) is
applicable, an estimate of the premium to be paid on the Redemption Date
computed using the Treasury Yield determined as if the Redemption Date were the
date of such notice) and to pay the Indenture Trustee all amounts then due it
hereunder, which funds shall be held by the Indenture Trustee as
<PAGE>
47
provided in Section 9.04. Upon the giving of such notice and the receipt by the
Indenture Trustee of such deposit, the Indenture Trustee shall deem all
instructions received from the Owner Trustee as having been given by the Holders
of 100% of the outstanding principal amount of Certificates for all purposes of
this Indenture. If such notice is given, the Owner Trustee further agrees that
it will deposit or cause to be deposited with the Indenture Trustee, on or prior
to the Business Day preceding the applicable Redemption Date, whether or not an
Indenture Event of Default is then continuing, funds sufficient, when added to
the funds already held by the Indenture Trustee for such purpose, to redeem or
purchase at the applicable Redemption Price (including the premium actually
payable in respect thereof) on such Redemption Date all Certificates then
outstanding and to pay the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement 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 Lease Event of Default unless
the Indenture Trustee as security assignee of the Owner Trustee shall have
exercised or concurrently be exercising one or more of the remedies provided for
in Section 15(a)-(f) 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 60 days or such other period as
may be specified in section 1110(a)(l)(A) of the Bankruptcy Code (such 60-day or
other 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 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)(1)(A) of
the Bankruptcy Code and continues to perform as required by Section
1110(a)(1)(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) results from the Company's assumption
during the Section 1110 period with the approval of the relevant court of the
Lease pursuant to Section 365 of the Bankruptcy Code or (D) is the consequence
of the Indenture Trustee's own failure to give any requisite notice to any
person or (E) is pursuant to a judicial stay pending the resolution of
litigation with respect to the applicability of Section 1110 of the Bankruptcy
Code and there is either no Lease Event of Default other than one arising solely
from the Company's bankruptcy or any such other Lease Event of Default has been
cured; provided, further, however, that the requirement to exercise one or more
-------- ------- --------
of such remedies under the Lease during a Continuous Stay Period subsequent to
the expiration of the Section 1110 period
<PAGE>
48
based upon a judicial stay as provided for in this clause (E) shall in any event
cease to be applicable subsequent to the 120th day of such Continuous Stay
Period. If the limitation upon cures of the Lessee's failure to pay Basic Rent
as provided in Section 8.03(e)(i) would otherwise prohibit the Owner Participant
or the Owner Trustee from making a payment to cure a Lease Event of Default for
purposes of clause (E) above, the Owner Participant or the Owner Trustee shall
nonetheless be entitled to make such payment. If the Indenture Trustee shall
acquire title to the Aircraft through foreclosure during a Continuous Stay
period without having exercised one or more of such remedies under the Lease by
virtue of the Continuous Stay Period having continued beyond its 120th day as
provided above in clause (E) and the Indenture Trustee shall have received prior
to the 183rd day subsequent to its acquisition of title to the Aircraft, the
proceeds from its sale of the Aircraft, the Indenture Trustee shall,
notwithstanding any other provision of this Indenture, distribute to the Owner
Trustee the amount, if any, by which such proceeds (net of the Indenture
Trustee's costs and expenses (including the fees and expenses of counsel and
other experts and agents retained by it), commissions and other costs and
expenses with respect to such foreclosure, the maintenance and preservation of
the Aircraft and such sale (including amounts in respect of any thereof paid by
others to whom the Indenture Trustee has a reimbursement obligation) and any
other amounts to which the Indenture Trustee is entitled pursuant to Section
9.06 or otherwise) exceed an amount equal to the aggregate of the principal
amount of the Certificates outstanding on the date of such foreclosure, together
with interest accrued thereon to such foreclosure date and an amount equal to
the amount of interest that would have accrued (at the rate per annum applicable
under the Certificates) on such principal amount from the date of such
foreclosure to the date of the distribution by the Indenture Trustee of such
proceeds for the benefit of the Holders if such principal amount had remained
outstanding. References in this subsection (iii) to particular sections of the
Bankruptcy Code as in effect on the date of the amendment and restatement of
this Indenture shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to the contrary,
including, without limitation, Sections 8.03(b), 8.03(c) and 8.03(d), as long as
no Lease Event of Default shall have occurred and be continuing, neither the
Indenture Trustee nor the Owner Trustee shall take any action in violation of
the Company's rights under the Lease, including, without limitation, (x) the
right to receive all monies due and payable to it in accordance with the
provisions of the Lease and (y) the Company's rights to possession and use of,
and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given to the
Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the exercise
<PAGE>
49
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 thereafter any other
right, power or remedy. No delay or omission by the Indenture Trustee in the
exercise of any right, remedy or power or in pursuing 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 Company or to be an acquiescence therein.
(h) Notwithstanding anything contained herein to the contrary, so long
as the Pass Through Trustee is a Holder, the Indenture Trustee is not authorized
or empowered to acquire title to the Indenture Estate, or to take any action
with respect to any of the Indenture Estate so acquired by it, if such
acquisition or action would cause any Pass Through Trust to fail to qualify as a
"grantor trust" for federal income tax purposes.
Section 8.04. Waiver of Owner Trustee. To the extent now or at any
-----------------------
time hereafter enforceable under applicable law, the Owner Trustee covenants
that it will not at any time insist upon or plead, or in any manner whatsoever
claim or take any benefit or advantage of or from any law now or hereafter in
force providing for the valuation or appraisal of the Indenture Estate or any
part thereof, prior to any sale or sales thereof to be made pursuant to any
provision herein contained, or prior to any applicable decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and
hereby expressly waives for itself and on behalf of each and every Person,
except decree or judgment creditors of the Owner Trustee acquiring any interest
in or title to the Indenture Estate or any part thereof subsequent to the date
of this Agreement, all benefit and advantage of any such law or laws, and
covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or, in any manner
whatsoever, claim or take any benefit or advantage of or from any law now or
hereafter in force even if it does not possess any of the Certificates or does
not produce any of them in the proceeding. A delay or omission by the Indenture
Trustee or any Holder in exercising any right or remedy accruing upon an
Indenture Event of Default under this Agreement shall not impair the right or
remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of a majority
---------------------------
in the aggregate principal amount of the Outstanding Certificates by notice to
the Indenture Trustee may waive on behalf of the Holders an existing Indenture
Default or Indenture Event of Default and its consequences except (i) an
Indenture Default or Indenture Event of Default in
<PAGE>
50
the payment of the principal of or interest on any Certificate or (ii) in
respect of a covenant or provision hereof which pursuant to Section 11.02 cannot
be amended or modified without the consent of the Holder affected.
Section 8.06. Control by Majority. (a) The Holders of a majority in
-------------------
aggregate principal amount of the Outstanding Certificates may direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee or exercising any trust or power conferred on it by this
Agreement. However, the Indenture Trustee may refuse to follow any direction
that conflicts with law or this Agreement, that is unduly prejudicial to the
rights of the Holders so affected, or that would subject the Indenture Trustee
to personal liability.
(b) The Owner Trustee may pursuant to the direction and instruction of
the Owner Participant by delivery of written notice to the Indenture Trustee set
a record date to determine the Holders entitled to give any consent, request,
demand, authorization, direction, notice, waiver or other act. Such record date
shall be the record date specified in such Officers' Certificate which shall be
a date not more than 30 days prior to the first solicitation of Holders in
connection therewith. If such a record date is fixed, such consent, request,
demand, authorization, direction, notice, waiver or other act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders holding the requisite proportion of certificates
have authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other act, and for that purpose the
Outstanding Certificates shall be computed as of such record date; provided that
no such consent, request, demand, authorization, direction, notice, waiver or
other act by the Holders on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Agreement not later
than one year after the record date.
Section 8.07. Limitation on Suits by Holders. A Holder may pursue a
------------------------------
remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written notice of a
continuing Indenture Event of Default under this Agreement;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Certificates make a written request to the Indenture Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee indemnity
satisfactory to the Indenture Trustee against any loss, liability or expense
to be, or which may be, incurred by the Indenture Trustee in pursuing the
remedy;
<PAGE>
51
(4) the Indenture Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the Outstanding Certificates do not give the Indenture
Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Agreement the right of any Holder to receive payment
of principal of, premium, if any, and interest on such Certificate on or after
the respective due dates expressed in such Certificate, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim. The
------------------------------------------
Indenture Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee and of the Holders allowed in any judicial proceedings relating to any
obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee. (a) The Indenture
---------------------------
Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity satisfactory to it against any loss, liability or expense.
(b) Subject to the provisions of Section 9.04, the Indenture Trustee
shall not be liable for interest on any money received except as otherwise
provided in any other Operative Document. Money held in trust by the Indenture
Trustee need not be segregated from other funds except to the extent required by
law.
Section 9.02. Rights of Indenture Trustee. (a) The Indenture
---------------------------
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
<PAGE>
52
(b) Before the Indenture Trustee acts or refrains from acting, it may
consult with counsel or require an Officer's Certificate or an Opinion of
Counsel from the Company or the Owner Trustee after which it will take such
action or refrain from acting as it deems appropriate. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith and
in accordance herewith in reliance on a resolution of the Board of Directors of
the Company, the written advice of counsel acceptable to the Owner Trustee, the
Company and the Indenture Trustee, officer's certificates or opinions of counsel
provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any such agent appointed with
due care; provided that, so long as no Lease Event of Default shall have
--------
occurred and be continuing no such agents shall be appointed by the Indenture
Trustee without the consent of the Company and the Owner Trustee, which consent
shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers.
(e) If an Indenture Event of Default under this Agreement has occurred
and is continuing, the Indenture Trustee shall exercise its rights and powers
under this Agreement, and shall 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.
Section 9.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates and may otherwise deal with the Owner Trustee, the Company or an
Affiliate of the Owner Trustee or the Company or a subsidiary of the Owner
Trustee or the Company with the same rights it would have if it were not the
Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
-------------------------------------------------------
Investments. Any monies (including without limitation for purpose of this
- -----------
Section 9.04 Permitted Investments constituting the proceeds of the maturity,
sale or other disposition of any Permitted Investment) held by the Indenture
Trustee or the Paying Agent hereunder as part of the Indenture Estate, until
paid out by the Indenture Trustee or the Paying Agent as herein provided, (i)
subject to clause (ii) below, may be carried by the Indenture Trustee or the
Paying Agent on deposit with itself or on deposit to its 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 combined capital and surplus and retained earnings of at least
$100,000,000, and neither the Indenture Trustee nor the Paying Agent shall have
any liability for interest upon any such monies except as otherwise agreed in
writing or (ii) at any time and from time to time, so long as no Lease Event of
<PAGE>
53
Default shall have occurred and be continuing, at the request (given directly by
the Company to the Indenture Trustee) of the Company acting as the Agent of the
Owner Trustee, shall be invested and reinvested in Permitted Investments as
specified in such request (if such investments are reasonably available for
purchase) and sold, in any case at such prices, including accrued interest or
its equivalent, as are set forth in such request, and such Permitted Investments
shall be held by the Indenture Trustee in trust as part of the Indenture Estate
until so sold; provided that the Company pursuant to Section 22 of the Lease, on
--------
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity, sale
or other disposition of any such Permitted Investment and, so long as no Lease
Event of Default shall have occurred and be continuing, be entitled to receive
from the Indenture Trustee, and the Indenture Trustee shall promptly pay to the
Company, on behalf of the Owner Trustee, any profit, income, interest, dividend
or gain realized upon maturity, sale or other disposition of any Permitted
Investment. If any Lease Event of Default shall have occurred and be
continuing, any net income, profit, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment shall be held as
part of the Indenture Estate and shall be applied by the Indenture Trustee at
the same time, on the same conditions and in the same manner as the amounts in
respect of which such income, profit, interest, dividend or gain was realized
are required to be distributed in accordance with the provisions hereof or of
the Lease pursuant to which such amounts were required to be held. The
Indenture Trustee shall not be responsible for any losses on any investments or
sales of Permitted Investments made pursuant to the procedure specified in this
Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of Default
------------------
under this Agreement occurs and is continuing and the Indenture Trustee has
Actual Knowledge of same, the Indenture Trustee shall (i) promptly send written
notice thereof by telecopier to the Company, the Owner Trustee and the Owner
Participant and (ii) within 90 days after it occurs, mail to each Holder notice
of all uncured Indenture Events of Default under this Agreement. Except in the
case of a default in the payment of the principal of, premium, if any, or
interest on any Certificate, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has Actual Knowledge of same, the Indenture Trustee shall promptly send
written notice thereof by telecopier to the Company, the Owner Trustee and the
Owner Participant.
Section 9.06. Compensation and Indemnity. (a) The Owner Trustee
--------------------------
shall pay to the Indenture Trustee from time to time (i) reasonable compensation
for its services, which compensation shall not be limited by any law on
compensation of a trustee of an express trust, (ii) reimbursement for all
reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the
<PAGE>
54
reasonable compensation and expenses of the Indenture Trustee's counsel and any
agent appointed in accordance with Section 9.02(c)), and (iii) indemnification
against any loss or liability incurred by it arising out of or in connection
with its acceptance or administration of the trust or trusts hereunder except
(A) as such expenses or loss or liability might result from the negligence or
willful misconduct of the Indenture Trustee or the inaccuracy of any
representation or warranty of the Indenture Trustee in its individual capacity
in Section 8 of the Participation Agreement, (B) as otherwise provided in
Section 9.10 hereof and (C) as otherwise excluded by the terms of Sections 7(b)
and 7(c) of the Participation Agreement from the Company's indemnities under
said Sections; provided that the Indenture Trustee shall not make any claim
--------
under this Section 9.06(a) for any claim or expense indemnified against by the
Company under the Participation Agreement without first making demand on the
Company for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Company promptly of any claim for which it is
entitled to be indemnified hereunder. Subject to the conditions and procedures
equivalent to those set forth in Sections 7(b) and 7(c) of the Participation
Agreement, the Owner Trustee shall defend the claim and the Indenture Trustee
shall cooperate in the defense. The Indenture Trustee may have separate counsel
and the Owner Trustee shall pay the reasonable fees and expenses of such
counsel. The Owner Trustee need not pay for any settlement made without its and
the Company's consent.
(b) To secure the payment obligations of the Owner Trustee pursuant to
this Section 9.06, the Indenture Trustee shall have a lien prior to that of the
Holders of the Certificates on all money or property held or collected by the
Indenture Trustee, except that held in trust to pay the principal of and
interest and premium, if any, on the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The resignation
--------------------------------
or removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee shall become effective only upon the successor Indenture Trustee's
acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least 30 days' prior
written notice to the Company and the Owner Trustee. The Holders of a majority
in aggregate principal amount of the Outstanding Certificates may remove the
Indenture Trustee by giving at least 30 days' prior written notice to the
Indenture Trustee, the Owner Trustee and the Company and may appoint a successor
Indenture Trustee for such Certificates with the Owner Trustee's and (so long as
no Lease Event of Default is continuing) the Company's consent. The Owner
Trustee may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with Section 9.09;
(2) the Indenture Trustee is adjudged a bankrupt or an insolvent;
<PAGE>
55
(3) a receiver or public officer takes charge of the Indenture Trustee
or its property; or
(4) the Indenture Trustee becomes incapable of acting.
(c) If the Indenture Trustee resigns or is removed, or if a vacancy
exists in the office of Indenture Trustee for any reason, the Owner Trustee
shall promptly appoint a successor Indenture Trustee which will (so long as no
Lease Event of Default is continuing) be approved by the Company.
(d) If a successor Indenture Trustee does not take office within 30
days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Company, the Owner Trustee or the Holders of a majority
in aggregate principal amount of the Outstanding Certificates may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(e) If the Indenture Trustee fails to comply with Section 9.09, any
Holder may petition any court of competent jurisdiction for the removal of such
Indenture Trustee and the appointment of a successor Indenture Trustee.
(f) A successor Indenture Trustee shall deliver a written acceptance
of its appointment to the retiring Indenture Trustee, to the Company and to the
Owner Trustee. Thereupon, the resignation or removal of the retiring Indenture
Trustee shall become effective, and the successor Indenture Trustee shall have
all the rights, powers and duties of the retiring Indenture Trustee for which
the successor Indenture Trustee is to be acting as Indenture Trustee under this
Agreement. The retiring Indenture Trustee shall promptly transfer all property
and all books and records relating to the administration of the Indenture Estate
held by it as Indenture Trustee to the successor Indenture Trustee subject to
the lien provided for in Section 9.06. The Company shall give notice of each
appointment of a successor Indenture Trustee if there are Certificates
outstanding, by mailing written notice of such event by first-class mail to the
Holders.
(g) All provisions of this Section 9.07 except subparagraphs (b)(l)
and (e) and the words "subject to the lien provided for in Section 9.06" in
subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by Merger, etc. If
--------------------------------------------------
the Indenture Trustee or any Agent consolidates with, merges or converts into,
or transfers all or substantially all of its corporate trust business assets to,
another corporation, the successor corporation, without any further act, shall
be the successor Indenture Trustee or Agent, as the case may be.
<PAGE>
56
Section 9.09. Eligibility; Disqualification. This Agreement shall at
-----------------------------
all times have an Indenture Trustee which (i) shall have a combined capital and
surplus of at least $75,000,000 or (ii) shall have a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any State or Territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000, and which, in any case,
shall be a Citizen of the United States. If such corporation publishes reports
of conditions at least annually, pursuant to law or to the requirements of
Federal, State, Territorial, or District of Columbia supervising or examining
authority, then for the purposes of this Section 9.09, 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 conditions so published.
In case at any time the Indenture Trustee shall cease to be eligible
in accordance with the provisions of this Section 9.09, the Indenture Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in its
---------------
individual capacity agrees that it will at its own cost and expense promptly
take such action as may be necessary to duly discharge and satisfy in full all
Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Documents, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting. The
----------------------------------------
Indenture Trustee shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Certificates 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 to the Certificates, to withhold such amounts and timely pay the same to
the appropriate authority in the name of and on behalf of the Holders, that 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 Holders may reasonably request from time
to time. The Indenture Trustee agrees to file any other information reports as
it may be required to file under United States law. Such withholding by the
Indenture Trustee shall in no event give rise to an Indenture Event of Default.
<PAGE>
57
Section 9.12. Additional Collateral. (a) From time to time the
---------------------
Owner Participant may pledge Additional Collateral to the Indenture Trustee as
part of the Indenture Estate and in connection with such Additional Collateral
shall deliver to the Indenture Trustee evidence of such filings and recordings
necessary to establish and perfect the Lien of this Indenture in such Additional
Collateral. Such Additional Collateral shall be held in trust by the Indenture
Trustee as part of the Indenture Estate until released by the Indenture Trustee
pursuant to clause (b) below or otherwise in accordance with the applicable
security agreement.
(b) Provided that all payments of principal and interest on the
Certificates due and payable on the tenth Interest Payment Date have been made,
on such Interest Payment Date, the Indenture Trustee shall, unless otherwise
directed by the Owner Trustee or the Owner Participant, release any Additional
Collateral from the Lien of this Indenture, provided, however, that the Owner
-------- -------
Trustee or the Owner Participant shall be responsible for the preparation and
recording of all filings and recordings necessary to release such Additional
Collateral from the Lien of this Indenture.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance;
----------------------------------------------------
Termination of Obligations. Subject to Section 10.02, this Agreement shall
- --------------------------
cease to be of further effect, and the Owner Trustee and the Indenture Trustee
shall, except as herein provided, be deemed to have been discharged from their
respective obligations with respect to the Certificates (and the Indenture
Trustee, on demand and at the expense of the Owner Trustee, shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement in
respect of the Certificates), when
(a) (i) all Certificates theretofore executed and delivered (other
than (A) Certificates which have been mutilated, destroyed, lost or stolen
and which have been replaced or exchanged as provided in Section 2.06 and
(B) Certificates for the payment of which money held in trust hereunder has
been paid and discharged from such trust, as provided in Section 7.01) have
been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to the Indenture
Trustee for cancellation
<PAGE>
58
(A) have become due and payable (whether upon stated maturity or
as a result of redemption), or
(B) will become due and payable (including as a result of
redemption in respect of which irrevocable notice has been given to
the Indenture Trustee on or prior to the date of such deposit and such
redemption either is a redemption without possibility of premium or,
as of the date of such deposit, any premium which may be payable in
connection therewith has been actually determined) at maturity or on a
Redemption Date within one year,
and there has been deposited with the Indenture Trustee in trust for the purpose
of paying and discharging the entire indebtedness on the Certificates not
theretofore cancelled by the Indenture Trustee or delivered to the Indenture
Trustee for cancellation, an amount sufficient to discharge such indebtedness,
including the principal of, the actual premium, if any, and interest on the
Certificates to the date of such deposit (in the case of Certificates which have
become due and payable), or to the maturity thereof or to the Redemption Date
thereof, as the case may be; or
(iii) (A) the Owner Trustee, subsequent to the Commencement Date, has
deposited or caused to be deposited irrevocably (except as provided in
Section 10.04) with the Indenture Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders, (1) money in an amount, or (2) U.S. Government Obligations
which, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide (not later than one Business Day
before the due date of any payment referred to below in this paragraph)
money in an amount, or (3) a combination of money and U.S. Government
Obligations referred to in the foregoing clause (2), sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to the
Indenture Trustee, to pay and discharge each installment of principal of and
interest on the Outstanding Certificates on the dates such payments of
principal or interest are due (including as a result of redemption without
the possibility of the payment of premium in respect of which irrevocable
notice has been given to the Indenture Trustee on or prior to the date of
such deposit), and no Lease Event of Default under either Section 14(f) or
14(g) of the Lease shall have occurred and be continuing on the date of such
deposit or at any time during the period ending on the 91st day after such
date; provided, however, that, upon the making of the deposit referred to
-------- -------
above in this clause (A), the right of the Owner Trustee or the Company to
cause the redemption of Certificates (except a redemption in respect of
which irrevocable notice has theretofore been given) shall terminate;
<PAGE>
59
(B) such deposit will not result in a breach or violation of, or
constitute an Indenture Default or Indenture Event of Default under, this
Agreement or a default or event of default under any other agreement or
instrument to which the Owner Trustee or the Company is a party or by which
it is bound; and
(C) the Company on behalf of the Owner Trustee has delivered to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel to the
effect that there has been published by the Internal Revenue Service a
ruling to the effect that Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of the exercise by the Owner
Trustee of its option under this Section 10.01(a)(iii) and will be subject
to Federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such option had not been
exercised;
(b) all other amounts then due and payable hereunder have been paid
and no notice of a redemption of the Certificates with the possibility of the
payment of premium has been delivered by the Indenture Trustee; and
(c) the Company on behalf of the Owner Trustee has delivered to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating to the satisfaction
and discharge of this Agreement contemplated by this Section 10.01, have been
complied with.
Section 10.02. Survival of Certain Obligations. Notwithstanding the
-------------------------------
provisions of Section 10.01, the obligations of the Indenture Trustee contained
in Sections 2.01 through 2.08, Section 7.01, Section 9.11, Section 10.03 and
Section 10.04, the rights, duties, immunities and privileges hereunder of the
Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and U.S.
--------------------------
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, premium,
if any, and interest, but such money need not be segregated from other funds
except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The Indenture
--------------------------------------
Trustee and any Paying Agent shall promptly pay or return to the Owner Trustee
upon request of the Owner Trustee any money or U.S. Government Obligations held
by them at any time that are not required for the payment of the amounts
described above in Section 10.03 on the Certificates for which money or U.S.
Government Obligations have been deposited pursuant to Section 10.01.
<PAGE>
60
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of
-----------------------------------------------
Holders. The Owner Trustee and the Indenture Trustee may enter into one or more
- -------
agreements supplemental hereto without the consent of any Holder for any of the
following purposes:
(1) to correct any mistake or cure any ambiguity, defect or inconsistency
herein or in the Certificates or to make any change not inconsistent with
the provisions hereof; provided that such change does not adversely affect
--------
the interests of any Holder;
(2) to evidence the succession of another party as the Owner Trustee in
accordance with the terms of the Trust Agreement or to evidence (in
accordance with Article 9) the succession of a new trustee hereunder, the
removal of the trustee hereunder or the appointment of any co-trustee or co-
trustees or any separate or additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee or to make any other provisions with respect to
matters or questions arising hereunder so long as such action shall not
adversely affect the interests of the Holders;
(4) to correct or amplify the description of any property at any time
subject to the lien of this Agreement or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subject to the lien of this Agreement or to subject to the lien of this
Agreement the Airframe or Engines or airframe or engines substituted for the
Airframe or Engines in accordance herewith or with the Lease; provided that
--------
Trust Supplements entered into for the purpose of subjecting to the lien of
this Agreement the Airframe or Engines in accordance with the Lease need
only be executed by the Owner Trustee and the Indenture Trustee;
(5) to add to the covenants of the Owner Trustee, for the benefit of the
Holders, or to surrender any rights or power herein conferred upon the Owner
Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
<PAGE>
61
(7) to provide for the assumption by the Company of the obligations of
the Owner Trustee hereunder in accordance with the terms and conditions
applicable thereto specified in Section 7.03; or
(8) to include on the Certificates any legend as may be required by
applicable law.
Section 11.02. Amendments to this Agreement with Consent of Holders.
----------------------------------------------------
(a) With the written consent of the Holders of a majority of the aggregate
principal amount of the Outstanding Certificates, the Owner Trustee and the
Indenture Trustee may enter into such supplemental agreements to add any
provisions to or to change or eliminate any provisions of this Agreement or of
any such supplemental agreements or to modify the rights of the Holders;
provided, however, that, an amendment under this Section 11.02 may not:
- -------- -------
(1) reduce the principal amount of, premium, if any, or any
installment of interest on, any Certificate; or
(2) change the date on which any principal amount of, any Installment
Payment Amount payable with respect to, premium, if any, or interest on any
Certificate, is due or payable; or
(3) create any Lien on the Indenture Estate prior to or pari passu
---- -----
with the Lien thereon under this Agreement except such as are permitted by
this Agreement, or deprive any Holder of the benefit of the Lien on the
Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of the Outstanding
Certificates, the consent of whose holders is required for any such
supplemental agreement, or the consent of whose holders is required for any
waiver (of compliance with certain provisions of this Agreement or of
certain defaults hereunder or their consequences) provided for in this
Agreement; or
(5) make any change in Sections 8.05, 8.08 or Section 11.02(a).
(b) It is not necessary under this Section 11.02 for the Holders to
consent to the particular form of any proposed supplemental agreement, but it is
sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and the
Indenture Trustee of any supplemental agreement pursuant to the provisions of
this Section 11.02, the Indenture Trustee shall transmit by first-class mail a
notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of
<PAGE>
62
such Holders appear on the Register. 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 agreement.
Section 11.03. Revocation and Effect of Consents. Until an amendment
---------------------------------
or waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder, even if notation of the consent is
not made on any Certificate. However, any such Holder or subsequent Holder may
revoke the consent as to his Certificate if the Indenture Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every Holder
affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
---------------------------------------
Indenture Trustee may place an appropriate notation about an amendment or waiver
on any Certificate thereafter executed. The Indenture Trustee in exchange for
such Certificates may execute new Certificates that reflect the amendment or
waiver.
Section 11.05. Indenture Trustee Protected. The Indenture Trustee
---------------------------
need not sign any supplemental agreement that adversely affects its rights.
Section 11.06. Amendments, Waivers, etc. of Other Operative
--------------------------------------------
Documents. (a) Subject to Section 11.01, without the consent of the Holders of
a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, 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 11.06 may be taken without the consent of the Indenture Trustee or
any Holder.
(b) Subject to the provisions of subsection (c) of this Section 11.06,
the respective parties to the Participation Agreement, the Lease and the Trust
Agreement, 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 11.06 the parties to the
Lease shall not modify, amend or supplement, or give any consent, waiver,
authorization or approval 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
<PAGE>
63
thereunder, with respect to the following provisions of the Lease as
originally executed: Section 2, Section 3(a) (if the result thereof would
be to shorten the Term of the Lease to a period shorter than the period
ending with the Maturity Date of the Certificates), Section 3(d) (except to
the extent such Section relates to amounts payable (whether directly or
pursuant to the Indenture) to Persons other than Holders and the Indenture
Trustee in its individual capacity), Section 3(e) (except insofar as it
relates to the address or account information of the Owner Trustee or the
Indenture Trustee) (other than as such Sections 3(a), 3(d) and 3(e) may be
amended pursuant to Section 3(c) of the Lease as originally executed),
Section 4, Section 6, Sections 9(b) through (d) (except that further
restrictions may be imposed on the Company), Section 10 (except that
additional requirements may be imposed on the Company), Section 11 (except
for Section 11(e) and except that additional insurance requirements may be
imposed on the Company), Section 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), Section 13
(except in the case of an assignment by the Lessor in circumstances where
the Aircraft shall remain registrable under the Federal Aviation Act),
Section 14 (except to impose additional or more stringent Lease Events of
Default), Section 15 (except to impose additional remedies), Section 16
(except to impose additional requirements on the Company), Section 18,
Section 20, Section 22 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 in the event an Indenture Event of Default shall have occurred
--------
and be continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as "Lessor" under the Lease to modify, amend or supplement the Lease
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 "Lessor" thereunder; provided further that without the prior consent of
-------- -------
the Owner Trustee, and whether or not an Indenture Event of Default shall
have occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification of a
definition contained therein would result in a modification of the Lease not
permitted by this proviso), 3(c), 4, 5, 6 (to the extent such action would
reduce the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19 and 21 of the Lease, or any
other Section of the Lease to the extent such action shall affect the amount
or timing of any amounts payable by the Company under the Lease as
originally executed (or as subsequently modified with the consent of the
Owner Trustee) which, absent the occurrence and continuance of an Indenture
Event of Default, will be distributable to the Owner Trustee under Article
3; and provided further that the parties to the Lease 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 Company's rights or
obligations with respect to, Excluded Payments;
<PAGE>
64
(2) modify, amend or supplement the Trust Agreement, or give any
consent, waiver, authorization or approval with respect thereto, in each
case only to the extent any such action shall not 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 11.06 the
parties to the Participation Agreement shall not modify, amend or
supplement, or give any consent, waiver, authorization or approval 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 Participation Agreement as originally executed: Sections 1(b),
Section 7 (insofar as such Section 7 relates to the Indenture Trustee and
the Holders), Section 8, Section 11 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 said agreements 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 Agreement which shall
not be inconsistent with the provisions of this Agreement, 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 (a) or pursuant to subsection
(b) of this Section 11.06 and anything in such subsections or elsewhere in this
Agreement to the contrary notwithstanding, shall, without the consent of the
Holder of each Outstanding Certificate affected thereby,
(1) modify, amend or supplement the Lease in such a way as to extend
the time of payment of Basic Rent or stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for the
account of the Holders (subject in any event to clause (iii) of Section 3(c)
of the Lease) upon the occurrence of an Event of Loss or Termination Value
and any other amounts payable to the Indenture Trustee for its own account
or for the account of the Holders (subject in any event to clause (iii) of
Section 3(c) of the Lease) upon termination of the Lease with respect to the
Aircraft, payable under, or as provided in, the Lease as originally
executed, or reduce the amount of any installment of Basic Rent or
Supplemental Rent so that the same is less than the payment of principal of,
premium, if any, and interest on the Certificates, as the case may be, to be
made from such installment of Basic Rent or
<PAGE>
65
Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value,
EBO Percentage, Special Termination Value Percentages, or any other amounts
payable under, or as provided in, the Lease as originally executed upon the
occurrence of an Event of Loss so that the same is less than the accrued
interest on and the principal as of the Lease Loss Payment Date, and
premium, if any, of the Certificates at the time Outstanding or reduce the
amount of Termination Value and any other amounts payable under, or as
provided in, the Lease as originally executed upon termination of the Lease
with respect to the Aircraft so that the same is less than the accrued
interest on and principal as of the Lease Termination Date and premium, if
any, of Certificates 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 Company from its
obligations in respect of payment of Basic Rent or Supplemental Rent, or
Stipulated Loss Value and any other amounts payable to the Indenture Trustee
for its own account or the account of the Holders (subject in any event to
clause (iii) of Section 3(c) of the Lease) upon the occurrence of an Event
of Loss, or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or the account of the Holders (subject in any
event to clause (iii) of Section 3(c) of the Lease) of the Lease with
respect to the Aircraft, payable under, or as provided in, the Lease as
originally executed, except for any such assignment pursuant to Section 8(u)
of the Participation Agreement, and except as provided in the Lease as
originally executed.
For the purposes of this Article 11, during the Pre-Commencement Date
Period, the "principal amount" of Outstanding Certificates shall include the
amount equal to that portion of the difference between the Original Issue Price
and the Original Principal. Amount for any Certificate originally issued at a
discount which corresponds to the period from the date of issuance thereof to
and including the Commencement Date.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically provided
-------
for herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by hand-delivery, overnight courier service, mail, telex or telecopier addressed
as indicated below and any such notice shall be effective, in the case of hand-
delivery, when delivered, in the case of overnight courier service, one Business
Day after delivery with charges paid to a courier service with instructions for
overnight delivery, in the case of mail, three Business Days after delivery to
<PAGE>
66
the postal service with certified or registered mail charges paid, in the case
of telex, upon receipt of a telex answerback and, in the case of telecopier,
upon transmittal:
if to the Company, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Telecopier: (708) 952-5204
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attn: Vice President and Treasurer
Telecopier: (708) 952-5204
if to the Indenture Trustee, to:
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopier: (801) 246-5053
Telex No.: 3789450
if to the Owner Trustee, to:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
or if by overnight courier, to:
Two International Place
Boston, Massachusetts 02110
Telecopier: (617) 664-5371
with a copy to the Owner Participant
<PAGE>
67
if to the Owner Participant, to:
[________________]
(b) The Company, the Owner Trustee, the Indenture Trustee or the Owner
Participant by notice to the others may designate additional or different
addresses for subsequent notices or communications.
(c) Any notice or communication to Holders of the Certificates shall
be mailed by first-class mail to the addresses for Holders shown on the Register
kept by the Registrar and to addresses filed with the Indenture Trustee for
other Holders. Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency with respect to
other Holders of such Certificates of that or any other Series entitled to
receive notice.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the Holders, it
shall mail a copy to the Indenture Trustee and to each Paying Agent at the same
time.
(f) Notwithstanding the foregoing, all communications or notices to
the Indenture Trustee shall be deemed to be given only when received by a
Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The Indenture
-------------------------------------
Trustee may make reasonable rules for action by or a meeting of the Holders.
The Paying Agent or Registrar may make reasonable rules and set reasonable
requirements for its functions.
Section 12.05. Non-Business Days. If a payment date is not a
-----------------
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE CERTIFICATES
-------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
<PAGE>
68
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PROVISIONS OF THE STATE OF ILLINOIS.
Section 12.07. No Recourse Against Others. No director, officer,
--------------------------
employee or stockholder, as such, of the Company, the Owner Trustee or the Owner
Participant, as the case may be, shall have any liability for any obligations of
the Company, the Owner Trustee or the Owner Participant, as the case may be,
under this Agreement or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting a Certificate
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which shall be an original but
such counterparts shall together constitute but one instrument.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of Lease. Upon
---------------------------------------------
any of:
(a) the voluntary termination of the Lease by the Company pursuant to
Section 9(b) thereof on the Lease Termination Date, and upon payment to the
Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its option pursuant
to Section 19(b) of the Lease on a Special Purchase Option Date or the EBO
Date as the case may be (unless the Company shall have elected to assume all
of the rights and obligations of the Owner Trustee hereunder as provided for
in Section 8(r) of the Participation Agreement), and upon payment to the
Indenture Trustee of an amount equal to the Redemption Price as at the
applicable Redemption Date of all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss Payment Date,
following an Event of Loss suffered by the Airframe under circumstances
where the Company does not exercise its option to substitute a Replacement
Airframe therefor pursuant to Section 10(a)(ii) of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price
as at the Redemption Date of all Outstanding Certificates, or
<PAGE>
69
(d) the satisfaction, discharge, defeasance and termination of
obligations under this Agreement in accordance with Section 10.01, or
(e) the voluntary termination of the Lease with respect to an Engine
pursuant to Section 10(b) thereof, and upon the payment of Stipulated Loss
Value with respect to such Engine,
the Lien of this Agreement on the Indenture Estate, in the case of (a), (b), (c)
and (d) above, and on such Engine, in the case of (e) above shall terminate
(except for the Lien on funds held by the Indenture Trustee to pay the
Certificates and the Lien on amounts due from the Company under the Lease
necessary to pay the Certificates or the Indenture Trustee) and the Indenture
Trustee shall execute such instruments as may be requested by the Company or the
Owner Trustee to evidence such termination.
<PAGE>
70
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee have
caused this Trust Indenture and Mortgage to be duly executed by their respective
officers thereunto duly authorized.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
except as expressly provided herein,
but solely as Owner Trustee
By: ______________________________________
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By: ______________________________________
Name:
Title:
<PAGE>
Exhibit A-1 to
Trust Indenture and
Mortgage
Form of Series 1995 777 A Installment Certificates
--------------------------------------------------
$_______________ (Original Issue Price) No. _____
$_______________ (Original Principal Amount)
SERIES 1995 777 A CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 A)
Dated as of May 1, 1995
Issued in connection with Aircraft N777UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1995 MATURITY DATE
-------------
_______ , 20__
INTEREST RATE PER ANNUM: __%
COMMENCEMENT DATE
CASH INTEREST: $
--------
State Street Bank and Trust Company, not in its individual
capacity, but solely as owner trustee (the "Owner Trustee") under that certain
Trust Agreement (1995 777 A), dated as of May 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" (herein as such Trust Agreement may be amended or
supplemented from time to time called the "Trust Agreement") for value
received, hereby promises to pay to _________________ or registered assigns the
principal sum in Dollars equal to the Original Principal Amount specified above
in installments on each Installment Payment Date as provided for herein below
with the final installment due and payable on the Maturity Date specified above
(provided, however, that, if the obligations evidenced by this
-------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
principal amount hereof to be paid shall be the Original Issue Price specified
above, together with the portion of the difference between such Original Issuer
Price and the Original Principal Amount specified above which corresponds to
the period from the date of issuance hereof to
<PAGE>
2
the date of such payment) and to pay interest (x) in the amount of the
Commencement Date Cash Interest specified above, payable on the Commencement
Date, and (y) at the Interest Rate Per Annum specified above on the Original
Principal Amount specified above from time to time outstanding in respect of
the period commencing on and including the Commencement Date and ending on the
date when the principal amount hereof shall have been paid in full, payable on
each October 19 and April 19 in each year, commencing on October 19, 1995
(provided, however, that, if the obligations evidenced by this
-------- -------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
amount thereof in respect of interest shall be an amount equal to the portion
of such Commencement Date Cash Interest which corresponds to the period from
the date of issuance hereof to the date of such payment). All amounts payable
by the Owner Trustee hereunder and under the Trust Indenture and Mortgage (1995
777 A), dated as of May 1, 1995 (as the same may hereafter be further amended
or supplemented from time to time, as the "Indenture", the defined terms
therein not otherwise defined herein being used herein with the same meanings),
by and among the Owner Trustee and First Security Bank of Utah, National
Association, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate for payment of such amounts, to the
extent available for distribution to the Holder hereof as provided in the
Indenture and (b) none of the Owner Participant, the Owner Trustee or the
Indenture Trustee is or shall be personally liable to the Holder hereof for any
amount payable hereunder or under the Indenture or, except as provided in the
Indenture in the case of the Indenture Trustee and the Owner Trustee, for any
liability under the Indenture.
The interest or Installment Payment Amount (other than that payable
on the Maturity Date hereof) so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date or Installment Payment Date, as
the case may be, will, as provided in the Indenture, be paid to the Person in
whose name this Certificate (or one or more predecessor Certificates) is
registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date or Installment Payment Date, as the case may be. Any
such interest or Installment Payment Amount not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holder
hereof on the such Record Date (or to the Person in whose name this Certificate
is registered upon issuance) and may be paid to the Person in whose name this
Certificate (or one or more predecessor Certificates) is registered at the
close of business on a special record date for the payment of such Defaulted
Installment or Defaulted Interest to be fixed by the Indenture Trustee pursuant
to Section 2.08 of the Indenture, notice whereof shall be given to Holders of
Certificates entitled thereto not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may
<PAGE>
3
be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture.
Payment of the principal of, premiums if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment
- -------- -------
Amounts (other than that payable on the Maturity Date hereof) may be made at
the option of the Indenture Trustee or the Paying Agent by check mailed to the
address of the Holder entitled thereto as such address shall appear on the
Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of 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 thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, and the terms upon which the Certificates are,
and are to be, executed and delivered, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, on each Installment
Payment Date, the Holder hereof will receive a payment of principal equal to
the Installment Payment Date, the Holder hereof will receive a payment of
principal equal to the Installment Payment Percentage for such Installment
Payment Date as specified on Exhibit B-1 hereto (provided that, after the
--------
occurrence of any partial redemption or redemption pursuant to clause (ii) of
Section 6.01(a) of the Indenture, the "Installment Payment Percentage" for each
Installment Payment Date subsequent to the applicable Redemption Date shall be
redetermined as provided for in the Indenture) multiplied by the Original
Principal Amount of this Certificate specified above.
As more fully provided in the Indenture, the Certificates are
subject to redemption or partial redemption on not less than 25 nor more than
60 days' notice by mail, under the circumstances set forth in the Indenture, at
a redemption price equal to the unpaid
<PAGE>
4
principal amount thereof, premium if any, plus accrued interest thereon to the
Redemption Date.
If an Indenture Event of Default shall occur and be continuing, the
principal amount remaining unpaid of the Certificates may be declared due and
payable in the manner and with the effect provided in the Indenture. If, and
only if, such an event of default constitutes an event of default by the
Company under the Lease, the Indenture Trustee may declare the Lease to be in
default, and may, to the exclusion of the Owner Trustee, exercise one or more
of the remedies of the Owner Trustee provided in the Lease. Such remedies
include the right to repossess and use or operate the Aircraft, to sell or
relet the Aircraft free and clear of the Company's rights and retain the
proceeds and to require the Company to pay as liquidated damages (i) any unpaid
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in
the performance of its Obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premiums, if any, and interest on
<PAGE>
5
the Outstanding Certificates on the dates such payments are due in accordance
with the terms of such Certificates and (b) certain other conditions are
satisfied, including the publication by the United States Internal Revenue
Service of a ruling to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Holder or his attorney duly
authorized in writing, one or more new Certificates of the same maturity and
type and of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that
is not an integral multiple of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Certificates are exchangeable
for a like aggregate principal amount of Certificates of the same maturity and
type and of authorized denominations, as requested by the Holder surrendering
the same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue, and
neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
<PAGE>
6
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to
be duly executed.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
but solely as Owner Trustee
By:
----------------------------------
Title:
<PAGE>
7
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By:
----------------------------------
Authorized officer and signatory
<PAGE>
Exhibit A-2 to
Trust Indenture and
Mortgage
Form of Series 1995 777 A Serial Certificates
---------------------------------------------
$________ (Original Issue Price) No. _____
$_________ (Original Principal Amount)
SERIES 1995 777 A CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 A)
Dated as of May 1, 1995
Issued in connection with Aircraft N777UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1995 MATURITY DATE
-------------
_______ , 199__
INTEREST RATE PER ANNUM: ____%
COMMENCEMENT DATE
CASH INTEREST: $
--------
State Street Bank and Trust Company, not in its individual
capacity, but solely as owner trustee (the "Owner Trustee") under that certain
Trust Agreement (1995 777 A), dated as of May 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" (herein as such Trust Agreement may be amended or
supplemented from time to time called the "Trust Agreement"), for value
received, hereby promises to pay to _________________ or registered assigns the
principal sum in dollars equal to the Original Principal Amount specified above
on the Maturity Date specified above (provided, however, that, if the
-------- -------
obligations evidenced by this Certificate shall become due and payable (upon
redemption or acceleration or otherwise) and shall be paid during the
Pre-Commencement Date Period, the principal amount hereof to be paid shall be
the Original Issue Price specified above, together with the portion of the
difference between such Original Issue Price and the Original Principal Amount
specified above which
<PAGE>
2
corresponds to the period from the date of issuance hereof to the date of such
payment) and to pay interest (x) in the amount of the Commencement Date Cash
Interest specified above, payable on the Commencement Date, and (y) at the
Interest Rate Per Annum specified above on the Original Principal Amount
specified above from time to time outstanding in respect of the period
commencing on and including the Commencement Date and ending on the date when
the principal amount hereof shall have been paid in full, payable on each
October 19 and April 19 in each year, commencing on October 19, 1995
(provided, however, that, if the obligations evidenced by this
-------- -------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
amount thereof in respect of interest shall be the amount equal to the portion
of such Commencement Date Cash Interest which corresponds to the period from
the date of issuance hereof to the date of such payment the accrual at the
Interest Rate Per Annum specified above of interest on the Original Issue Price
specified above from the date of issuance of this Certificate to the date of
such payment). All amounts payable by the Owner Trustee hereunder and under
the Trust Indenture and Mortgage (1995 777 A), dated as of May 1, 1995 (as the
same may hereafter be further amended or supplemented from time to time, as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and First
Security Bank of Utah, National Association, as Indenture Trustee thereunder,
shall be made only from the income and proceeds of the Indenture Estate. Each
Holder hereof, by its acceptance of this Certificate, agrees that (a) it will
look solely to the income and proceeds of the Indenture Estate for payment of
such amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) none of the Owner Participant, the Owner
Trustee or the Indenture Trustee is or shall be personally liable to the Holder
hereof for any amount payable hereunder or under the Indenture or, except as
provided in the Indenture in the case of the Indenture Trustee and the Owner
Trustee, for any liability under the Indenture.
The interest so payable and punctually paid or duly provided for,
on the applicable Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on the Record Date for
payment of such interest, which shall be the fifteenth day (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on the such Record Date (or
to the Person in whose name this Certificate is registered upon issuance) and
may be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a special
record date for the payment of such Defaulted Interest to be fixed by the
Indenture Trustee pursuant to Section 2.08 of the Indenture, notice whereof
shall be given to Holders of Certificates entitled thereto not less than 10
days prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Certificates may be listed, and
<PAGE>
3
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.
Payment of the principal of, premium if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option
- -------- -------
of the Indenture Trustee or the Paying Agent by check mailed to the address of
the Holder entitled thereto as such address shall appear on the Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of 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 thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Company, the Indenture
Trustee and the Holders of the Certificates, and the terms upon which the
Certificates are, and are to be, executed and delivered, as well as for a
statement of the terms and conditions of the trust created by the Indenture, to
all of which terms and conditions in the Indenture each Holder hereof agrees by
its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption or partial redemption, on not less than 25 nor more than
60 days' notice by mail, under the circumstances set forth in the Indenture, at
a redemption price equal to the unpaid principal amount thereof, premium, if
any, plus accrued interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be continuing, the
principal of the Certificates may be declared due and payable in the manner and
with the effect provided in the Indenture. If, and only if, such an event of
default constitutes an event of default by the Company under the Lease, the
Indenture Trustee may declare the Lease to be in default, and may, to the
exclusion of the Owner Trustee, exercise one or more of the remedies of the
Owner Trustee provided in the Lease. Such remedies include the right to
repossess and use or operate the Aircraft, to sell or relet the Aircraft free
and clear of the Company's rights and retain the proceeds and to require the
Company to pay as liquidated damages (i) any
<PAGE>
4
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Holder or his attorney duly
authorized in
<PAGE>
5
writing, one or more new Certificates of the same maturity and type and of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that
is not an integral multiple of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Certificates are exchangeable
for a like aggregate principal amount of Certificates of the same maturity and
type and of authorized denominations, as requested by the Holder surrendering
the same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue, and
neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to
be duly executed.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
but solely as Owner Trustee
By:
----------------------------------
Title:
<PAGE>
6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By
--------------------------------
Authorized Officer or signatory
Title:
<PAGE>
Exhibit B to
Trust Indenture and
Mortgage
MATURITY DATES, PRINCIPAL AMOUNTS AND
-------------------------------------
INTEREST RATES OF SERIES 1995 777 A CERTIFICATES
------------------------------------------------
<TABLE>
<CAPTION>
ORIGINAL COMMENCEMENT
PRINCIPAL ISSUE DATE CASH INTEREST RATE
MATURITY DATE AMOUNT PRICE INTEREST PER ANNUM
------------- --------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Series 1995 777 A1 [________] $[_____] $[_____] $[________] $[_______]
Series 1995 777 A2 [________] $[_____] $[_____] $[________] $[_______]
</TABLE>
<PAGE>
Trust Indenture and
Mortgage
Installment Payment Dates and Installment Payment Percentages
-------------------------------------------------------------
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: [_________]
<TABLE>
<CAPTION>
Corresponding
Installment Payment Installment Payment Aggregate Installment
Date Percentage Payment Amount
- ------------------- ------------------- ---------------------
<S> <C> <C>
[ ] [ ]% $[ ]
[ ] [ ]% [ ]
TOTAL 100.00000000% $[ ]
------------- -------------------
</TABLE>
<PAGE>
B-1-2
Installment Certificate No. 2 - Maturity Date: [_________]
<TABLE>
<CAPTION>
Corresponding
-------------
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
%
TOTAL 100.00000000% $
------------- -----------------
</TABLE>
<PAGE>
Exhibit B-2 to
Trust Indenture and
Mortgage
Issuance of Series 1995 777 A Certificates
------------------------------------------
The Series 1995 777 A Certificates issued hereunder shall be issued
to and shall be payable to each of the Pass Through Trustees under the Pass
Through Trust Agreements with respect to the grantor trusts created thereby, in
each case as set forth below:
1995-Al Trust:
[_____]% Certificate due [_________]
1995-A2 Trust:
[_____]% Certificate due [_________]
<PAGE>
[Trust Indenture and Mortgage (1995 777 A)]
EXHIBIT C
---------
TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT
(1995 777 A)
This TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT
(1995 777 A), dated May __, 1995 (herein called the "Trust Supplement") of
STATE STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely
as Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1995 777 A), dated as of May 1, 1995 (herein called the "Trust Agreement") ,
between the Owner Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below used herein as therein
defined) included in the property covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Mortgage (1995 777 A), dated as of
May 1, 1995 (herein called the "Trust Indenture"), between the Owner Trustee
and FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, as Indenture Trustee
(herein called the "Indenture Trustee"), provides for the execution and
delivery of a supplement thereto substantially in the form hereof, which shall
particularly describe the Aircraft, and shall specifically mortgage such
Aircraft to the Indenture Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement Witnesseth, that the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
<PAGE>
C-2
[Trust Indenture and Mortgage (1995 777 A)]
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ --------------
The Boeing Company 777-222 N777UA 26916
together with all Parts which are from time to time incorporated or installed
in or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, whether or not such engines
shall be installed in or attached to the Airframe or any other airframe,
identified as follows:
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
Pratt & Whitney PW4084 [ ]
Pratt & Whitney PW4084 [ ]
together with all Parts which are from time to time incorporated or installed
in or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee hereby confirms
that the Lien of the Trust Indenture over the Trust Indenture Estate includes
the Lease Supplement of even date herewith covering the property described
above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto
the Indenture Trustee, its successors and assigns, for the equal and
proportionate benefit and security of the and the holders from time to time of
the Certificates outstanding, without any
<PAGE>
C-3
[Trust Indenture and Mortgage (1995 777 A)]
preference, distinction or priority of any one Certificate over any other by
reason of series, priority of time of issue, sale, negotiation, date of
maturity thereof or otherwise for any reason whatsoever, and for the uses and
purposes and subject to the terms and provisions set forth in the Trust
Indenture.
This Trust supplement shall be construed as Supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
* * *
<PAGE>
C-4
[Trust Indenture and Mortgage (1995 777 A)]
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity but
solely as Owner Trustee
By:__________________________
Title:
<PAGE>
EXHIBIT 4.1
------------------------------------------------
TRUST INDENTURE AND MORTGAGE
(1995 777 B)
Dated as of May 1, 1995
between
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except as expressly set forth herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Indenture Trustee
One Boeing 777-222 Aircraft N766UA
United Air Lines, Inc.
Series 1995 777 B Certificates
_______________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................................... 1
GRANTING CLAUSE............................................................ 2
HABENDUM CLAUSE............................................................ 5
ARTICLE 1 DEFINITIONS..................................................... 7
1.01. Definitions................................................... 7
ARTICLE 2 THE CERTIFICATES................................................ 19
2.01. Certificates; Title and Terms................................. 19
2.02. Execution and Authentication.................................. 20
2.03. Registrar and Paying Agent.................................... 20
2.04. Transfer and Exchange......................................... 21
2.05. Holder Lists; Ownership of Certificates....................... 21
2.06. Mutilated, Destroyed, Lost or Stolen Certificates............. 22
2.07. Cancellation.................................................. 22
2.08. Payment on Certificates; Defaulted Principal and Interest..... 22
2.09. Payment from Indenture Estate Only; Non-Recourse Obligations.. 24
2.10. Execution, Delivery and Dating of Certificates upon Original
Issuance..................................................... 25
ARTICLE 3 RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE......................... 25
3.01. [Reserved for Potential Future Use]........................... 25
3.02. Payment in Case of Redemption or Purchase of Certificates..... 25
3.03. Application of Rent When No Indenture Event of Default Is
Continuing................................................... 26
3.04. Application of Certain Payments in Case of Requisition or
Event of Loss................................................ 26
3.05. Payments During Continuance of Indenture Event of Default..... 27
3.06. Payments for Which Application Is Provided in Other Documents. 28
3.07. Payments for Which No Application Is Otherwise Provided....... 28
ARTICLE 4 COVENANTS OF OWNER TRUSTEE...................................... 29
4.01. Covenants of the Owner Trustee................................ 29
<PAGE>
ii
ARTICLE 5 DISPOSITION, SUBSTITUTION AND RELEASE OF PROPERTY
INCLUDED IN THE INDENTURE ESTATE DURING CONTINUATION OF
LEASE...................................................... 30
5.01. Disposition, Substitution and Release of Property Included
in the Indenture Estate During Continuation of Lease......... 30
ARTICLE 6 REDEMPTION OF CERTIFICATES...................................... 31
6.01. Redemption of Certificates upon Certain Events................ 31
6.02. Redemption or Purchase of Certificates upon Certain Indenture
Events of Default............................................ 33
6.03. Notice of Redemption to Holders............................... 34
6.04. Deposit of Redemption Price................................... 34
6.05. Certificates Payable on Redemption Date....................... 34
ARTICLE 7 MATTERS CONCERNING THE COMPANY.................................. 35
7.01. Repayment of Monies for Certificate Payments Held by the
Indenture Trustee............................................ 35
7.02. Change in Registration........................................ 35
7.03. Assumption of Obligations of Owner Trustee by the Company..... 36
ARTICLE 8 DEFAULTS AND REMEDIES........................................... 38
8.01. Indenture Events of Default................................... 38
8.02. Acceleration; Rescission and Annulment........................ 41
8.03. Other Remedies Available to Indenture Trustee................. 41
8.04. Waiver of Owner Trustee....................................... 49
8.05. Waiver of Existing Defaults................................... 49
8.06. Control by Majority........................................... 50
8.07. Limitation on Suits by Holders................................ 50
8.08. Rights of Holders to Receive Payment.......................... 51
8.09. Indenture Trustee May File Proofs of Claim.................... 51
ARTICLE 9 INDENTURE TRUSTEE............................................... 51
9.01. Duties of Indenture Trustee................................... 51
9.02. Rights of Indenture Trustee................................... 51
9.03. Individual Rights of Indenture Trustee........................ 52
9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments.................................................. 52
9.05. Notice of Defaults............................................ 53
9.06. Compensation and Indemnity.................................... 53
9.07. Replacement of Indenture Trustee.............................. 54
9.08. Successor Indenture Trustee, Agents by Merger, etc............ 55
<PAGE>
iii
9.09. Eligibility; Disqualification................................. 55
9.10. Trustee's Liens............................................... 56
9.11. Withholding Taxes; Information Reporting...................... 56
9.12. Additional Collateral......................................... 56
ARTICLE 10 SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS............................... 57
10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations................................... 57
10.02. Survival of Certain Obligations............................... 59
10.03. Monies to Be Held in Trust.................................... 59
10.04. Monies to Be Returned to Owner Trustee........................ 59
ARTICLE 11 AMENDMENTS AND WAIVERS......................................... 60
11.01. Amendments to this Agreement Without Consent of Holders....... 60
11.02. Amendments to this Agreement with Consent of Holders.......... 61
11.03. Revocation and Effect of Consents............................. 62
11.04. Notation on or Exchange of Certificates....................... 62
11.05. Indenture Trustee Protected................................... 62
11.06. Amendments, Waivers, etc. of Other Operative Documents........ 62
ARTICLE 12 MISCELLANEOUS.................................................. 65
12.01. Notices....................................................... 65
12.02. [Reserved for Potential Future Use]........................... 67
12.03. [Reserved for Potential Future Use]........................... 67
12.04. Rules by Indenture Trustee and Agents......................... 67
12.05. Non-Business Days............................................. 67
12.06. GOVERNING LAW................................................. 68
12.07. No Recourse Against Others.................................... 68
12.08. Execution in Counterparts..................................... 68
ARTICLE 13 ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE.................. 68
13.01. Actions to Be Taken upon Termination of Lease................. 68
<PAGE>
iv
SIGNATURES................................................................. 70
Exhibit A-1 Form of Series 1995 777 B Installment
Certificates
Exhibit A-2 Form of Series 1995 777 B Serial
Certificates
Exhibit B Maturity Dates, Original Issue Prices,
Principal Amounts and
Interest Rates of Series 1995 777 B
Certificates
Exhibit B-1 Installment Payment Dates and Installment
Payment Percentages
Exhibit B-2 Issuance of Series 1995 777 B
Certificates
Exhibit C Form of Trust Agreement and Trust Indenture
and Mortgage Supplement
<PAGE>
TRUST INDENTURE AND MORTGAGE
This TRUST INDENTURE AND MORTGAGE (1995 777 B), dated as of May 1,
1995, between STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity except as otherwise expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (capitalized terms
used herein having the respective meanings specified therefor in Article 1), and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, as Indenture Trustee hereunder.
W I T N E S S E T H:
-------------------
WHEREAS, the Owner Participant and the Owner Trustee in its individual
capacity have entered into the Trust Agreement whereby, among other things, (i)
the Owner Trustee has established a certain trust for the use and benefit of the
Owner Participant, subject, however, to the Indenture Estate created pursuant
hereto for the use and benefit of, and with the priority of payment to, the
holders of the Certificates issued hereunder, and (ii) the Owner Trustee has
been authorized and directed pursuant to the Trust Agreement to execute and
deliver this Trust Indenture and Mortgage;
WHEREAS, all capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof;
WHEREAS, the parties desire by this Agreement, among other things, (i)
to provide for the issuance by the Owner Trustee of the Series 1995 777 B
Certificates evidencing the loans made by the Pass Through Trustees to finance
the Owner Trustee's payment of Lessor's Cost, 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, among other things, of certain of the Owner Trustee's right, title
and interest in and to the Aircraft and the Operative Documents and certain
payments and other amounts received hereunder or thereunder in accordance with
the terms hereof, as security for, among other things, the Owner Trustee's
obligations to the Indenture Trustee, for the ratable benefit and security of
the Holders;
WHEREAS, all things have been done to make the Certificates, when
executed by the Owner Trustee and authenticated and delivered by the Indenture
Trustee hereunder, the valid, binding and enforceable obligations of the Owner
Trustee; and
WHEREAS, all things necessary to make this Agreement the legal, valid
and binding obligation of the Owner Trustee and the Indenture Trustee, for the
uses and purposes
<PAGE>
2
herein set forth, in accordance with its terms, have been done and performed and
have happened;
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND MORTGAGE WITNESSETH, that, to
secure the prompt payment of the principal of, premium, if any, and interest on,
and all other amounts due with respect to, all Certificates from time to time
Outstanding and the performance and observance by the Owner Trustee of all the
agreements, covenants and provisions contained herein and in the Operative
Documents to which it is a party, for the benefit of the Holders, and for the
uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of other good and valuable
consideration the receipt and adequacy whereof are hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the Holders from time to
time, a 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,
rights, interests and privileges (which collectively, including all property
hereafter specifically subjected to the lien of this Agreement by any instrument
supplemental hereto, but excluding the Excluded Payments, are herein called the
"Indenture Estate"):
(1) the Airframe and Engines (each such Engine having 750 or more
rated take-off horsepower or the equivalent thereof) and all replacements
thereof and substitutions therefor in which the Owner Trustee shall from
time to time acquire an interest in accordance with the Lease, as more
particularly described in the Trust Supplement and the Lease Supplement
executed and delivered with respect to the Aircraft or any such
replacements or substitutions therefor, as provided in this Agreement and
the Lease;
(2) the Lease and all Rent thereunder, including, without limitation,
all amounts of Basic Rent, Supplemental Rent, and payments of any kind
required to be made by the Company thereunder; all amounts payable to the
Owner Trustee under the Participation Agreement that do not constitute
Excluded Payments; the Purchase Agreement (to the extent assigned by the
Owner Trustee's Purchase Agreement), the Owner Trustee's Purchase
Agreement, the Owner Trustee's Bill of Sale, the Owner Trustee's FAA Bill
of Sale and any and all contracts relating to the Airframe and Engines or
any rights or interest therein to which the Owner Trustee is now or may
hereafter be a party; including, without limitation, all rights of the
Owner Trustee to receive any payments or other amounts or to exercise any
election or option or to
<PAGE>
3
make any decision or determination or to give or receive any notice,
consent, waiver or approval or to take any other action under or in respect
of any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on the
part of the Owner Trustee, whether acting under any such document or by
statute or at law or in equity, or otherwise, arising out of any Lease
Event of Default (other than the rights of the Owner Trustee provided for
hereunder);
(3) all rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Lien of this
Agreement;
(4) all requisition 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) and all insurance proceeds with respect to the
Aircraft or any part thereof from insurance required to be maintained by
the Company under Section 11 of the Lease, but excluding any insurance
maintained by the Company and not required under Section 11 of the Lease;
(5) all moneys and securities 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
Document and held or required to be held by the Indenture Trustee
hereunder;
(6) all proceeds of the foregoing; and
(7) the Additional Collateral, if any.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest granted by this
Agreement all Excluded Payments;
(b) (i) whether or not a Lease Event of Default or 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 Excluded Payments and to commence an action at law
to obtain such Excluded Payments, (b) to adjust Basic Rent and the
percentages relating to Stipulated Loss Value and Termination Value, the
Special Termination Value Percentage and the EBO Percentages as provided in
Section 3(c) of the Lease and Section 18 of the Participation Agreement,
(c) 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,
<PAGE>
4
Excluded Payments, (d) to retain the rights of the "Lessor" with respect to
solicitations of bids, and the election to retain the Aircraft pursuant to
Section 9 of the Lease, (e) to exercise the right of "Lessor" to determine
the fair market rental value or fair market sales value pursuant to Section
19 of the Lease, (f) to exercise all rights with respect to insurance
maintained for its own account which Section 11(e) of the Lease
specifically confers on the "Lessor" and (g) to exercise, to the extent
necessary to enable it to exercise its rights under Section 8.03(e)(i)
hereof, the rights of the "Lessor" under Section 21 of the Lease;
(ii) whether or not a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee and the Indenture
Trustee shall each have the right separately but not to the exclusion of
the other, (a) to receive from the Company all notices, certificates,
reports, filings, Opinions of Counsel, copies of all documents and all
information which the Company 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 Document, (b) to exercise inspection rights pursuant to
Section 12 of the Lease, (c) to maintain separate insurance pursuant to
Section 11(e) of the Lease and to retain all rights with respect to such
insurance maintained for its own account, (d) to give any notice of default
under Section 15 of the Lease and to declare the Lease in default in
respect thereof, (e) to cause the Company to take any action and execute
and deliver such documents and assurances as the "Lessor" may from time to
time reasonably request pursuant to Section 16 of the Lease; (f) to consent
(with the concurrent consent of the other such party to the extent such
consent is required) to changes to the list of countries on Exhibit F or G
to the Lease and (g) to purchase an engine pursuant to Section 5(e) of the
Lease;
(iii) so long as no Indenture Event of Default shall have occurred
and be continuing (but subject to the provisions of Section 11.06), the
Owner Trustee shall retain the right, to the exclusion of the Indenture
Trustee, to exercise the following rights of the "Lessor" under the Lease:
(a) the right to approve as satisfactory any accountants, engineers or
counsel to render services for or issue opinions to the Owner Trustee
pursuant to express provisions of the Operative Documents, (b) the right to
waive the opinion required pursuant to Section 8(e)(ii)(C) of the
Participation Agreement and (c) in connection with an Event of Loss
relating only to one or more Engines, the right to elect (or not to elect)
under Section 10(b) of the Lease to require the Company to pay the amounts
set forth in clauses (A) and (B) of Section 10(b);
(c) the leasehold interest granted to the Company by the Lease shall
not be subject to the security interest granted by this Agreement, and
nothing in this Agreement shall affect the rights of the Company under the
Lease so long as no Lease Event of Default has occurred and is continuing;
and
<PAGE>
5
(d) as between the Owner Trustee and the Indenture Trustee, nothing
contained in this Granting Clause shall prevent the Owner Trustee, as the
"Lessor" under the Lease, from seeking specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and from
maintaining separate insurance with respect to the Aircraft to the extent
permitted by Section 11 of the Lease.
None of the payments and rights described in the foregoing clauses (a)
through (d) shall be included in the Indenture Estate.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, in trust for the benefit and
security of the Indenture Trustee and the Holders from time to time, without any
priority of any one Certificate over any other, and for the uses and purposes
and subject to the terms and provisions set forth in this Agreement.
1. The Owner Trustee agrees that this Agreement creates and grants
and is intended to and shall create and grant a security interest in the
Aircraft to the Indenture Trustee, which security interest shall attach on the
Delivery Date. The security interest created by this Agreement and granted to
the Indenture Trustee hereunder in the Indenture Estate other than in the
Aircraft shall attach upon the delivery of this Agreement.
2. It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Documents to which it is a party to perform all of its obligations
assumed by it thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Indenture Trustee and the Holders shall have no
obligation or liability under any of the Operative Documents to which the Owner
Trustee is a party by reason of or arising out of the assignment hereunder, nor
shall the Indenture Trustee (except as to the Indenture Trustee, if the
Indenture Trustee shall have become the "Lessor" under the Lease) or the Holders
be required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of the Operative Documents to which the Owner
Trustee is a party, or, except as herein expressly provided, 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.
3. The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of
<PAGE>
6
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 moneys and claims for moneys due and to become due to the Owner
Trustee (other than Excluded Payments) under or arising out of the Lease
(subject to Section 11.06(b)(1)), the Purchase Agreement and the Owner Trustee's
Purchase Agreement, to endorse any checks or other instruments or orders in
connection therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable in
the premises. The Owner Trustee has directed the Company to make all payments
of Rent (other than Excluded Payments) payable to the Owner Trustee by the
Company and all other amounts 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 as the Indenture Trustee shall specify, for application as provided
in this Agreement. The Owner Trustee agrees that promptly on receipt thereof,
it will transfer to the Indenture Trustee any and all moneys from time to time
received by it constituting part of the Indenture Estate, for distribution by
the Indenture Trustee pursuant to this Agreement, except that the Owner Trustee
shall accept for distribution pursuant to the Trust Agreement any amounts
distributed to it by the Indenture Trustee as expressly provided in this
Agreement and any Excluded Payments.
4. 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
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 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 and 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 pursuant to any Operative Document.
5. The Owner Trustee does hereby warrant and represent that it has
not assigned or pledged, and hereby covenants that it will not assign or pledge,
so long as the assignment hereunder shall remain in effect, any of its right,
title or interest hereby assigned, to any Person other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement amending
or supplementing any of the Operative Documents, execute any waiver or
modification of, or consent under the terms of any of the Operative Documents,
settle or compromise any claim (other than claims in respect of Excluded
Payments) against the Company arising under any of the Operative Documents, or
submit or consent to the
<PAGE>
7
submission of any dispute, difference or other matter arising under or in
respect of any of the Operative Documents, to arbitration thereunder.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this Agreement,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article 1 have the meanings assigned to
them in this Article 1, and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States;
(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(4) all references in this Agreement to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following capitalized
terms have the following respective meanings:
"Actual Knowledge" means, (i) as it applies to the Owner Trustee or
----------------
Indenture Trustee, as the case may be, actual knowledge of a responsible officer
in the Corporate Trust Department or the Corporate Trust Office, as the case may
be, and (ii) as it applies to the Owner Participant, actual knowledge of a Vice
President or more senior officer of the Owner Participant or other officer of
the Owner Participant in each case having responsibility for the transactions
contemplated by the Operative Documents; provided that each of the Owner
Trustee, the Indenture Trustee and the Owner Participant shall be deemed to have
"Actual Knowledge" of any matter as to which it has been given notice by any of
Lessee, the Owner Participant, any Holder, the Owner Trustee or the Indenture
Trustee, such notice having been given pursuant to and in accordance with
Section 12.01.
<PAGE>
8
"Additional Collateral" means any property in addition to the
---------------------
collateral listed in clauses (1) through (5) of the Granting Clause which may be
added to the Indenture Estate from time to time by the Owner Participant in
accordance with Section 9.12 hereof for so long as such property is to be
included in the Indenture Estate in accordance with the grant made in said
Section 9.12.
"Affiliate" with respect to a specified Person, means any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control"
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
-----
"Aircraft" shall have the meaning specified therefor in the Lease.
--------
"Airframe" shall have the meaning specified therefor in the Lease.
--------
"Appraiser" means a Person engaged in the business of making
---------
appraisals and, in the case of the Aircraft, familiar with commercial aviation
equipment.
"Bankruptcy Code" shall have the meaning specified therefor in the
---------------
Lease
"Basic Rent" shall have the meaning specified therefor in the Lease.
----------
"Business Day" shall have the meaning specified therefor in the Lease.
------------
"Certificate" or "Certificates" means any Certificate issued under
----------- ------------
this Agreement, including the Series 1995 777 B Certificates issued hereunder
substantially in the form of Exhibits A-1 and A-2 hereto as such form may be
varied pursuant to the terms hereof and any and all Certificates issued in
replacement or exchange therein in accordance with the provisions hereof.
"Certificate Holder" shall have the meaning specified for the term
------------------
"Holder" hereunder.
"Citizen of the United States" shall have the meaning specified
----------------------------
therefor in the Lease.
"Commencement Date" shall have the meaning specified therefor in the
-----------------
Lease.
<PAGE>
9
"Commencement Date Cash Interest" when used with respect to a
-------------------------------
Certificate, shall be such Certificate's pro rata portion of the aggregate
--- ----
commencement date cash interest as determined on the basis of the data included
in Exhibit B.
"Company" means United Air Lines, Inc., a Delaware corporation, and,
-------
subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company executed on
---------------
its behalf by a Responsible Company Officer.
"Co-Registrar" shall have the meaning specified therefor in Section
------------
2.03.
"Debt" shall mean any liability for borrowed money, or any liability
----
for the payment of money in connection with any letter of credit transaction, or
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"Defaulted Installment" shall have the meaning specified therefor in
---------------------
Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor in
------------------
Section 2.08.
"Delivery Date" shall have the meaning specified therefor in the
-------------
Lease.
"EBO Date" shall have the meaning specified therefor in the Lease.
--------
"Engine" shall have the meaning specified therefor in the Lease.
------
"Event of Loss" shall have the meaning specified therefor in the
-------------
Lease.
"Excess Amount" shall have the meaning specified therefor in the
-------------
Lease.
"Excluded Payments" means (i) any right, title or interest of the
-----------------
Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective successors, permitted assigns,
directors, officers, employees, servants and agents to any payment which by the
terms of Section 7(b) or 7(c) of the Participation Agreement, Section 5.03 or
7.01 of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3(d) of the Lease is payable to such Person,
(ii) any insurance proceeds payable under insurance maintained by the Owner
Trustee in its individual capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu thereof)
payable to the Owner Trustee in its individual
<PAGE>
10
capacity or to the Owner Participant, or to their respective Affiliates,
successors, permitted assigns, directors, officers, employees, servants and
agents, under any liability insurance maintained by the Company pursuant to
Section 11 of the Lease or by any other Person (or proceeds of governmental
indemnities in lieu thereof), (iv) any rights of the Owner Participant or the
Owner Trustee to demand, collect, sue for, or otherwise receive and enforce
payment of the foregoing amounts (including interest thereon to the extent
provided in the applicable provisions of the Operative Documents) and the right
to declare an Event of Default under the Lease in respect of any of the
foregoing amounts, but not including the right to exercise any remedies under
the Lease except for those specifically provided for in this clause (iv), (v)
payments to the Owner Participant by the Owner Trustee pursuant to Section 2 of
the Participation Agreement and any funds held by the Owner Trustee or payable
to the Owner Participant pursuant to any funding letter entered into in lieu of
the provisions of Section 2 of the Participation Agreement, (vi) if the Lessee
has assumed the obligations of the Owner Trustee in respect of the Certificates
in accordance with Section 7.03 hereof and Section 8(r) of the Participation
Agreement, the amount payable as purchase price pursuant to Section 19(b) of the
Lease, (vii) Transaction Expenses or other amounts or expenses paid or payable
to, or for the benefit of, the Owner Participant pursuant to the Participation
Agreement, (viii) the respective rights of the Owner Trustee in its individual
capacity or the Owner Participant to the proceeds of the foregoing and (ix) any
right to demand, collect or otherwise receive and enforce the payment of any
amount described in clauses (i) through (viii) above.
"Federal Aviation Act" shall have the meaning specified therefor in
--------------------
the Lease.
"Federal Aviation Administration" and "FAA" shall have the meaning
------------------------------- ---
specified therefor in the Lease.
"Holder" means a person in whose name a Certificate is registered on
------
the Register including, so long as it holds any Certificate issued hereunder,
the respective Pass Through Trustee under each Pass Through Trust Agreement.
"Indenture Default" means any event which is, or after notice or
------------------
passage of time, or both, would be, an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified therefor in the
----------------
Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified therefor
---------------------------
in Article 8.
<PAGE>
11
"Indenture Trustee" means First Security Bank of Utah, National
-----------------
Association and each other Person which may from time to time be acting as
Indenture Trustee in accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, Appraiser or
-----------
other expert, means an engineer, Appraiser or other expert who (i) is in fact
independent, (ii) does not have any direct financial interest or any material
indirect financial interest in the Company or any Affiliate of the Company, and
(iii) is not connected with the Company or any Affiliate of the Company as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Investment Banker" shall mean an independent investment
-----------------------------
banking institution of national standing appointed by (i) the Company on behalf
of the Owner Trustee or (ii) in the case of a redemption or purchase of the
Certificates under Section 6.01(b) pursuant to Section 8.03(e)(ii), the Owner
Trustee; provided that, if the Indenture Trustee shall not have received written
--------
notice of such an appointment at least 10 days prior to the relevant Redemption
Date or if a Lease Event of Default shall have occurred and be continuing,
"Independent Investment Banker" shall mean such an institution appointed by
- ------------------------------
the Indenture Trustee.
"Installment Certificate" shall mean a Certificate substantially in
-----------------------
the form of Exhibit A-1, should any such Certificate be issued hereunder.
"Installment Payment Amount" means, with respect to each Installment
--------------------------
Certificate, the amount of the installment payment of principal due and payable
on each Installment Payment Date, which amount shall be equal to the product of
the original principal amount of such Certificate and the Installment Payment
Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an installment
------------------------
payment of principal is due and payable on any Installment Certificate, as set
forth in Exhibit B-1.
"Installment Payment Percentage" means, with respect to each
------------------------------
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-1;
provided that, after the occurrence of any partial redemption or redemptions
- --------
pursuant to clause (ii) of Section 6.01(a), the "Installment Payment Percentage"
------------------------------
for each Installment Payment Date subsequent to the applicable Redemption Date
shall be equal to the percentage obtained from the following calculation:
(p - n) x y
-----------
p x s
<PAGE>
12
where, for Installment Certificates maturing on the same Maturity Date:
p = the sum of the original principal amounts of all Installment
Certificates maturing on such Maturity Date as reflected on
Exhibit B hereto;
n = the sum of the principal amounts paid to all holders of
Installment Certificates maturing on such Maturity Date as a
result of all such partial redemptions (excluding any Installment
Payment Amounts paid on a Redemption Date as a result of any such
Redemption Date occurring on an Installment Payment Date) and all
payments of principal paid on Installment Payment Dates on or
prior to the applicable Redemption Date;
y = the Installment Payment Percentage set forth in such Exhibit B-1
applicable to the Installment Payment Date for which this
calculation is being performed; and
s = the sum of the Installment Payment Percentages for Installment
Payment Dates related to such Installment Certificates maturing
on such Maturity Date and subsequent to the applicable Redemption
Date.
"Interest Payment Date" means each October 19 and April 19, commencing
---------------------
on the Commencement Date.
"Lease" means the Lease Agreement (1995 777 B), dated as of May 1,
-----
1995, between the Owner Trustee, as lessor, and the Company, as lessee, as such
Lease Agreement may from time to time be further supplemented, amended or
modified in accordance with the terms thereof and this Agreement. The term
"Lease" shall also include each Lease Supplement entered into pursuant to the
-----
terms of the Lease.
"Lease Event of Default" shall have the meaning specified for the term
----------------------
"Event of Default" in the Lease.
"Lease Loss Payment Date" shall have the meaning specified for the
-----------------------
term "Loss Payment Date" in the Lease.
"Lease Supplement" shall have the meaning specified therefor in the
----------------
Lease.
"Lease Termination Date" shall have the meaning specified for the term
----------------------
"Termination Date" in the Lease.
<PAGE>
13
"Lessor Liens" shall have the meaning specified therefor in the Lease.
------------
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
----
exercise of rights, security interest or claim.
"Loan Certificate" shall have the meaning specified for the term
-----------------
"Certificate" hereunder.
"Maturity Date" means each of the dates specified in Exhibit B as a
-------------
maturity date of one or more of the Certificates.
"Officers' Certificate" means a certificate signed, in the case of the
---------------------
Company, by (i) the Chairman of the Board of Directors, the President, or any
Senior Vice President of the Company, signing alone, or (ii) any Vice President
signing together with the Secretary, any Assistant Secretary, the Treasurer or
any Assistant Treasurer of the Company or, in the case of the Owner Trustee, a
Responsible Officer of the Owner Trustee.
"Operative Documents" means this Agreement, the Participation
-------------------
Agreement, the Lease, the Tax Indemnity Agreement, the Consent and Agreement,
the Owner Trustee's Bill of Sale, the Owner Trustee's FAA Bill of Sale, the
Acceptance Certificate, the Purchase Agreement (to the extent assigned by the
Owner Trustee's Purchase Agreement), the Owner Trustee's Purchase Agreement, the
Certificates, the Trust Agreement and the Trust Supplement.
"Opinion of Counsel" means a written opinion of legal counsel, who in
------------------
the case of counsel for the Company may be (i) the senior attorney employed by
the Company, (ii) Vedder, Price, Kaufman & Kammholz or (iii) other counsel
designated by the Company and who shall be reasonably satisfactory to the
Indenture Trustee or, in the case of legal counsel for the Owner Trustee, may be
(x) Bingham, Dana & Gould or (y) other counsel designated by the Owner Trustee
and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Issue Price", when used with respect to a Certificate, shall
--------------------
be such Certificate's pro rata portion of the aggregate original issue price as
--- ----
determined on the basis of the data included in Exhibit B hereto.
"Outstanding", when used with respect to Certificates, means, as of
-----------
the date of determination, all Certificates theretofore executed and delivered
under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation pursuant to Section
2.07 or otherwise;
<PAGE>
14
(ii) Certificates for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Indenture Trustee
in trust for the Holders of such Certificates; provided that if such
--------
Certificates are to be redeemed, notice of such redemption has been duly
given pursuant to this Agreement or provision therefor satisfactory to the
Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, declaration, direction, notice, consent or
waiver, only Certificates which the Indenture Trustee knows to be so owned or so
pledged shall be disregarded. Certificates owned by the Company, or the Owner
Trustee or the Owner Participant, which have been pledged in good faith may be
regarded as Outstanding if the Company, or the Owner Trustee or the Owner
Participant, as the case may be, establishes to the satisfaction of the
Indenture Trustee the pledgee's right to act with respect to such Certificates
and that the pledgee is not the Company, or the Owner Trustee or the Owner
Participant or any Affiliate thereof.
"Owner Participant" shall be the party specified as the "Owner
-----------------
Participant" in the Participation Agreement, its successors and, to the extent
permitted by Article VIII of the Trust Agreement and Section 8(l) of the
Participation Agreement, its permitted successors and assigns.
"Owner Trustee" means State Street Bank and Trust Company, a
-------------
Massachusetts trust company, not in its individual capacity, but solely as
trustee under the Trust Agreement, and each other Person which may from time to
time be acting as Owner Trustee in accordance with the provisions of the
Operative Documents.
"Owner Trustee's Purchase Agreement" shall have the meaning specified
----------------------------------
therefor in the Lease.
"Participation Agreement" shall have the meaning specified therefor in
-----------------------
the Lease.
"Parts" shall have the meaning specified therefor in the Lease.
-----
<PAGE>
15
"Pass Through Certificates" means any of the Pass Through Certificates
-------------------------
issued pursuant to any of the Pass Through Trust Agreements.
"Pass Through Trust" means each pass through trust created pursuant to
------------------
the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means the Pass Through Trust Agreement
-----------------------------
dated as of February 1, 1992, as amended and restated as of May 1, 1995, between
the Company and the Pass Through Trustee as supplemented by each of the two Pass
Through Trust Supplements Nos. 1995- A1 and 1995-A2, each dated as of May __,
1995, as the same may from time to time be further amended, supplemented or
otherwise modified.
"Pass Through Trust Supplement" shall have the meaning specified for
-----------------------------
the term "Trust Supplement" in the Pass Through Trust Agreement.
"Pass Through Trustee" means First Security Bank of Utah, National
--------------------
Association in its capacity as trustee under each Pass Through Trust Agreement,
and such other Person that may from time to time be acting as successor trustee
under any such Pass Through Trust Agreement.
"Paying Agent" means any person acting as Paying Agent hereunder
------------
pursuant to Section 2.03.
"Permitted Investment" means each of (i) obligations of, or guaranteed
--------------------
by, the United States Government or agencies thereof, (ii) open market
commercial paper of any corporation incorporated under the laws of the United
States of America or any State thereof rated at least P-2 or its equivalent by
Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard &
Poor's Corporation, (iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any political subdivision
thereof having a combined capital and surplus in excess of $500,000,000 which
banks or their holding companies have a rating of A or its equivalent by Moody's
Investors Service or Standard & Poor's Corporation; provided, however, that the
-------- -------
aggregate amount at any one time so invested in certificates of deposit issued
by any one bank shall not exceed 5% of such bank's capital and surplus, (iv)
U.S. dollar denominated offshore certificates of deposit issued by, or offshore
time deposits with, any commercial bank described in clause (iii) or any
subsidiary thereof and (v) repurchase agreements with any financial institution
having combined capital and surplus of at least $500,000,000 with any of the
obligations described in clauses (i) through (iv) as collateral.
"Permitted Lien" shall have the meaning specified therefor in the
--------------
Lease.
<PAGE>
16
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pre-Commencement Date Period" means, with respect to any Certificate,
----------------------------
the period commencing on the date of the original issuance of such Certificate
and ending on and including the day immediately preceding the Commencement Date.
"Premium" or "premium" shall have the meaning specified in Section
------- -------
6.01(b) hereto.
"Premium Termination Date" means, with respect to a Certificate, the
------------------------
date set forth below opposite the Maturity Date of such Certificate:
<TABLE>
<CAPTION>
Premium
Certificates Maturity Date Termination Date
---------------- ------------- ----------------
<S> <C> <C>
Series 777 B-1
Certificate [_________] [_________]
Series 777 B-2
Certificate [_________] [_________]
</TABLE>
"Purchase Agreement" shall have the meaning specified therefor in the
------------------
Lease.
"Purchase Option Date" shall have the meaning specified therefor in
--------------------
the Lease.
"Record Date" for the interest or Installment Payment Amount payable
-----------
on any Certificate on any Interest Payment Date or Installment Payment Date
(other than the Maturity Date) for such Certificate, as the case may be, means
the calendar day (whether or not a Business Day) which is 15 calendar days prior
to the related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are to be
---------------
redeemed or purchased pursuant to Section 6.01 or Section 6.02, as the case may
be, as specified in the notice delivered pursuant to Section 6.03 hereof.
"Redemption Price" means the price at which the Certificates are to be
----------------
redeemed or purchased, determined as of the applicable Redemption Date, pursuant
to Section 6.01 or Section 6.02, as the case may be; provided, however, that in
-------- -------
the case of a Certificate which is issued at a discount which shall become due
and payable (upon redemption, acceleration or otherwise) and shall be paid or
shall be purchased during the Pre-Commencement Date Period, the Redemption Price
or purchase price therefor shall be the amount payable upon such Certificate
becoming due and payable and being paid during the Pre-Commencement Date Period
as specified therein.
<PAGE>
17
"Refinancing Date" shall mean the date designated by the Lessee as the
----------------
date for a refinancing of the Certificates in accordance with Section 17 of the
Participation Agreement.
"Register" shall have the meaning specified therefor in Section 2.03.
--------
"Registrar" means any person acting as Registrar hereunder pursuant to
---------
Section 2.03.
"Rent" shall have the meaning specified therefor in the Lease.
----
"Replacement Airframe" shall have the meaning specified therefor in
--------------------
the Lease.
"Replacement Engine" shall have the meaning specified therefor in the
------------------
Lease.
"Responsible Company Officer" means, with respect to the Company, its
---------------------------
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President, the Treasurer or any other management
employee (a) working under the direct supervision of such Chairman of the Board,
President, Senior Vice President, Chief Financial Officer, Vice President or
Treasurer and (b) whose responsibilities include the administration of the
transactions and agreements, including the Lease, contemplated by the
Participation Agreement.
"Responsible Officer", with respect to the Owner Trustee or the
-------------------
Indenture Trustee, shall mean any officer in its Corporate Trust Administration
Department or any officer of the Owner Trustee or the Indenture Trustee, as the
case may be, customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with a particular subject.
"SEC" means the Securities and Exchange Commission.
---
"Series 1995 777 B Certificate" means any Certificate issued by the
-----------------------------
Owner Trustee under this Agreement substantially in the form of Exhibit A-1 or
A-2, and any and all of the Series 1995 777 B Certificates issued in replacement
or exchange thereof in accordance with the provisions hereof.
"Special Purchase Option Date" shall have the meaning specified
----------------------------
therefor in the Lease.
"Stipulated Loss Value" shall have the meaning specified therefor in
---------------------
the Lease.
"Supplemental Rent" shall have the meaning specified therefor in the
-----------------
Lease.
<PAGE>
18
"Tax Indemnity Agreement" shall have the meaning specified therefor in
-----------------------
the Lease.
"Termination Value" shall have the meaning specified therefor in the
-----------------
Lease.
"Treasury Yield" means, with respect to each Certificate to be
--------------
redeemed or purchased, (x) in the case of a Certificate having a maturity less
than one year after the applicable redemption or purchase date, the average
yield to stated maturity on a government bond equivalent basis of the applicable
United States Treasury Bill due the week of the maturity of such Certificate or
(y) in the case of a Certificate having a maturity of one year or more after the
applicable redemption or purchase date, the average yield to stated maturity of
the most comparable United States Treasury Notes or Bonds as identified by an
independent investment banker, corresponding in maturity to the Remaining
Weighted Average Life (as defined below) of such Certificate (or, if there is no
maturity corresponding to such Remaining Weighted Average Life, an interpolation
of maturities by such independent investment banker), in each case under (x) and
(y) above determined by such independent investment banker based on the average
of the yields to stated maturity determined from the bid prices on the fourth
Business Day preceding the applicable redemption on purchase date. For purposes
hereof, "Remaining Weighted Average Life" means, for any Certificate, at the
redemption or purchase date of such Certificate, the number of years obtained by
dividing (a) the sum of the products obtained by multiplying (i) the amount of
each then remaining scheduled payment of principal, including the payment due on
the maturity date of such Certificate, by (ii) the number of years (calculated
to the nearest one-twelfth) which will elapse between the redemption or purchase
date and the regular distribution dates as of such scheduled payments of
principal; by (b) the then outstanding principal amount (including accretion of
discount) of such Certificate.
"Trust Agreement" shall have the meaning specified therefor in the
---------------
Lease.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trust Indenture and Mortgage" or "this Agreement" means this Trust
---------------------------- --------------
Indenture and Mortgage (1995 777 B), as the same may from time to time be
supplemented, amended or modified.
"Trust Indenture Estate" shall have the meaning specified for the term
----------------------
"Indenture Estate" hereunder.
"Trust Office" shall mean the principal corporate trust office of the
------------
Owner Trustee located at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust Department, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
<PAGE>
19
"Trust Supplement" means a supplement to the Trust Agreement and this
----------------
Agreement in the form of Exhibit C hereto.
"Trustee's Liens" shall have the meaning specified therefor in Section
---------------
9.10.
"United States" or "U.S." means the United States of America.
------------- ----
"U.S. Government Obligations" means securities that are direct
---------------------------
obligations of the United States or agencies or instrumentalities thereof for
the payment of which the full faith and credit of the United States are pledged
which are not callable or redeemable, and shall also include a depository
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt so long as such custodian is not authorized
to make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of the
U.S. Government Obligation evidenced by such depository receipt.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. The Certificates issued
-----------------------------
hereunder shall be designated as Series 1995 777 B Certificates. The
Installment Certificates and the Serial Certificates shall be substantially in
the form set forth in Exhibit A-1 or A-2, respectively. The Certificates
originally issued hereunder shall be dated the date of issuance thereof and
shall be issued in the maturities and principal amounts and at the Original
Issue Prices, shall provide for Commencement Date Cash Interest, if any, and
shall bear interest during and after the Pre-Commencement Date Period at the
rates per annum, in each case as specified in or determined pursuant to Exhibit
B. The principal of each Certificate, other than Installment Certificates,
shall be payable in full on the Maturity Date for such Certificate. The
principal of each Installment Certificate shall be payable in installments, on
each Installment Payment Date, in amounts equal to the Installment Payment
Amount for such Installment Payment Date. Each Certificate shall be issued to
the Pass Through Trustee under each of the Pass Through Trust Agreements, as set
forth in Exhibit B-2.
The Certificates shall be issued in registered form only. The
Certificates shall be issued in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that is
not an integral multiple of $1,000.
<PAGE>
20
The Certificates are not redeemable or subject to purchase prior to
maturity except as provided in this Agreement. Interest accrued on the
Certificates shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.02. Execution and Authentication. (a) Certificates shall
----------------------------
be executed on behalf of the Owner Trustee by the manual or facsimile signature
of its President, a senior vice president, a vice president, an assistant vice
president, its treasurer, its secretary, an assistant secretary or an assistant
treasurer.
(b) If any officer of the Owner Trustee executing the Certificates no
longer holds that office at the time the Certificate is executed on behalf of
the Owner Trustee, the Certificate shall be valid nevertheless.
(c) At any time and from time to time after the execution of the
Certificates, the Owner Trustee may deliver such Certificates to the Indenture
Trustee for authentication and, subject to the provisions of Section 2.10, the
Indenture Trustee shall authenticate the Certificates by manual signature upon
written orders of the Owner Trustee. Certificates shall be authenticated on
behalf of the Indenture Trustee by any authorized officer or signatory of the
Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for any purpose or
entitled to any security or benefit hereunder until executed on behalf of the
Owner Trustee by the manual or facsimile signature of an officer of the Owner
Trustee as provided in Section 2.02(a) and until authenticated on behalf of the
Indenture Trustee by the manual signature of an authorized officer or signatory
of the Indenture Trustee as provided in Section 2.02(c). Such signatures shall
be conclusive evidence that such Certificate has been duly executed,
authenticated and issued under this Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture Trustee
--------------------------
shall maintain an office or agency where the Certificates may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where (subject to Sections 2.04 and 2.08) the Certificates may be
presented for payment or for exchange (the "Paying Agent"). The Registrar shall
keep a register (the "Register") with respect to the Certificates and to their
transfer and exchange and the payments of Installment Payment Amounts thereon,
if any. The Indenture Trustee may appoint one or more co-registrars (the "Co-
Registrars") and one or more additional Paying Agents for the Certificates and
the Indenture Trustee may terminate the appointment of any Co-Registrar or
Paying Agent at any time upon written notice. The term "Registrar" includes any
Co-Registrar. The term "Paying Agent" includes any additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and Paying
Agent.
<PAGE>
21
Section 2.04. Transfer and Exchange. At the option of the Holder
---------------------
thereof, Certificates may be exchanged for an equal aggregate principal amount
of other Certificates of the same maturity and type and of any authorized
denominations or transferred upon surrender of the Certificates to be exchanged
or transferred at the principal corporate trust office of the Indenture Trustee,
or at any office or agency maintained for such purpose pursuant to Section 2.03.
Whenever any Certificates are so surrendered for exchange, the Owner Trustee
shall execute, and the Indenture Trustee shall authenticate and deliver, the
replacement Certificates, dated the same date as the Certificate or Certificates
being replaced which the Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or exchange
of Certificates shall be the valid obligations of the Owner Trustee, evidencing
the same obligations, and entitled to the same security and benefits under this
Agreement, as the Certificates surrendered upon such registration of transfer or
exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Certificates, but the Registrar may, as a condition to
any transfer or exchange hereunder, require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates.
The Registrar shall not be required to register the transfer of or to
exchange any Certificate called for redemption or purchase pursuant to such
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (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, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semi-annually on or before each
Interest Payment Date, and 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.
(b) Ownership of the Certificates shall be proved by the Register kept
by the Registrar. Prior to due presentment for registration of transfer of any
Certificate, the
<PAGE>
22
Owner Trustee, the Owner Participant, the Company, the Indenture Trustee, the
Paying Agent and the Registrar may deem and treat the Person in whose name any
Certificate is registered as the absolute owner of such Certificate for the
purpose of receiving payment of principal (including, subject to the provisions
herein regarding the applicable Record Dates, Installment Payment Amounts) of,
premium, if any, and interest on such Certificate and for all other purposes
whatsoever, whether or not such Certificate is overdue, and none of the Owner
Trustee, the Indenture Trustee, the Paying Agent or the Registrar shall be
affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
any Certificate shall become mutilated, destroyed, lost or stolen, the Owner
Trustee shall, upon the written request of the Holder of such Certificate, issue
and execute, and the Indenture Trustee shall authenticate and deliver, in
replacement thereof, as applicable, a new Certificate of the same type and
having the same maturity, payable to the same Holder in the same principal
amount and dated the same date as the Certificate so mutilated, destroyed, lost
or stolen. If the Certificate being replaced has become mutilated, such
Certificate shall be surrendered to the Indenture Trustee. If the Certificate
being replaced has been destroyed, lost or stolen, the Holder of such
Certificate shall furnish to the Owner Trustee and the Indenture Trustee such
security or indemnity as may be required by it to save the Owner Trustee and the
Indenture Trustee harmless and evidence satisfactory to the Owner Trustee and
the Indenture Trustee of the destruction, loss or theft of such Certificate and
of the ownership thereof.
Section 2.07. Cancellation. The Registrar and any Paying Agent shall
------------
forward to the Indenture Trustee all Certificates surrendered to them for
replacement, redemption, registration of transfer, exchange or payment. The
Indenture Trustee shall cancel all Certificates surrendered for replacement,
redemption, registration of transfer, exchange, payment or cancellation and
shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal and
------------------------------------------------
Interest. (a) The Indenture Trustee will arrange directly with any Paying Agent
- --------
for the payment, or the Indenture Trustee will make payment, all pursuant to
Section 2.09, of the principal of, premium, if any, and interest on the
Certificates at the principal corporate trust office of the Indenture Trustee or
at any office or agency maintained for such purpose to Section 2.03 hereof. All
payments in respect of the Certificates shall be made in such coin or currency
of the United States as at the time of payment in legal tender for payment of
public and private debts. Payments (other than on the Maturity Date therefor or
on the Redemption Date in respect of the redemption in whole thereof) on
Certificates shall be made to the Holder thereof at the close of business on the
relevant Record Date; provided, however, that the Paying Agent will, at the
-------- -------
request of the Indenture Trustee and may, at its option, pay such interest,
premium or principal by check mailed to such Holder's address as it appears on
the Register. Principal of Certificates and premium, if any, with respect
thereto, shall (except as
<PAGE>
23
provided pursuant to the immediately preceding sentence) be payable only against
presentation and surrender thereof at the principal corporate trust office of
the Indenture Trustee or at the office of the Paying Agent maintained for such
purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right with
respect to, the Indenture Estate when and if the principal amount of, premium,
if any, and interest on all Certificates held by such Holder and all other sums
payable to such Holder hereunder, under such Certificates and under the
Participation Agreement shall have been paid in full.
(b) Any Installment Payment Amount payable on an Installment Payment
Date (other than the Maturity Date with respect to a Certificate) or any
interest payable on an Interest Payment Date on any Certificate which is not
punctually paid on such Installment Payment Date or such Interest Payment Date,
as the case may be (herein called, respectively, a "Defaulted Installment" and
"Defaulted Interest"), shall forthwith cease to be payable to the Holder on the
relevant Record Date by virtue of his having been such Holder; and such
Defaulted Installment or Defaulted Interest may be paid by the Indenture
Trustee, at its election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make payment of any Defaulted
Installment or Defaulted Interest, as the case may be, to the person in
whose name any Certificate is registered at the close of business on a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be fixed in the
following manner. The Indenture Trustee shall notify the Paying Agent in
writing of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date of
the proposed payment, and at the same time the Indenture Trustee shall make
arrangements to set aside an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Installment or Defaulted
Interest, as the case may be, prior to the date of the proposed payment, to
be held in trust for the benefit of the Persons entitled to such Defaulted
Installment or Defaulted Interest, as the case may be, as this clause
provides and shall fix a special record date for the payment of such
Defaulted Installment or Defaulted Interest, as the case may be, which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and shall
cause notice of the proposed payment of such Defaulted Installment or
Defaulted Interest, as the case may be, and the special record date therefor
to be mailed, first class postage prepaid, to each Holder at its address as
it appears in the Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Installment
or Defaulted Interest, as the case may be, and the special record date
therefor having been mailed, as aforesaid, such Defaulted Installment or
Defaulted
<PAGE>
24
Interest, as the case may be, shall be paid to the Persons in whose names
the applicable Certificates are registered on such special record date and
shall no longer be payable pursuant to the following clause (2).
(2) The Indenture Trustee may make, or cause to be made, payment of
any Defaulted Installment or Defaulted Interest, as the case may be, in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which Certificates may be listed, and upon such notice as may be
required by such exchange, if such payment shall be deemed practicable by
the Indenture Trustee.
(c) The Indenture Trustee shall require each Paying Agent to agree in
writing that such Paying Agent will hold in trust, for the benefit of the
Holders of the Certificates and the Indenture Trustee, all money held by the
Paying Agent for the payment of the principal of, premium, if any, or interest
and shall give to such Indenture Trustee notice of any default in the making of
any such payment upon the Certificates. The Indenture Trustee at any time may
require a Paying Agent to repay to the Indenture Trustee all money held by it.
Upon so doing the Paying Agent shall have no further liability for the money so
paid.
Section 2.09. Payment from Indenture Estate Only; Non-Recourse
------------------------------------------------
Obligations. All amounts payable by the Indenture Trustee and the Owner Trustee
- -----------
under the Certificates and this Agreement shall be made only from the income and
proceeds of the Indenture Estate. Each Holder of a Certificate, by its
acceptance of such Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate for the payment of such amounts, to
the extent available for distribution to it as herein provided, and (b) none of
the Owner Trustee, the Owner Participant or the Indenture Trustee is or shall be
personally liable to the Holder of any Certificate for any amount payable under
such Certificate or this Agreement or, except as expressly provided in this
Agreement in the case of the Owner Trustee and the Indenture Trustee, for any
liability thereunder.
State Street Bank and Trust Company is entering into this Agreement
solely as Owner Trustee under the Trust Agreement and not in its individual
capacity, and in no case whatsoever shall State Street Bank and Trust Company
(or any entity acting as successor trustee under the Trust Agreement) be
personally liable for, or for any loss in respect of, any statements,
representations, warranties, agreements or obligations hereunder or thereunder;
provided that State Street Bank and Trust Company shall be liable hereunder in
- --------
its individual capacity, (i) for the performance of its agreements in its
individual capacity under Section 8 of the Participation Agreement, (ii) for its
own willful misconduct or gross negligence and (iii) for the failure to use
ordinary care in the disbursement of funds. If a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement and the
Participation Agreement, such successor Owner Trustee shall, without any further
act, succeed to all of the rights, duties, immunities and obligations hereunder,
and its predecessor
<PAGE>
25
Owner Trustee and State Street Bank and Trust Company shall be released from all
further duties and obligations hereunder, without prejudice to any claims
against State Street Bank and Trust Company or such predecessor Owner Trustee
for any default by State Street Bank and Trust Company or such predecessor Owner
Trustee, respectively, in the performance of its obligations hereunder prior to
such appointment.
Section 2.10. Execution, Delivery and Dating of Certificates upon
---------------------------------------------------
Original Issuance. The Owner Trustee shall issue and execute, and the Indenture
- -----------------
Trustee shall authenticate and deliver, the Certificates for original issuance
upon payment to the Indenture Trustee of an amount equal to its Original Issue
Price. Each Certificate shall (except for those issued pursuant to Section 2.04
or Section 2.06) be dated the date of its issuance.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption or Purchase of
--------------------------------------------
Certificates. Except as otherwise provided in Section 3.05, in the event the
- ------------
Certificates are redeemed or purchased in accordance with the provisions of
Section 6.01 or 6.02, the Indenture Trustee will apply on the Redemption Date
any amounts then held by it in the Indenture Estate and received by it from or
on behalf of the Company or the Owner Trustee in the following order of
priority:
first, so much thereof as was received by the Indenture Trustee with
-----
respect to the amounts due to it pursuant to Section 9.06 shall be applied
to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay an
------
amount equal to the Redemption Price on the Outstanding Certificates
pursuant to Section 6.01 or 6.02, as the case may be, on the Redemption Date
shall be applied to the redemption or purchase of the Certificates on the
Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall be
-----
distributed to the Owner Trustee to be held or distributed to the Owner
Participant in accordance with the terms of the Trust Agreement.
Section 3.03. Application of Rent When No Indenture Event of Default
------------------------------------------------------
Is Continuing. Except as otherwise provided in Section 3.02, 3.04, 3.05 or
- -------------
3.06, each amount
<PAGE>
26
of Excess Amount or Rent received by the Indenture Trustee from the Owner
Trustee or the Company, together with any amount received by the Indenture
Trustee pursuant to Section 8.03(e) shall be distributed by the Indenture
Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required to pay in
-----
full the interest, principal of, premium (to the extent received by the
Indenture Trustee from the Company as Supplemental Rent), if any, then due
on, all Outstanding Certificates shall be distributed to the Persons
entitled thereto; and in case such payments or amounts shall be insufficient
to pay in full the whole amount so due and unpaid, then to the payment of
such interest, principal and premium, if any, without any preference or
priority of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal and premium, if any, at the date fixed
by the Indenture Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
------
required to pay any amount due the Indenture Trustee pursuant to Section
9.06 shall be applied to pay the Indenture Trustee such amounts; and
third, the balance, if any, of such aggregate amount remaining
-----
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement.
Section 3.04. Application of Certain Payments in Case of Requisition
------------------------------------------------------
or Event of Loss. Except as otherwise provided in Section 3.05, any amounts
- ----------------
received directly or otherwise pursuant to the Lease from any governmental
authority or other party pursuant to Section 10 of the Lease with respect to the
Airframe or the Airframe and the Engines or engines then installed on the
Airframe as the result of an Event of Loss, to the extent that such amounts are
not at the time required to be paid to the Company pursuant to said Section 10,
and any amounts of insurance proceeds for damage to the Indenture Estate
received directly or otherwise pursuant to the Lease from any insurer pursuant
to Section 11 of the Lease with respect thereto as the result of an Event of
Loss, to the extent such amounts are not at the time required to be paid to the
Company pursuant to said Section 11, shall, except as otherwise provided in the
next sentence, be applied by the Indenture Trustee on behalf of the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the Lease
and the remainder, if any, shall, except as provided in the next sentence, be
distributed to the Owner Trustee to be held or distributed in accordance with
the terms of the Lease. Any portion of any such amount referred to in the
preceding sentence which is not required to be so paid to the Company pursuant
to the Lease, solely because a Lease Event of Default shall have occurred and be
continuing, shall be held by the Indenture Trustee on behalf of the Owner
Trustee as security for the obligations of the Company under the Lease and at
<PAGE>
27
such time as there shall not be continuing any Lease Event of Default or such
earlier time as shall be provided for in the Lease, such portion shall be paid
to the Owner Trustee to be held or distributed in accordance with the terms of
the Lease, unless the Indenture Trustee (as assignee from the Owner Trustee of
the Lease) shall have theretofore declared the Lease to be in default pursuant
to Section 15 thereof, in which event such portion shall be distributed
forthwith upon such declaration in accordance with the provisions of Section
3.05 hereof.
Section 3.05. Payments During Continuance of Indenture Event of
-------------------------------------------------
Default. All payments (except Excluded Payments) received and amounts held or
- -------
realized by the Indenture Trustee after an Indenture Event of Default shall have
occurred and be continuing (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as all
payments or amounts then held or thereafter received by the Indenture Trustee as
part of the Indenture Estate while such Indenture Event of Default shall be
continuing, shall be 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 the Indenture Trustee all amounts then due it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much of such payments or amounts remaining as shall be
------
required to pay the expenses incurred (including unbilled expenses in
respect of property delivered or contracted for or services rendered or
contracted for if the amount of such expenses is liquidated) in using,
operating, storing, leasing, controlling or managing the Indenture Estate,
and of all maintenance, insurance, repairs, replacements, alterations,
additions and improvements of and to the Indenture Estate and to make all
payments which the Indenture Trustee may be required or may elect to make,
if any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the Lease,
the Company), all in accordance with Section 8.03(c), shall be applied for
such purposes;
third, so much of such payments or amounts remaining as shall be
-----
required to pay the principal of, premium, if any, to the extent payable by
the Owner Trustee pursuant to Section 6.0l(b)(ii) or to the extent received
by the Indenture Trustee from the Company as Supplemental Rent, and accrued
interest, on all Certificates Outstanding, whether by declaration of
acceleration pursuant to Section 8.02 or otherwise, shall be applied to the
payment of such interest, principal and premium, if any, and in case such
payments or amounts shall be insufficient to pay in full the whole amount so
due and unpaid, then to the payment of such interest principal and premium,
if any, without any preference or priority of one Certificate over another,
<PAGE>
28
ratably according to the aggregate amount so due for interest, principal and
premium, if any, at the date fixed by the Indenture Trustee for the
distribution of such payments or amounts; and
fourth, the balance, if any, of such payments or amounts remaining
------
thereafter shall be held by the Indenture Trustee as collateral security for
the obligations secured hereby until such time as no Indenture Event of
Default shall be continuing hereunder or the Certificates have been
accelerated and all amounts due thereon have been paid, at which time such
payments or amounts shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement; provided that at such time as one or more
--------
Lease Events of Default shall have occurred and any such Lease Event of
Default shall have continued for a period of 180 days during which time the
Certificates could, but shall not, have been accelerated pursuant to Section
8.02, such amounts shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement so long as no Indenture Event of Default
exists other than by virtue of such Lease Event of Default.
Section 3.06. Payments for Which Application Is Provided in Other
---------------------------------------------------
Documents. Except as otherwise provided in this Agreement, any payment received
- ---------
by the Indenture Trustee for which provision as to the application thereof is
made in the Lease or any other Operative Document shall be distributed to the
Person for whose benefit such payments were made. The Indenture Trustee shall
be obligated to distribute any Excluded Payments received by the Indenture
Trustee promptly upon receipt thereof by the Indenture Trustee to the Person
entitled thereto.
Section 3.07. Payments for Which No Application Is Otherwise
----------------------------------------------
Provided. Except as otherwise provided in Section 3.05:
- --------
(a) any payment received by the Indenture Trustee for which no
provision as to the application thereof is made elsewhere in this Agreement,
and
(b) any payment received and amounts realized by the Indenture Trustee
with respect to the Aircraft to the extent received or realized at any time
after the conditions set forth in Article 10 for the satisfaction and
discharge of this Agreement or for the defeasance of the Certificates shall
have been satisfied, as well as any other amounts remaining as part of the
Indenture Estate after such satisfaction shall be distributed by the
Indenture Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required to pay
-----
the Indenture Trustee all amounts then due it pursuant to Section 9.06 shall
be applied to pay the Indenture Trustee such amounts; and
<PAGE>
29
second, the balance if any, of such aggregate amount remaining
------
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Trust Agreement.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner Trustee
------------------------------
hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually pay the principal of,
premium, if any, and interest on and other amounts due under the
Certificates, provided it or the Indenture Trustee has funds in the Trust
Estate for this purpose;
(ii) the Owner Trustee will, in its individual capacity, not directly
or indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it in its individual capacity with respect to any of the
properties or assets of the Indenture Estate;
(iii) in the event an officer in the Corporate Trust Department of the
Owner Trustee shall have Actual Knowledge of an Indenture Event of Default
or Indenture Default or an Event of Loss, the Owner Trustee will give prompt
written notice of such Indenture Event of Default or Indenture Default or
Event of Loss to the Indenture Trustee, the Owner Participant and the
Company;
(iv) except as contemplated by the Operative Documents, the Owner
Trustee will not contract for, create, incur, assume or permit to exist 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 be
or become contingently liable, directly or indirectly, in connection with
the Debt of any other Person; and
(v) the Owner Trustee will not enter into any business or other
activity other than owning the Aircraft, the leasing thereof to the Company
and the carrying out of the transactions contemplated hereby and by the
Participation Agreement, the Trust Agreement and the other Operative
Documents.
<PAGE>
30
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of Property
-------------------------------------------------
Included in the Indenture Estate During Continuation of Lease. So long as the
- -------------------------------------------------------------
Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and modifications
-----
in and additions to the Aircraft shall, to the extent required or specified
by the Lease, become subject to the lien of this Agreement and be leased to
the Company under the Lease; provided that, to the extent permitted by and
--------
as provided in the Lease, the Company shall have the right, at any time and
from time to time, without any release from or consent by the Owner Trustee
or the Indenture Trustee, to remove, replace and pool Parts and to make
alterations, improvements and modifications in, and additions to, the
Aircraft. The Indenture Trustee agrees that, to the extent permitted by and
as provided in the Lease, title to any such Part shall vest in the Company.
The Indenture Trustee shall from time to time execute an appropriate written
instrument or instruments to confirm the release of the security interest of
the Indenture Trustee in any Part as provided in this Section 5.01, in each
case upon receipt by the Indenture Trustee of a Company Request stating that
said action was duly taken by the Company in conformity with this Section
5.01 and that the execution of such written instrument or instruments is
appropriate to evidence such release of a security interest under this
Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss Occurring to
---------------------------------------------------------------
Airframe or Engines or upon Voluntary Termination of Lease with Respect to
--------------------------------------------------------------------------
Engines. Upon (i) the occurrence of an Event of Loss occurring to the
-------
Airframe or an Engine, or (ii) a voluntary termination of the Lease with
respect to an Engine, the Company, in accordance with the Lease, may, in the
case of an Event of Loss which has occurred to the Airframe, or shall,
except as provided in Section 10(b) of the Lease, in the case of an Event of
Loss which has occurred to or termination of the Lease with respect to an
Engine, substitute an airframe or engine, as the case may be, in which case,
upon satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of its
right, interest and lien in and to the Airframe or such Engine in accordance
with the provisions of the following two sentences. The Indenture Trustee
shall execute and deliver to the Owner Trustee an instrument releasing its
lien in and to the Airframe or such Engine and shall execute for recording
in public offices, at the expense of the Owner Trustee (if requested by the
Owner Trustee) or the Company (if requested by the Company), such
instruments in writing as the Owner Trustee or the Company shall reasonably
<PAGE>
31
request and as shall be reasonably acceptable to the Indenture Trustee in
order to make clear upon public records that such lien has been released
under the laws of the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and all
rights existing or that may be acquired to any penalties, forfeit or damages
from or against the Indenture Trustee for failure to execute and deliver any
document in connection with the release of a lien or to file any certificate in
compliance with any law or statute requiring the filing of the same in
connection with the release of a lien, except for failure by the Indenture
Trustee to execute and deliver any document or to file any certificate as may be
specifically requested in writing by the Owner Trustee or the Company.
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain Events. (a)
----------------------------------------------
(i) If there shall be an Event of Loss to the Aircraft and the Aircraft is not
replaced pursuant to Section 10(a)(ii) of the Lease, each Outstanding
Certificate shall be redeemed in whole at a Redemption Price equal to 100% of
the outstanding principal amount of such Certificate plus accrued and unpaid
interest thereon to but excluding the applicable Redemption Date.
(ii) If there shall be an Event of Loss to any Engine under
circumstances in which there has not occurred an Event of Loss with respect to
the Airframe and, as a result of such an Event of Loss, Lessor elects to receive
payment for such Engine from Lessee pursuant to Section 10(b) of the Lease and
Lessee shall not have elected to replace such Engine notwithstanding such
election by Lessor, a portion of the principal of each Outstanding Certificate
equal to the product obtained by multiplying the unpaid principal amount of such
Certificate on the Redemption Date applicable to such partial redemption
(assuming, only for the purposes of this calculation, that, if such Redemption
Date is coincident with a Maturity Date or an Installment Payment Date, the
scheduled principal payment due on such Redemption Date is paid prior to the
time the Redemption Price is calculated pursuant to this Section 6.0l(a)(ii) and
applied to principal in accordance with Section 3.03 hereof) by
_________________. The Redemption Price for each such Certificate shall be the
sum of such portion of principal being redeemed plus the amount of interest
accrued and unpaid to such Redemption Date on the principal amount of such
Certificate to be redeemed on such Redemption Date (assuming, only for the
purposes of this calculation, that, if, such Redemption Date is coincident with
an Interest Payment Date, the interest due on such Interest Payment Date is paid
prior to the time such Redemption Price is calculated pursuant to this Section
6.0l(a)(ii) and applied to interest in accordance with Section 3.03 hereof);
provided that each Certificate shall receive, as to the principal thereof,
- --------
<PAGE>
32
the same portion of such Redemption Price as the principal value of such
Certificate at such Redemption Date represents of the total principal value of
all Certificates Outstanding at such Redemption Date. Upon the occurrence of
any partial redemption or redemptions pursuant to the preceding sentence the
principal amount of each Outstanding Certificate shall be adjusted to take
account of any such partial redemption or redemptions, and the Installment
Payment Percentages applicable to any Installment Certificates issued hereunder
shall be adjusted as provided for in the definition thereof. The Redemption Date
for Certificates to be redeemed pursuant to this Section 6.01(a) shall be the
Lease Loss Payment Date.
(b) If (i) the Lease shall be terminated by the Company at its option
pursuant to Section 9(b) of the Lease or upon the purchase of the Aircraft by
the Company at its option on a Special Purchase Option Date or the EBO Date
pursuant to Section 19(b) of the Lease (unless the Company shall have elected to
assume the rights and obligations of the Owner Trustee hereunder to the extent
and as provided for in Section 8(r) of the Participation Agreement) or (ii) the
Owner Trustee or the Owner Participant shall have given notice of redemption or
purchase to the Indenture Trustee pursuant to Section 8.03(e)(ii) at any time
after one or more Lease Events of Default shall have occurred and be continuing
for a period of 180 days or more but less than one year (or a period of less
than 180 days if any such Lease Event of Default shall be a Lease Event of
Default under Section 14(a) of the Lease) and the Certificates shall not have
been accelerated, each Outstanding Certificate shall be redeemed or purchased in
whole on the Redemption Date and at the Redemption Price determined below.
Prior to the Premium Termination Date applicable to such Certificate, the
Redemption Price applicable to a redemption or purchase pursuant to this Section
6.01(b) shall be equal to an amount which an Independent Investment Banker (or,
in the case of the deposit of estimated premium pursuant to Section 8.03(e)(ii),
the Owner Trustee) determines to be equal to the greater of (x) the unpaid
principal amount of such Certificate as at such Redemption Date together
(assuming, only for the purposes of this calculation, that, if such Redemption
Date is coincident with an Interest Payment Date, the interest due on such
Interest Payment Date is paid prior to the time such Redemption Price is
calculated pursuant to this Section 6.01(b) and applied to interest in
accordance with Section 3.03 hereof) with an amount equal to the interest
accrued thereon from the immediately preceding Interest Payment Date to such
Redemption Date and (y) the present value (computed in accordance with generally
accepted financial practices on a semiannual basis at a discount rate equal to
the Treasury Yield applicable to such Certificate as of such Redemption Date) as
at such Redemption Date of (A) the regularly scheduled future payments of
interest on such Certificate as required by the terms thereof and of this
Agreement and (B) the regularly scheduled future payments of principal payable
on such Certificate (the excess, if any, of the amount referred to in clause (y)
of this sentence over the amount referred to in clause (x) constituting a
"premium" or a "Premium"), plus, in either case, interest on the principal of
such Certificate accrued as at the immediately preceding Interest Payment Date
and unpaid as of such Redemption Date. On or after the Premium Termination Date
applicable to such Certificate, the Redemption Price applicable to a redemption
or purchase pursuant to this
<PAGE>
33
Section 6.01(b) shall equal the unpaid principal amount of such Certificate as
at such Redemption Date together with an amount equal to the interest accrued
thereon from the immediately preceding Interest Payment Date to such Redemption
Date plus interest on the principal of such Certificate accrued as at the
immediately preceding Interest Payment Date and unpaid as of such Redemption
Date and, in the case of either of the two immediately preceding sentences (but
without duplication), if such Redemption Date is coincident with an Interest
Payment Date, the regularly scheduled interest payment due on such Interest
Payment Date. The Redemption Date for Certificates to be redeemed or purchased
(x) pursuant to clause (i) of this Section 6.01(b) shall be (A) in the case of a
termination of the Lease pursuant to Section 9(b) thereof, the third Business
Day following the Lease Termination Date, if any, or, in the case of purchase of
the Aircraft by the Company pursuant to Section 19(b) of the Lease, the
applicable Special Purchase Option Date or EBO Date and (y) pursuant to clause
(ii) of this Section 6.01(b), shall be the same date as if the redemption had
occurred pursuant to Section 6.02. If the Owner Trustee elects to purchase the
Certificates under Section 8.03(e)(ii), nothing herein, including use of the
terms "Redemption Date" and "Redemption Price" shall be deemed to result in a
redemption of the Certificates.
(c) Certificates may be redeemed if the Company shall have requested
the Owner Trustee and the Owner Participant to effect a redemption thereof
pursuant to Section 17 of the Participation Agreement as part of a refunding or
refinancing, and if all the conditions to such refunding or refinancing set
forth in such Section 17 of the Participation Agreement shall have been
satisfied. In such event, each Outstanding Certificate may be so redeemed at a
Redemption Price determined in accordance with the procedures described above in
Section 6.01(b); provided, however, that the applicable Redemption Date for
-------- -------
Certificates to be redeemed pursuant to this Section 6.01(c) shall be the
applicable Refinancing Date under Section 17 of the Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates upon Certain
---------------------------------------------------
Indenture Events of Default. If the Owner Trustee or the Owner Participant
- ---------------------------
shall have given notice of redemption or purchase to the Indenture Trustee
pursuant to Section 8.03(e)(ii) at any time after the Certificates shall have
been accelerated pursuant to Section 8.02 or after one or more Lease Events of
Default shall have occurred and be continuing for a period of one year or more
(or a period of 180 days or more if any such Lease Event of Default shall be a
Lease Event of Default under Section 14(a) of the Lease) and the Certificates
shall not have been accelerated, each Outstanding Certificate shall be redeemed
or purchased in whole at a Redemption Price equal to 100% of its principal
amount plus accrued and unpaid interest thereon to but excluding the applicable
Redemption Date as determined below. The Redemption Date for Certificates to be
redeemed or purchased pursuant to this Section 6.02 shall be the date specified
in the notice given by the Owner Trustee to the Indenture Trustee pursuant to
Section 8.03(e)(ii). If the Owner Trustee elects to purchase the Certificates
<PAGE>
34
under Section 8.03(e)(ii), nothing herein, including use of the terms
"Redemption Date" and "Redemption Price" shall be deemed to result in a
redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. Notice of redemption
-------------------------------
or purchase shall be given by first-class mail, postage prepaid, mailed not less
than 25 nor more than 60 days prior to the Redemption Date, to each Holder of
Certificates to be redeemed or purchased, at such Holder's address appearing in
the Register; provided that, in the case of a redemption pursuant to Section
--------
6.01(b)(1) related to Lessee's exercise of its option pursuant to Section 9(b)
of the Lease, such notice shall be revocable and shall be deemed revoked in the
event the Lease does not in fact terminate on the related Lease Termination
Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption Price,
(3) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Certificate, and that interest on Certificates
shall cease to accrue on and after such Redemption Date, and
(4) the place or places where such Certificates are to be surrendered
for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
Section 6.04. Deposit of Redemption Price. On or before the
---------------------------
Redemption Date, the Owner Trustee (or any person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 noon in immediately available
funds the Redemption Price of the Certificates to be redeemed or purchased on
the Redemption Date.
Section 6.05. Certificates Payable on Redemption Date. Notice of
---------------------------------------
redemption or purchase having been given as aforesaid (and not deemed revoked as
contemplated in the proviso to Section 6.03), the Certificates shall, on the
applicable Redemption Date, become due and payable at the principal corporate
trust office of the Indenture Trustee or at any office or agency maintained for
such purposes pursuant to Section 2.03, and from and after such Redemption Date
(unless there shall be a default in the payment of the Redemption Price) any
Certificates then Outstanding shall cease to bear interest. Upon surrender of
any
<PAGE>
35
such Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price.
If any Certificate called for redemption or purchase shall not be so
paid upon surrender thereof for redemption or purchase, the principal amount
thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments Held by
----------------------------------------------------
the Indenture Trustee. Any money held by the Indenture Trustee or any Paying
- ---------------------
Agent in trust for any payment of the principal of, premium, if any, or interest
on any Certificate, including without limitation any money deposited pursuant to
Article 10 and remaining unclaimed for two years and eleven months after the due
date for such payment, shall be paid to the Owner Trustee; and the Holders of
any Outstanding Certificates shall thereafter, as unsecured general creditors,
look only to the Company on behalf of the Owner Trustee for payment thereof, and
all liability of the Indenture Trustee or any such Paying Agent with respect to
such trust money shall thereupon cease; provided that the Indenture Trustee or
--------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be mailed to each such Holder notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of mailing, any unclaimed balance of such
money then remaining will be repaid to the Owner Trustee as provided herein.
Section 7.02. Change in Registration. The Indenture Trustee shall,
----------------------
upon the request of the Company, consent to the deregistration of the Aircraft
under the laws of the jurisdiction in which it is at the time registered and the
registration of the Aircraft under the laws of another jurisdiction (herein
called a "change in registration") provided that the following conditions are
met:
(a) such change in registration complies with the provisions of the
Participatioin Agreement or the Lease;
(b) no Lease Event of Default and no event which, with lapse of time
or notice, or both, would become a Lease Event of Default shall have
occurred and be continuing at the date of such request or at the effective
date of the change in registration, provided that it shall not be necessary
to comply with this condition (b) if the change in registration results in
the registration of the Aircraft under the laws of
<PAGE>
36
the United States or if the Indenture Trustee in its discretion believes the
change in registration would be advantageous to the Holders; and
(c) the Indenture Trustee shall have received an opinion of counsel
reasonably satisfactory to the Indenture Trustee to the effect that:
(i) after giving effect to the change in registration, the Lien on
the Aircraft and the other property included in the Indenture Estate
shall continue as a fully perfected lien and that all filing,
recording or other action necessary to perfect and protect the lien of
this Indenture has been accomplished (or if such opinion cannot be
given at the time by which the Indenture Trustee has been requested to
consent to a change in registration, (x) the opinion shall detail what
filing, recording or other action is necessary and (y) the Indenture
Trustee shall have received a certificate from the Company that all
possible preparations to accomplish such filing, recording and other
action shall have been done, and such filing, recording and other
action shall be accomplished and a supplemental opinion to that effect
shall be delivered to the Indenture Trustee on or prior to the
effective date of the change in registration); and
(ii) the terms of the Lease and this Agreement (including the
governing law clauses) being legal, valid and binding and enforceable
in such jurisdiction, 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 and except as limited by applicable laws which may affect
the remedies provided in the Lease and this Agreement, respectively,
which laws, however, do not in the opinion of such counsel make the
remedies provided in the Lease and this Agreement, respectively,
inadequate for the practical realization of the rights and benefits
provided thereby.
The Indenture Trustee shall execute such documents as the Company or the Owner
Trustee shall reasonably request in order to satisfy the above conditions and
upon satisfaction of such conditions to effect the change in registration.
Section 7.03. Assumption of Obligations of Owner Trustee by the
-------------------------------------------------
Company. In the event that the Company shall have elected to assume all of the
- -------
rights and obligations of the Owner Trustee under this Agreement in respect of
the Certificates in connection with the purchase by the Company of the Aircraft
pursuant to Section 8(r) of the Participation Agreement and, if on or prior to
the Purchase Option Date:
(a) the Company shall have delivered to the Indenture Trustee a
certificate, dated the Purchase Option Date, of a Responsible Company
Officer stating that the
<PAGE>
37
Company has paid to the Owner Trustee all amounts required to be paid to the
Owner Trustee pursuant to Section 19(b) of the Lease in connection with such
purchase and assumption;
(b) no event which constitutes or, with the lapse of time or notice,
or both, would become, an Event of Default under this Agreement after giving
effect to the indenture supplement referred to below shall have occurred and
be continuing immediately subsequent to such purchase or assumption and the
Indenture Trustee shall have received a certificate, dated the Purchase
Option Date, of a Responsible Company Officer to such effect;
(c) the Indenture Trustee shall have received, on or prior to the
Purchase Option Date, evidence of all filings, recordings and other action
referred to in the Opinion or Opinions of Counsel referred to below;
(d) the Indenture Trustee shall have received an Opinion or opinions
of Counsel for the Company, dated the Purchase Option Date, which without
unusual qualification shall be to the effect that, after giving effect to
the indenture supplement referred to below:
(i) this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company 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, and except as limited by applicable laws
which may affect the remedies provided for in this Agreement, which
laws, however, do not in the opinion of such counsel make the remedies
provided for in this Agreement inadequate for the practical
realization of the rights and benefits provided for in this Agreement;
(ii) the Aircraft is duly registered in compliance with applicable
law;
(iii) the Lien on the Aircraft constitutes a fully perfected Lien
and all filing, recording or other action (specifying the same)
necessary to perfect and protect the Lien of this Agreement has been
accomplished;
(iv) the Indenture Trustee would be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to the Aircraft;
provided that such opinion may contain qualifications of the tenor
--------
contained in the opinion of special counsel for the Company delivered
pursuant to Section 4(a)(xi)(b) of the Participation Agreement on the
Delivery Date; and
<PAGE>
38
(v) no Holder will be required to recognize gain or loss for tax
purposes in connection with such assumption; and
(e) an indenture supplement reasonably satisfactory to the Indenture
Trustee, dated the Purchase Option Date, shall have been executed by the
Indenture Trustee and any other parties necessary thereto and shall have
been delivered to the Indenture Trustee;
then, automatically and without the requirement of further action by any Person,
effective as of the Purchase Option Date, the Owner Trustee shall be released
from all of its obligations under the Agreement in respect of the Certificates
or otherwise (other than any obligations or liabilities of the Owner Trustee in
its individual capacity incurred on or prior to the Purchase Option Date or
arising out of or based upon events occurring on or prior to the Purchase Option
Date, which obligations and liabilities shall remain the sole responsibility of
the Owner Trustee).
If, concurrent with an assumption pursuant to this Section 7.03, the
Aircraft is being reregistered the Company must comply with the provisions of
Section 7.02 hereof.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following events
---------------------------
shall constitute "Indenture Events of Default" under this Agreement (whether any
such event 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) and each such Indenture Event of Default shall be deemed to
exist so long as, but only so long as, it shall not be remedied:
(a) any amount of interest upon any Certificate or of principal of any
Certificate or of premium, if any, in respect of any Certificate shall not
be paid when due and payable (whether upon redemption or purchase, final
maturity, acceleration or otherwise) and such default in payment shall
continue for more than 10 days after such amount shall have become due and
payable; or
(b) any failure by the Owner Trustee, in its individual capacity or as
Owner Trustee, as the case may be, to observe or perform in any material
respect any covenant or obligation required pursuant to Article 4 or clauses
1-5 under the Habendum Clause hereof or Section 8(b), 8(c), 8(g), 8(n) or 10
of the Participation Agreement or the failure by the Owner Participant to
observe or perform in any
<PAGE>
39
material respect any covenant or obligation of it required pursuant to
Section 8(b), 8(g) or 10 of the Participation Agreement, or, to the extent
that the interest of the Indenture Trustee or any Holder of an Outstanding
Certificate is adversely affected by such failure, in Section 4.01(a) of the
Trust Agreement or the termination or revocation by the Owner Participant of
the trust created by the Trust Agreement without the Indenture Trustee's
prior written consent if, but only if, such failure or termination or
revocation is not remedied within a period of 30 days after there has been
given to the Owner Trustee and the Owner Participant by registered or
certified mail, a written notice specifying such failure and requiring it to
be remedied and stating that such notice is a "Notice of Default" hereunder,
by the Indenture Trustee or by the Holders of at least 25% in principal
amount of Outstanding Certificates; provided that no Indenture Event of
--------
Default shall arise under this Section 8.01(b) solely as a result of a
failure by the Owner Participant or the Owner Trustee to observe or perform
any covenant contained in Section 8(g) of the Participation Agreement if all
action necessary to discharge all Lessor Liens referred to in such Section
shall have been taken and the Indenture Trustee and the Indenture Estate
shall have been compensated for all claims, losses and expenses arising from
the failure of the Owner Trustee or the Owner Participant, as the case may
be, to observe and perform any such covenant; or
(c) any failure by the Owner Trustee, in its individual capacity or as
Owner Trustee, to observe or perform any other covenant or obligation of the
Owner Trustee contained in this Agreement or in the Participation Agreement
or any failure by the Owner Participant to observe or perform any other
covenant or obligation of the Owner Participant contained in the
Participation Agreement which failure, in any case and either individually
or together with other then existing failures, shall have a material adverse
effect on the rights and interests of the Holders and is not remedied within
a period of 30 days after there has been given to the Owner Trustee and the
Owner Participant by registered or certified mail, a written notice
specifying such failure and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder, by the Indenture Trustee or
by the Holders of at least 25% in principal amount of Outstanding
Certificates; provided, however, that, if the Owner Trustee, in its
-------- -------
individual capacity or as Owner Trustee, or the Owner Participant shall have
undertaken to cure any such failure and, notwithstanding the reasonable
diligence of any of them in attempting to cure such failure, such failure is
not cured within said 30 day period but is curable with future due
diligence, there shall exist no Indenture Event of Default as a consequence
of such failure so long as the Owner Trustee in its individual capacity or
as Owner Trustee or the Owner Participant is proceeding with due diligence
to cure such failure, there exists no adverse effect on the Lien of this
Agreement and such failure is in fact cured within a further period of 30
days; or
<PAGE>
40
(d) any material representation or warranty made by the Owner Trustee,
in its individual capacity or as Owner Trustee, or by the Owner Participant
under the Participation Agreement, or by the Owner Trustee hereunder, or by
the Owner Trustee, in its individual capacity or as Owner Trustee, or by the
Owner Participant in any document or certificate furnished to the Indenture
Trustee in connection herewith or therewith or pursuant hereto or hereto,
shall prove at any time to have been incorrect in any material respect as of
the date made and such incorrectness shall remain material at the date of
the notice referred to below and such incorrectness shall continue
unremedied for a period of 30 days after there has been given to the Owner
Trustee and the Owner Participant by registered or certified mail, a written
notice specifying such incorrectness and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder, by the
Indenture Trustee or by the Holders of at least 25% in principal amount of
Outstanding Certificates; or
(e) there shall be a Lease Event of Default other than any such Lease
Event of Default arising by reason of nonpayment of any Excluded Payments
when due; provided that any Lease Event of Default shall be deemed to exist
--------
and continue so long as, but only so long as, it shall not be remedied; or
(f) either the Indenture Estate or the Owner Trustee with respect
thereto (and not in its individual capacity) or the Owner Participant, as
the case may be, shall (i) file, or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of itself or any substantial part of its property; provided that an
-------- ----
event referred to in this Section 8.01(f) with respect to the Owner
Participant shall not constitute an Indenture Event of Default if (A) an
order, judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and non-
appealable or has not been stayed pending any appeal, or (B) an opinion of
counsel satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust Estate
created by the Trust Agreement (except for the Owner Participant's
beneficial interest in such Trust Estate) and no right, title or interest
under the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to the
bankruptcy, insolvency or liquidation of the Owner Participant referred to
in this Section 8.01(f); or
(g) a court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by the Indenture Estate or the
Owner Trustee with respect thereto (and not in its individual capacity) or
the Owner Participant, as
<PAGE>
41
the case may be, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of
its property, or constituting an order for relief or approving a petition
for relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Indenture Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant, as the case may be, and any
such order or petition is not dismissed or stayed within 90 days after the
earlier of the entering of any such order or the approval of any such
petition; provided that an event referred to in this Section 8.01(g) with
--------
respect to the Owner Participant shall not constitute an Indenture Event of
Default if (A) an order, judgment or decree shall be entered in a proceeding
by a court or a trustee, custodian, receiver or liquidator which is either
final and non-appealable or has not been stayed pending an appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be provided
by Owner Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner Participant's
beneficial interest in such Trust Estate) and no right, title or interest
under the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant referred to
in this Section 8.01(g).
Section 8.02. Acceleration; Rescission and Annulment. If an
--------------------------------------
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee, the Owner Trustee and the Owner
Participant, may declare the principal of all the Certificates to be due and
payable. Upon such declaration, the principal of all Certificates together with
accrued interest thereon from the date in respect of which interest was last
paid hereunder to the date payment of such principal has been made or duly
provided for, shall be immediately due and payable. At any time after such
declaration and prior to the sale or disposition of the Indenture Estate, the
Holders of a majority in aggregate principal amount of all of the Outstanding
Certificates, by notice to the Indenture Trustee, the Company, the Owner Trustee
and the Owner Participant, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal on any
Certificates which have become due otherwise than by such declaration and any
interest thereon and interest due or past due, if any, and all sums due and
payable to the Indenture Trustee have been deposited with the Indenture Trustee,
(ii) the rescission would not conflict with any judgment or decree and (iii) all
existing Indenture Defaults and Indenture Events of Default under this Agreement
have been cured or waived except nonpayment of principal of, or interest on, the
Certificates that has become due solely because of such acceleration.
<PAGE>
42
Section 8.03. Other Remedies Available to Indenture Trustee. (a)
---------------------------------------------
After an Indenture Event of Default shall have occurred and so long as such
Indenture Event of Default shall be continuing, then and in every such case the
Indenture Trustee, as trustee of an express trust and as assignee hereunder of
the Lease or as holder of a security interest in the Aircraft or Engines or
otherwise, may, and when required pursuant to the provisions of Article 9 shall,
exercise, subject to Sections 8.03(b), 8.03(e), 8.03(f) and 8.03(h), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8, may
recover judgment in its own name as Indenture Trustee against the Indenture
Estate and may take possession of all or any part of the Indenture Estate and
may exclude the Owner Trustee and the Owner Participant and all persons claiming
under any of them wholly or partly therefrom.
(b) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, subject to Sections
8.03(e), 8.03(f) and 8.03(h), the Indenture Trustee may, if at the time such
action may be lawful and always subject to compliance with any mandatory legal
requirements, either with or without taking possession, and either before or
after taking possession and without instituting any legal proceedings
whatsoever, and having first given notice of such sale by registered mail to the
Owner Trustee, the Owner Participant and the Company once at least 30 days prior
to the date of such sale, and any other notice which may be required by law,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public auction to the highest bidder, in one lot as an entirety or
in separate lots, and either for cash or on credit and on such terms as the
Indenture Trustee may determine, and at any place (whether or not it be the
location of the Indenture Estate or any part thereof) and time designated in the
notice above referred to; provided, however, that, notwithstanding any provision
-------- -------
herein to the contrary, the Indenture Trustee may not provide the notice
provided for above of its intention to sell any of the Indenture Estate,
exercise remedies under the Lease or exercise other remedies against the
Indenture Estate seeking to deprive the Owner Trustee or the Owner Participant
of its rights therein unless a declaration of acceleration has been made
pursuant to Section 8.02 or the Certificates have otherwise theretofore become
due and payable through redemption or otherwise. Any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
notice, and the Indenture Trustee and the Holder or Holders of any Certificates,
or any interest therein, may bid and become the purchaser at any such sale. No
such sale may be consummated if the Owner Trustee shall, prior to the
consummation thereof, have given notice pursuant to and made the deposit
required by Section 8.03(e)(ii). The Indenture Trustee may exercise such right
without possession or production of the Certificates or proof of ownership
thereof, and as representative of the Holders may exercise such right without
notice to the Holders or including the Holders as parties to any suit or
proceeding relating to foreclosure of any property in the Indenture Estate. The
Owner Trustee hereby irrevocably constitutes the Indenture Trustee the true and
lawful attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee
or otherwise)
<PAGE>
43
for the purpose of effectuating any sale, assignment, transfer or delivery for
enforcement of the lien created under this Agreement, whether pursuant to
foreclosure or power of sale or otherwise, to execute and deliver all such bills
of sale, assignments and other instruments as the Indenture Trustee may consider
necessary or appropriate, with full power of substitution, the Owner Trustee
hereby ratifying and confirming all that such attorney or any substitute shall
lawfully do by virtue hereof. 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.
(c) Subject to Sections 8.03(e) and 8.03(f), if an Indenture Event of
Default has occurred and is continuing, the Owner Trustee shall, at the request
of the Indenture Trustee, promptly execute and deliver to the Indenture Trustee
such instruments of title or other documents as the Indenture Trustee may 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. If the Owner Trustee shall for any
reason fail to execute and deliver such instruments and documents after such
request by the Indenture Trustee, the Indenture Trustee shall be entitled, in a
proceeding to which the Owner Trustee will be a necessary party, to a judgment
for specific performance of the covenants contained in the foregoing sentence,
conferring upon the Indenture Trustee the right to immediate possession and
requiring the Owner Trustee to execute and deliver such instruments and
documents to the Indenture Trustee. The Indenture Trustee shall also be
entitled to pursue all or any part of the Indenture Estate wherever it may be
found and may enter any of the premises of the Owner Trustee or any other Person
wherever the Indenture Estate may be or be supposed to be and search for the
Indenture Estate and take possession of any item of the Indenture Estate
pursuant to this Section 8.03(c). The Indenture Trustee may, from time to time,
at the expense of the Indenture Estate, make all such expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Indenture Estate, as it may deem proper. In each
such case, the Indenture Trustee shall have the right to use, operate, store,
lease, control or manage the Indenture Estate, and to exercise all rights and
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control or
management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, pursuant to this Section 8.03(c).
The Indenture Trustee may, from time to time, at the expense of the Indenture
Estate, make all such expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the Indenture
Estate, as it may deem proper. In each such case, the Indenture Trustee shall
have the right to use, operate, store, lease, control or manage the Indenture
Estate, and to exercise all rights and
<PAGE>
44
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control or
management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, revenues and other income of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Agreement to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. In accordance with the terms of this Section 8.03(c), such
tolls, rents (including Rent), issues, profits, products, revenues and other
income shall be applied to pay the expenses of using, operating, storing,
leasing, controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect to
make, if any, for taxes, assessments, insurance or other proper charges upon the
Indenture Estate or any part thereof (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, to the extent permitted by the Lease, the
Company), and all other payments which the Indenture Trustee may be required or
authorized to make under any provision of this Agreement, including this Section
8.03(c), as well as just and reasonable compensation for the services of the
Indenture Trustee, and of all persons properly engaged and employed by the
Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and the
Indenture Trustee shall have obtained possession of or title to the Aircraft,
the Indenture Trustee shall not be obligated to use or operate the Aircraft or
cause the Aircraft to be used or operated directly or indirectly by itself or
through agents or other representatives or to lease, license or otherwise permit
or provide for the use or operation of the Aircraft by any other Person unless
(i) the Indenture Trustee shall have been able to obtain insurance in kinds, at
rates and in amounts satisfactory to it in its discretion to protect the
Indenture Estate and the Indenture Trustee, as trustee and individually, against
any and all liability for loss or damage to the Aircraft and for public
liability and property damage resulting from use or operation of the Aircraft
and (ii) funds are available in the Indenture Estate to pay for all such
insurance or, in lieu of such insurance, the Indenture Trustee is furnished with
indemnification from the Holders or any other Person upon terms and in amounts
satisfactory to the Indenture Trustee in its discretion to protect the Indenture
Estate and the Indenture Trustee, as trustee and individually, against any and
all such liabilities.
(d) Subject to Sections 8.03(b), 8.03(e) and 8.03(f), the Indenture
Trustee may proceed to protect and enforce this Agreement and the Certificates
by suit or suits or proceedings in equity, at law or in bankruptcy, and whether
for the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted; or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Indenture Estate or any
part thereof, or for the recovery of judgment for the indebtedness
<PAGE>
45
secured by the Lien created under this Agreement or for the enforcement of any
other proper, legal or equitable remedy available under applicable law.
(e) (i) If the Company shall fail to make any payment of Basic Rent
under the Lease when the same shall become due, and if such failure of the
Company to make such payment of Basic Rent shall not constitute the fourth
consecutive such failure or the seventh or subsequent cumulative such failure,
then as long as no Indenture Event of Default (other than arising from a Lease
Event of Default not involving any failure to make any payments to which the
Indenture Trustee or any Holder is entitled hereunder when due) shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the day which is
the later of (x) the 11th day subsequent to notice of such failure by the
Indenture Trustee to the Owner Trustee or the Owner Participant and (y) the
sixth day subsequent to the expiration of the grace period provided for in
Section 14(a) of the Lease with respect to the payment of Basic Rent (and the
Indenture Trustee shall not (without the prior written consent of the Owner
Trustee) declare the Lease in default pursuant to Section 15 thereof or exercise
any of the rights, powers or remedies pursuant to such Section 15 or this
Section 8 prior to the occurrence of such later date), an amount equal to the
full amount of such payment of Basic Rent, together with any interest due
thereon on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure as of the date of such payment any Indenture Event of Default which
arose from such failure of the Company (including any Lease Event of Default
arising from the Lessee's failure to pay interest in respect of such overdue
Basic Rent for the period commencing on the date of such payment), but such cure
shall not relieve the Company of any of its obligations. If the Company shall
fail to perform or observe any covenant, condition or agreement to be performed
or observed by it under the Lease, and if (but only if) the performance or
observance thereof can be effected by the payment of money alone (it being
understood that actions such as the obtaining of insurance and the procurement
of maintenance services can be so effected), then as long as no other Indenture
Event of Default (other than those arising from a Lease Event of Default) shall
have occurred and be continuing, the Owner Participant or the Owner Trustee may
(but need not) pay to the Indenture Trustee (or to such other person as may be
entitled to receive the same), at any time prior to the day which is the later
of (x) the 11th day subsequent to notice of such failure by the Indenture
Trustee to the Owner Trustee or the Owner Participant and (y) the sixth day
subsequent to the expiration of the grace period, if any, provided with respect
to such failure on the part of the Company in Section 14 of the Lease (and the
Indenture Trustee shall not (without the prior written consent of the Owner
Trustee) declare the Lease in default pursuant to Section 15 thereof or exercise
any of the rights, powers or remedies pursuant to such Section 15 or this
Section 8 prior to the occurrence of such later date), all sums necessary to
effect the performance or observance of such covenant or agreement of the
Company, together with any interest due thereon on account of the delayed
payment thereof to the date of such payments and such payment by the Owner
Participant or the Owner Trustee shall be deemed to cure as of the
<PAGE>
46
date of such payment any Indenture Event of Default which arose from such
failure of the Company (including any Lease Event of Default arising from the
Lessee's failure to pay interest in respect of such overdue payment for the
period commencing on the date of such payment), but such cure shall not relieve
the Company of any of its obligations. Upon any payment of Basic Rent by the
Owner Participant or the Owner Trustee in accordance with the first sentence of
this Section 8.03(e)(i), or upon any payment of any other sums by the Owner
Participant or the Owner Trustee in accordance with the second sentence of this
Section 8.03(e)(i), the Owner Participant or the Owner Trustee shall, to the
extent of their respective payments, be subrogated, in the case of any such
payment in accordance with such first sentence, to the rights of the Indenture
Trustee, as assignee hereunder of the Owner Trustee, or, in the case of any such
payment in accordance with such second sentence, to the rights of the Indenture
Trustee or such other person as the case may be, which actually received such
payment, to receive such payment of Basic Rent or such other payment, as the
case may be (and any interest due thereon on account of the delayed payment
thereof), and shall be entitled to receive such payment upon its receipt by the
Indenture Trustee or such other person, as aforesaid (but in each case only if
all amounts of principal of, and interest at the time due and payable on, the
Certificates together with interest due thereon on account of the delayed
payment thereof shall have been paid in full); provided that neither the Owner
--------
Participant nor the Owner Trustee shall attempt to recover any such amount paid
by it on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of the Company payment of such amount or by proceeding by appropriate
court action against the Company to enforce the payment of such amount pursuant
to Section 15(f), but only said Section 15(f), of the Lease.
(ii) In the event that (A) at any time one or more Lease Events of
Default shall have occurred and be continuing for a period of 180 days or more
but less than one year (or a period of less than 180 days if any such Lease
Event of Default shall be a Lease Event of Default under Section 14(a) of the
Lease) and the Certificates shall not have been accelerated or (B) the
Certificates shall have been accelerated pursuant to Section 8.02 or after one
or more Lease Events of Default shall have occurred and be continuing for a
period of one year or more (or a period of 180 days or more, if such Lease Event
of Default shall be a Lease Event of Default under Section 14(a) of the Lease),
the Owner Trustee or the Owner Participant may, at its option, give at least 30
days' prior irrevocable notice to the Indenture Trustee that the Owner Trustee
or the Owner Participant will redeem or purchase all Certificates then
outstanding on the Business Day specified in such notice and, concurrently with
such notice, the Owner Trustee or the Owner Participant will deposit with the
Indenture Trustee an amount sufficient to redeem or purchase at the applicable
Redemption Price determined consistently with the applicable provisions of
Article 6 all Certificates then outstanding (including, if Section 6.01(b) is
applicable, an estimate of the premium to be paid on the Redemption Date
computed using the Treasury Yield determined as if the Redemption Date were the
date of such notice) and to pay the Indenture Trustee all amounts then due it
hereunder, which funds shall be held by the Indenture Trustee as
<PAGE>
47
provided in Section 9.04. Upon the giving of such notice and the receipt by the
Indenture Trustee of such deposit, the Indenture Trustee shall deem all
instructions received from the Owner Trustee as having been given by the Holders
of 100% of the outstanding principal amount of Certificates for all purposes of
this Indenture. If such notice is given, the Owner Trustee further agrees that
it will deposit or cause to be deposited with the Indenture Trustee, on or prior
to the Business Day preceding the applicable Redemption Date, whether or not an
Indenture Event of Default is then continuing, funds sufficient, when added to
the funds already held by the Indenture Trustee for such purpose, to redeem or
purchase at the applicable Redemption Price (including the premium actually
payable in respect thereof) on such Redemption Date all Certificates then
outstanding and to pay the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement 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 Lease Event of Default unless
the Indenture Trustee as security assignee of the Owner Trustee shall have
exercised or concurrently be exercising one or more of the remedies provided for
in Section 15(a)-(f) 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 60 days or such other period as
may be specified in section 1110(a)(l)(A) of the Bankruptcy Code (such 60-day or
other 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 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)(1)(A) of
the Bankruptcy Code and continues to perform as required by Section
1110(a)(1)(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) results from the Company's assumption
during the Section 1110 period with the approval of the relevant court of the
Lease pursuant to Section 365 of the Bankruptcy Code or (D) is the consequence
of the Indenture Trustee's own failure to give any requisite notice to any
person or (E) is pursuant to a judicial stay pending the resolution of
litigation with respect to the applicability of Section 1110 of the Bankruptcy
Code and there is either no Lease Event of Default other than one arising solely
from the Company's bankruptcy or any such other Lease Event of Default has been
cured; provided, further, however, that the requirement to exercise one or more
-------- ------- --------
of such remedies under the Lease during a Continuous Stay Period subsequent to
the expiration of the Section 1110 period
<PAGE>
48
based upon a judicial stay as provided for in this clause (E) shall in any event
cease to be applicable subsequent to the 120th day of such Continuous Stay
Period. If the limitation upon cures of the Lessee's failure to pay Basic Rent
as provided in Section 8.03(e)(i) would otherwise prohibit the Owner Participant
or the Owner Trustee from making a payment to cure a Lease Event of Default for
purposes of clause (E) above, the Owner Participant or the Owner Trustee shall
nonetheless be entitled to make such payment. If the Indenture Trustee shall
acquire title to the Aircraft through foreclosure during a Continuous Stay
period without having exercised one or more of such remedies under the Lease by
virtue of the Continuous Stay Period having continued beyond its 120th day as
provided above in clause (E) and the Indenture Trustee shall have received prior
to the 183rd day subsequent to its acquisition of title to the Aircraft, the
proceeds from its sale of the Aircraft, the Indenture Trustee shall,
notwithstanding any other provision of this Indenture, distribute to the Owner
Trustee the amount, if any, by which such proceeds (net of the Indenture
Trustee's costs and expenses (including the fees and expenses of counsel and
other experts and agents retained by it), commissions and other costs and
expenses with respect to such foreclosure, the maintenance and preservation of
the Aircraft and such sale (including amounts in respect of any thereof paid by
others to whom the Indenture Trustee has a reimbursement obligation) and any
other amounts to which the Indenture Trustee is entitled pursuant to Section
9.06 or otherwise) exceed an amount equal to the aggregate of the principal
amount of the Certificates outstanding on the date of such foreclosure, together
with interest accrued thereon to such foreclosure date and an amount equal to
the amount of interest that would have accrued (at the rate per annum applicable
under the Certificates) on such principal amount from the date of such
foreclosure to the date of the distribution by the Indenture Trustee of such
proceeds for the benefit of the Holders if such principal amount had remained
outstanding. References in this subsection (iii) to particular sections of the
Bankruptcy Code as in effect on the date of the amendment and restatement of
this Indenture shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to the contrary,
including, without limitation, Sections 8.03(b), 8.03(c) and 8.03(d), as long as
no Lease Event of Default shall have occurred and be continuing, neither the
Indenture Trustee nor the Owner Trustee shall take any action in violation of
the Company's rights under the Lease, including, without limitation, (x) the
right to receive all monies due and payable to it in accordance with the
provisions of the Lease and (y) the Company's rights to possession and use of,
and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given to the
Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the exercise
<PAGE>
49
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 thereafter any other
right, power or remedy. No delay or omission by the Indenture Trustee in the
exercise of any right, remedy or power or in pursuing 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 Company or to be an acquiescence therein.
(h) Notwithstanding anything contained herein to the contrary, so long
as the Pass Through Trustee is a Holder, the Indenture Trustee is not authorized
or empowered to acquire title to the Indenture Estate, or to take any action
with respect to any of the Indenture Estate so acquired by it, if such
acquisition or action would cause any Pass Through Trust to fail to qualify as a
"grantor trust" for federal income tax purposes.
Section 8.04. Waiver of Owner Trustee. To the extent now or at any
-----------------------
time hereafter enforceable under applicable law, the Owner Trustee covenants
that it will not at any time insist upon or plead, or in any manner whatsoever
claim or take any benefit or advantage of or from any law now or hereafter in
force providing for the valuation or appraisal of the Indenture Estate or any
part thereof, prior to any sale or sales thereof to be made pursuant to any
provision herein contained, or prior to any applicable decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and
hereby expressly waives for itself and on behalf of each and every Person,
except decree or judgment creditors of the Owner Trustee acquiring any interest
in or title to the Indenture Estate or any part thereof subsequent to the date
of this Agreement, all benefit and advantage of any such law or laws, and
covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or, in any manner
whatsoever, claim or take any benefit or advantage of or from any law now or
hereafter in force even if it does not possess any of the Certificates or does
not produce any of them in the proceeding. A delay or omission by the Indenture
Trustee or any Holder in exercising any right or remedy accruing upon an
Indenture Event of Default under this Agreement shall not impair the right or
remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of a majority
---------------------------
in the aggregate principal amount of the Outstanding Certificates by notice to
the Indenture Trustee may waive on behalf of the Holders an existing Indenture
Default or Indenture Event of Default and its consequences except (i) an
Indenture Default or Indenture Event of Default in
<PAGE>
50
the payment of the principal of or interest on any Certificate or (ii) in
respect of a covenant or provision hereof which pursuant to Section 11.02 cannot
be amended or modified without the consent of the Holder affected.
Section 8.06. Control by Majority. (a) The Holders of a majority in
-------------------
aggregate principal amount of the Outstanding Certificates may direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee or exercising any trust or power conferred on it by this
Agreement. However, the Indenture Trustee may refuse to follow any direction
that conflicts with law or this Agreement, that is unduly prejudicial to the
rights of the Holders so affected, or that would subject the Indenture Trustee
to personal liability.
(b) The Owner Trustee may pursuant to the direction and instruction of
the Owner Participant by delivery of written notice to the Indenture Trustee set
a record date to determine the Holders entitled to give any consent, request,
demand, authorization, direction, notice, waiver or other act. Such record date
shall be the record date specified in such Officers' Certificate which shall be
a date not more than 30 days prior to the first solicitation of Holders in
connection therewith. If such a record date is fixed, such consent, request,
demand, authorization, direction, notice, waiver or other act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders holding the requisite proportion of certificates
have authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other act, and for that purpose the
Outstanding Certificates shall be computed as of such record date; provided that
no such consent, request, demand, authorization, direction, notice, waiver or
other act by the Holders on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Agreement not later
than one year after the record date.
Section 8.07. Limitation on Suits by Holders. A Holder may pursue a
------------------------------
remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written notice of a
continuing Indenture Event of Default under this Agreement;
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Certificates make a written request to the Indenture Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee indemnity
satisfactory to the Indenture Trustee against any loss, liability or expense
to be, or which may be, incurred by the Indenture Trustee in pursuing the
remedy;
<PAGE>
51
(4) the Indenture Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the Outstanding Certificates do not give the Indenture
Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Agreement the right of any Holder to receive payment
of principal of, premium, if any, and interest on such Certificate on or after
the respective due dates expressed in such Certificate, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim. The
------------------------------------------
Indenture Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture
Trustee and of the Holders allowed in any judicial proceedings relating to any
obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee. (a) The Indenture
---------------------------
Trustee may refuse to perform any duty or exercise any right or power unless it
receives indemnity satisfactory to it against any loss, liability or expense.
(b) Subject to the provisions of Section 9.04, the Indenture Trustee
shall not be liable for interest on any money received except as otherwise
provided in any other Operative Document. Money held in trust by the Indenture
Trustee need not be segregated from other funds except to the extent required by
law.
Section 9.02. Rights of Indenture Trustee. (a) The Indenture
---------------------------
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
<PAGE>
52
(b) Before the Indenture Trustee acts or refrains from acting, it may
consult with counsel or require an Officer's Certificate or an Opinion of
Counsel from the Company or the Owner Trustee after which it will take such
action or refrain from acting as it deems appropriate. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith and
in accordance herewith in reliance on a resolution of the Board of Directors of
the Company, the written advice of counsel acceptable to the Owner Trustee, the
Company and the Indenture Trustee, officer's certificates or opinions of counsel
provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any such agent appointed with
due care; provided that, so long as no Lease Event of Default shall have
--------
occurred and be continuing no such agents shall be appointed by the Indenture
Trustee without the consent of the Company and the Owner Trustee, which consent
shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers.
(e) If an Indenture Event of Default under this Agreement has occurred
and is continuing, the Indenture Trustee shall exercise its rights and powers
under this Agreement, and shall 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.
Section 9.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates and may otherwise deal with the Owner Trustee, the Company or an
Affiliate of the Owner Trustee or the Company or a subsidiary of the Owner
Trustee or the Company with the same rights it would have if it were not the
Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
-------------------------------------------------------
Investments. Any monies (including without limitation for purpose of this
- -----------
Section 9.04 Permitted Investments constituting the proceeds of the maturity,
sale or other disposition of any Permitted Investment) held by the Indenture
Trustee or the Paying Agent hereunder as part of the Indenture Estate, until
paid out by the Indenture Trustee or the Paying Agent as herein provided, (i)
subject to clause (ii) below, may be carried by the Indenture Trustee or the
Paying Agent on deposit with itself or on deposit to its 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 combined capital and surplus and retained earnings of at least
$100,000,000, and neither the Indenture Trustee nor the Paying Agent shall have
any liability for interest upon any such monies except as otherwise agreed in
writing or (ii) at any time and from time to time, so long as no Lease Event of
<PAGE>
53
Default shall have occurred and be continuing, at the request (given directly by
the Company to the Indenture Trustee) of the Company acting as the Agent of the
Owner Trustee, shall be invested and reinvested in Permitted Investments as
specified in such request (if such investments are reasonably available for
purchase) and sold, in any case at such prices, including accrued interest or
its equivalent, as are set forth in such request, and such Permitted Investments
shall be held by the Indenture Trustee in trust as part of the Indenture Estate
until so sold; provided that the Company pursuant to Section 22 of the Lease, on
--------
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity, sale
or other disposition of any such Permitted Investment and, so long as no Lease
Event of Default shall have occurred and be continuing, be entitled to receive
from the Indenture Trustee, and the Indenture Trustee shall promptly pay to the
Company, on behalf of the Owner Trustee, any profit, income, interest, dividend
or gain realized upon maturity, sale or other disposition of any Permitted
Investment. If any Lease Event of Default shall have occurred and be
continuing, any net income, profit, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment shall be held as
part of the Indenture Estate and shall be applied by the Indenture Trustee at
the same time, on the same conditions and in the same manner as the amounts in
respect of which such income, profit, interest, dividend or gain was realized
are required to be distributed in accordance with the provisions hereof or of
the Lease pursuant to which such amounts were required to be held. The
Indenture Trustee shall not be responsible for any losses on any investments or
sales of Permitted Investments made pursuant to the procedure specified in this
Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of Default
------------------
under this Agreement occurs and is continuing and the Indenture Trustee has
Actual Knowledge of same, the Indenture Trustee shall (i) promptly send written
notice thereof by telecopier to the Company, the Owner Trustee and the Owner
Participant and (ii) within 90 days after it occurs, mail to each Holder notice
of all uncured Indenture Events of Default under this Agreement. Except in the
case of a default in the payment of the principal of, premium, if any, or
interest on any Certificate, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has Actual Knowledge of same, the Indenture Trustee shall promptly send
written notice thereof by telecopier to the Company, the Owner Trustee and the
Owner Participant.
Section 9.06. Compensation and Indemnity. (a) The Owner Trustee
--------------------------
shall pay to the Indenture Trustee from time to time (i) reasonable compensation
for its services, which compensation shall not be limited by any law on
compensation of a trustee of an express trust, (ii) reimbursement for all
reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the
<PAGE>
54
reasonable compensation and expenses of the Indenture Trustee's counsel and any
agent appointed in accordance with Section 9.02(c)), and (iii) indemnification
against any loss or liability incurred by it arising out of or in connection
with its acceptance or administration of the trust or trusts hereunder except
(A) as such expenses or loss or liability might result from the negligence or
willful misconduct of the Indenture Trustee or the inaccuracy of any
representation or warranty of the Indenture Trustee in its individual capacity
in Section 8 of the Participation Agreement, (B) as otherwise provided in
Section 9.10 hereof and (C) as otherwise excluded by the terms of Sections 7(b)
and 7(c) of the Participation Agreement from the Company's indemnities under
said Sections; provided that the Indenture Trustee shall not make any claim
--------
under this Section 9.06(a) for any claim or expense indemnified against by the
Company under the Participation Agreement without first making demand on the
Company for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Company promptly of any claim for which it is
entitled to be indemnified hereunder. Subject to the conditions and procedures
equivalent to those set forth in Sections 7(b) and 7(c) of the Participation
Agreement, the Owner Trustee shall defend the claim and the Indenture Trustee
shall cooperate in the defense. The Indenture Trustee may have separate counsel
and the Owner Trustee shall pay the reasonable fees and expenses of such
counsel. The Owner Trustee need not pay for any settlement made without its and
the Company's consent.
(b) To secure the payment obligations of the Owner Trustee pursuant to
this Section 9.06, the Indenture Trustee shall have a lien prior to that of the
Holders of the Certificates on all money or property held or collected by the
Indenture Trustee, except that held in trust to pay the principal of and
interest and premium, if any, on the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The resignation
--------------------------------
or removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee shall become effective only upon the successor Indenture Trustee's
acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least 30 days' prior
written notice to the Company and the Owner Trustee. The Holders of a majority
in aggregate principal amount of the Outstanding Certificates may remove the
Indenture Trustee by giving at least 30 days' prior written notice to the
Indenture Trustee, the Owner Trustee and the Company and may appoint a successor
Indenture Trustee for such Certificates with the Owner Trustee's and (so long as
no Lease Event of Default is continuing) the Company's consent. The Owner
Trustee may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with Section 9.09;
(2) the Indenture Trustee is adjudged a bankrupt or an insolvent;
<PAGE>
55
(3) a receiver or public officer takes charge of the Indenture Trustee
or its property; or
(4) the Indenture Trustee becomes incapable of acting.
(c) If the Indenture Trustee resigns or is removed, or if a vacancy
exists in the office of Indenture Trustee for any reason, the Owner Trustee
shall promptly appoint a successor Indenture Trustee which will (so long as no
Lease Event of Default is continuing) be approved by the Company.
(d) If a successor Indenture Trustee does not take office within 30
days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Company, the Owner Trustee or the Holders of a majority
in aggregate principal amount of the Outstanding Certificates may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(e) If the Indenture Trustee fails to comply with Section 9.09, any
Holder may petition any court of competent jurisdiction for the removal of such
Indenture Trustee and the appointment of a successor Indenture Trustee.
(f) A successor Indenture Trustee shall deliver a written acceptance
of its appointment to the retiring Indenture Trustee, to the Company and to the
Owner Trustee. Thereupon, the resignation or removal of the retiring Indenture
Trustee shall become effective, and the successor Indenture Trustee shall have
all the rights, powers and duties of the retiring Indenture Trustee for which
the successor Indenture Trustee is to be acting as Indenture Trustee under this
Agreement. The retiring Indenture Trustee shall promptly transfer all property
and all books and records relating to the administration of the Indenture Estate
held by it as Indenture Trustee to the successor Indenture Trustee subject to
the lien provided for in Section 9.06. The Company shall give notice of each
appointment of a successor Indenture Trustee if there are Certificates
outstanding, by mailing written notice of such event by first-class mail to the
Holders.
(g) All provisions of this Section 9.07 except subparagraphs (b)(l)
and (e) and the words "subject to the lien provided for in Section 9.06" in
subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by Merger, etc. If
--------------------------------------------------
the Indenture Trustee or any Agent consolidates with, merges or converts into,
or transfers all or substantially all of its corporate trust business assets to,
another corporation, the successor corporation, without any further act, shall
be the successor Indenture Trustee or Agent, as the case may be.
<PAGE>
56
Section 9.09. Eligibility; Disqualification. This Agreement shall at
-----------------------------
all times have an Indenture Trustee which (i) shall have a combined capital and
surplus of at least $75,000,000 or (ii) shall have a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any State or Territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000, and which, in any case,
shall be a Citizen of the United States. If such corporation publishes reports
of conditions at least annually, pursuant to law or to the requirements of
Federal, State, Territorial, or District of Columbia supervising or examining
authority, then for the purposes of this Section 9.09, 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 conditions so published.
In case at any time the Indenture Trustee shall cease to be eligible
in accordance with the provisions of this Section 9.09, the Indenture Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in its
---------------
individual capacity agrees that it will at its own cost and expense promptly
take such action as may be necessary to duly discharge and satisfy in full all
Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Documents, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting. The
----------------------------------------
Indenture Trustee shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Certificates 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 to the Certificates, to withhold such amounts and timely pay the same to
the appropriate authority in the name of and on behalf of the Holders, that 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 Holders may reasonably request from time
to time. The Indenture Trustee agrees to file any other information reports as
it may be required to file under United States law. Such withholding by the
Indenture Trustee shall in no event give rise to an Indenture Event of Default.
<PAGE>
57
Section 9.12. Additional Collateral. (a) From time to time the
---------------------
Owner Participant may pledge Additional Collateral to the Indenture Trustee as
part of the Indenture Estate and in connection with such Additional Collateral
shall deliver to the Indenture Trustee evidence of such filings and recordings
necessary to establish and perfect the Lien of this Indenture in such Additional
Collateral. Such Additional Collateral shall be held in trust by the Indenture
Trustee as part of the Indenture Estate until released by the Indenture Trustee
pursuant to clause (b) below or otherwise in accordance with the applicable
security agreement.
(b) Provided that all payments of principal and interest on the
Certificates due and payable on the tenth Interest Payment Date have been made,
on such Interest Payment Date, the Indenture Trustee shall, unless otherwise
directed by the Owner Trustee or the Owner Participant, release any Additional
Collateral from the Lien of this Indenture, provided, however, that the Owner
-------- -------
Trustee or the Owner Participant shall be responsible for the preparation and
recording of all filings and recordings necessary to release such Additional
Collateral from the Lien of this Indenture.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance;
----------------------------------------------------
Termination of Obligations. Subject to Section 10.02, this Agreement shall
- --------------------------
cease to be of further effect, and the Owner Trustee and the Indenture Trustee
shall, except as herein provided, be deemed to have been discharged from their
respective obligations with respect to the Certificates (and the Indenture
Trustee, on demand and at the expense of the Owner Trustee, shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement in
respect of the Certificates), when
(a) (i) all Certificates theretofore executed and delivered (other
than (A) Certificates which have been mutilated, destroyed, lost or stolen
and which have been replaced or exchanged as provided in Section 2.06 and
(B) Certificates for the payment of which money held in trust hereunder has
been paid and discharged from such trust, as provided in Section 7.01) have
been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to the Indenture
Trustee for cancellation
<PAGE>
58
(A) have become due and payable (whether upon stated maturity or
as a result of redemption), or
(B) will become due and payable (including as a result of
redemption in respect of which irrevocable notice has been given to
the Indenture Trustee on or prior to the date of such deposit and such
redemption either is a redemption without possibility of premium or,
as of the date of such deposit, any premium which may be payable in
connection therewith has been actually determined) at maturity or on a
Redemption Date within one year,
and there has been deposited with the Indenture Trustee in trust for the purpose
of paying and discharging the entire indebtedness on the Certificates not
theretofore cancelled by the Indenture Trustee or delivered to the Indenture
Trustee for cancellation, an amount sufficient to discharge such indebtedness,
including the principal of, the actual premium, if any, and interest on the
Certificates to the date of such deposit (in the case of Certificates which have
become due and payable), or to the maturity thereof or to the Redemption Date
thereof, as the case may be; or
(iii) (A) the Owner Trustee, subsequent to the Commencement Date, has
deposited or caused to be deposited irrevocably (except as provided in
Section 10.04) with the Indenture Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders, (1) money in an amount, or (2) U.S. Government Obligations
which, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide (not later than one Business Day
before the due date of any payment referred to below in this paragraph)
money in an amount, or (3) a combination of money and U.S. Government
Obligations referred to in the foregoing clause (2), sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to the
Indenture Trustee, to pay and discharge each installment of principal of and
interest on the Outstanding Certificates on the dates such payments of
principal or interest are due (including as a result of redemption without
the possibility of the payment of premium in respect of which irrevocable
notice has been given to the Indenture Trustee on or prior to the date of
such deposit), and no Lease Event of Default under either Section 14(f) or
14(g) of the Lease shall have occurred and be continuing on the date of such
deposit or at any time during the period ending on the 91st day after such
date; provided, however, that, upon the making of the deposit referred to
-------- -------
above in this clause (A), the right of the Owner Trustee or the Company to
cause the redemption of Certificates (except a redemption in respect of
which irrevocable notice has theretofore been given) shall terminate;
<PAGE>
59
(B) such deposit will not result in a breach or violation of, or
constitute an Indenture Default or Indenture Event of Default under, this
Agreement or a default or event of default under any other agreement or
instrument to which the Owner Trustee or the Company is a party or by which
it is bound; and
(C) the Company on behalf of the Owner Trustee has delivered to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel to the
effect that there has been published by the Internal Revenue Service a
ruling to the effect that Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of the exercise by the Owner
Trustee of its option under this Section 10.01(a)(iii) and will be subject
to Federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such option had not been
exercised;
(b) all other amounts then due and payable hereunder have been paid
and no notice of a redemption of the Certificates with the possibility of the
payment of premium has been delivered by the Indenture Trustee; and
(c) the Company on behalf of the Owner Trustee has delivered to the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating to the satisfaction
and discharge of this Agreement contemplated by this Section 10.01, have been
complied with.
Section 10.02. Survival of Certain Obligations. Notwithstanding the
-------------------------------
provisions of Section 10.01, the obligations of the Indenture Trustee contained
in Sections 2.01 through 2.08, Section 7.01, Section 9.11, Section 10.03 and
Section 10.04, the rights, duties, immunities and privileges hereunder of the
Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and U.S.
--------------------------
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, premium,
if any, and interest, but such money need not be segregated from other funds
except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The Indenture
--------------------------------------
Trustee and any Paying Agent shall promptly pay or return to the Owner Trustee
upon request of the Owner Trustee any money or U.S. Government Obligations held
by them at any time that are not required for the payment of the amounts
described above in Section 10.03 on the Certificates for which money or U.S.
Government Obligations have been deposited pursuant to Section 10.01.
<PAGE>
60
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of
-----------------------------------------------
Holders. The Owner Trustee and the Indenture Trustee may enter into one or more
- -------
agreements supplemental hereto without the consent of any Holder for any of the
following purposes:
(1) to correct any mistake or cure any ambiguity, defect or
inconsistency herein or in the Certificates or to make any change not
inconsistent with the provisions hereof; provided that such change does not
--------
adversely affect the interests of any Holder;
(2) to evidence the succession of another party as the Owner Trustee
in accordance with the terms of the Trust Agreement or to evidence (in
accordance with Article 9) the succession of a new trustee hereunder, the
removal of the trustee hereunder or the appointment of any co-trustee or co-
trustees or any separate or additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee or to make any other provisions with respect to
matters or questions arising hereunder so long as such action shall not
adversely affect the interests of the Holders;
(4) to correct or amplify the description of any property at any time
subject to the lien of this Agreement or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subject to the lien of this Agreement or to subject to the lien of this
Agreement the Airframe or Engines or airframe or engines substituted for the
Airframe or Engines in accordance herewith or with the Lease; provided that
--------
Trust Supplements entered into for the purpose of subjecting to the lien of
this Agreement the Airframe or Engines in accordance with the Lease need
only be executed by the Owner Trustee and the Indenture Trustee;
(5) to add to the covenants of the Owner Trustee, for the benefit of
the Holders, or to surrender any rights or power herein conferred upon the
Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
<PAGE>
61
(7) to provide for the assumption by the Company of the obligations of
the Owner Trustee hereunder in accordance with the terms and conditions
applicable thereto specified in Section 7.03; or
(8) to include on the Certificates any legend as may be required by
applicable law.
Section 11.02. Amendments to this Agreement with Consent of Holders.
----------------------------------------------------
(a) With the written consent of the Holders of a majority of the aggregate
principal amount of the Outstanding Certificates, the Owner Trustee and the
Indenture Trustee may enter into such supplemental agreements to add any
provisions to or to change or eliminate any provisions of this Agreement or of
any such supplemental agreements or to modify the rights of the Holders;
provided, however, that, an amendment under this Section 11.02 may not:
- -------- -------
(1) reduce the principal amount of, premium, if any, or any
installment of interest on, any Certificate; or
(2) change the date on which any principal amount of, any Installment
Payment Amount payable with respect to, premium, if any, or interest on any
Certificate, is due or payable; or
(3) create any Lien on the Indenture Estate prior to or pari passu
---- -----
with the Lien thereon under this Agreement except such as are permitted by
this Agreement, or deprive any Holder of the benefit of the Lien on the
Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of the Outstanding
Certificates, the consent of whose holders is required for any such
supplemental agreement, or the consent of whose holders is required for any
waiver (of compliance with certain provisions of this Agreement or of
certain defaults hereunder or their consequences) provided for in this
Agreement; or
(5) make any change in Sections 8.05, 8.08 or Section 11.02(a).
(b) It is not necessary under this Section 11.02 for the Holders to
consent to the particular form of any proposed supplemental agreement, but it is
sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and the
Indenture Trustee of any supplemental agreement pursuant to the provisions of
this Section 11.02, the Indenture Trustee shall transmit by first-class mail a
notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of
<PAGE>
62
such Holders appear on the Register. 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 agreement.
Section 11.03. Revocation and Effect of Consents. Until an amendment
---------------------------------
or waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder, even if notation of the consent is
not made on any Certificate. However, any such Holder or subsequent Holder may
revoke the consent as to his Certificate if the Indenture Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every Holder
affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
---------------------------------------
Indenture Trustee may place an appropriate notation about an amendment or waiver
on any Certificate thereafter executed. The Indenture Trustee in exchange for
such Certificates may execute new Certificates that reflect the amendment or
waiver.
Section 11.05. Indenture Trustee Protected. The Indenture Trustee
---------------------------
need not sign any supplemental agreement that adversely affects its rights.
Section 11.06. Amendments, Waivers, etc. of Other Operative
--------------------------------------------
Documents. (a) Subject to Section 11.01, without the consent of the Holders of
- ---------
a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, 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 11.06 may be taken without the consent of the Indenture Trustee or
any Holder.
(b) Subject to the provisions of subsection (c) of this Section 11.06,
the respective parties to the Participation Agreement, the Lease and the Trust
Agreement, 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 11.06 the parties to the
Lease shall not modify, amend or supplement, or give any consent, waiver,
authorization or approval 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
<PAGE>
63
thereunder, with respect to the following provisions of the Lease as
originally executed: Section 2, Section 3(a) (if the result thereof would
be to shorten the Term of the Lease to a period shorter than the period
ending with the Maturity Date of the Certificates), Section 3(d) (except to
the extent such Section relates to amounts payable (whether directly or
pursuant to the Indenture) to Persons other than Holders and the Indenture
Trustee in its individual capacity), Section 3(e) (except insofar as it
relates to the address or account information of the Owner Trustee or the
Indenture Trustee) (other than as such Sections 3(a), 3(d) and 3(e) may be
amended pursuant to Section 3(c) of the Lease as originally executed),
Section 4, Section 6, Sections 9(b) through (d) (except that further
restrictions may be imposed on the Company), Section 10 (except that
additional requirements may be imposed on the Company), Section 11 (except
for Section 11(e) and except that additional insurance requirements may be
imposed on the Company), Section 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), Section 13
(except in the case of an assignment by the Lessor in circumstances where
the Aircraft shall remain registrable under the Federal Aviation Act),
Section 14 (except to impose additional or more stringent Lease Events of
Default), Section 15 (except to impose additional remedies), Section 16
(except to impose additional requirements on the Company), Section 18,
Section 20, Section 22 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 in the event an Indenture Event of Default shall have occurred
--------
and be continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as "Lessor" under the Lease to modify, amend or supplement the Lease
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 "Lessor" thereunder; provided further that without the prior consent of
-------- -------
the Owner Trustee, and whether or not an Indenture Event of Default shall
have occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification of a
definition contained therein would result in a modification of the Lease not
permitted by this proviso), 3(c), 4, 5, 6 (to the extent such action would
reduce the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19 and 21 of the Lease, or any
other Section of the Lease to the extent such action shall affect the amount
or timing of any amounts payable by the Company under the Lease as
originally executed (or as subsequently modified with the consent of the
Owner Trustee) which, absent the occurrence and continuance of an Indenture
Event of Default, will be distributable to the Owner Trustee under Article
3; and provided further that the parties to the Lease 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 Company's rights or
obligations with respect to, Excluded Payments;
<PAGE>
64
(2) modify, amend or supplement the Trust Agreement, or give any
consent, waiver, authorization or approval with respect thereto, in each
case only to the extent any such action shall not 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 11.06 the
parties to the Participation Agreement shall not modify, amend or
supplement, or give any consent, waiver, authorization or approval 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 Participation Agreement as originally executed: Sections 1(b),
Section 7 (insofar as such Section 7 relates to the Indenture Trustee and
the Holders), Section 8, Section 11 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 said agreements 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 Agreement which shall
not be inconsistent with the provisions of this Agreement, 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 (a) or pursuant to subsection
(b) of this Section 11.06 and anything in such subsections or elsewhere in this
Agreement to the contrary notwithstanding, shall, without the consent of the
Holder of each Outstanding Certificate affected thereby,
(1) modify, amend or supplement the Lease in such a way as to extend
the time of payment of Basic Rent or stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for the
account of the Holders (subject in any event to clause (iii) of Section 3(c)
of the Lease) upon the occurrence of an Event of Loss or Termination Value
and any other amounts payable to the Indenture Trustee for its own account
or for the account of the Holders (subject in any event to clause (iii) of
Section 3(c) of the Lease) upon termination of the Lease with respect to the
Aircraft, payable under, or as provided in, the Lease as originally
executed, or reduce the amount of any installment of Basic Rent or
Supplemental Rent so that the same is less than the payment of principal of,
premium, if any, and interest on the Certificates, as the case may be, to be
made from such installment of Basic Rent or
<PAGE>
65
Supplemental Rent, or reduce the aggregate amount of Stipulated Loss Value,
EBO Percentage, Special Termination Value Percentages, or any other amounts
payable under, or as provided in, the Lease as originally executed upon the
occurrence of an Event of Loss so that the same is less than the accrued
interest on and the principal as of the Lease Loss Payment Date, and
premium, if any, of the Certificates at the time Outstanding or reduce the
amount of Termination Value and any other amounts payable under, or as
provided in, the Lease as originally executed upon termination of the Lease
with respect to the Aircraft so that the same is less than the accrued
interest on and principal as of the Lease Termination Date and premium, if
any, of Certificates 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 Company from its
obligations in respect of payment of Basic Rent or Supplemental Rent, or
Stipulated Loss Value and any other amounts payable to the Indenture Trustee
for its own account or the account of the Holders (subject in any event to
clause (iii) of Section 3(c) of the Lease) upon the occurrence of an Event
of Loss, or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or the account of the Holders (subject in any
event to clause (iii) of Section 3(c) of the Lease) of the Lease with
respect to the Aircraft, payable under, or as provided in, the Lease as
originally executed, except for any such assignment pursuant to Section 8(u)
of the Participation Agreement, and except as provided in the Lease as
originally executed.
For the purposes of this Article 11, during the Pre-Commencement Date
Period, the "principal amount" of Outstanding Certificates shall include the
amount equal to that portion of the difference between the Original Issue Price
and the Original Principal. Amount for any Certificate originally issued at a
discount which corresponds to the period from the date of issuance thereof to
and including the Commencement Date.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically provided
-------
for herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by hand-delivery, overnight courier service, mail, telex or telecopier addressed
as indicated below and any such notice shall be effective, in the case of hand-
delivery, when delivered, in the case of overnight courier service, one Business
Day after delivery with charges paid to a courier service with instructions for
overnight delivery, in the case of mail, three Business Days after delivery to
<PAGE>
66
the postal service with certified or registered mail charges paid, in the case
of telex, upon receipt of a telex answerback and, in the case of telecopier,
upon transmittal:
if to the Company, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Telecopier: (708) 952-5204
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attn: Vice President and Treasurer
Telecopier: (708) 952-5204
if to the Indenture Trustee, to:
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopier: (801) 246-5053
Telex No.: 3789450
if to the Owner Trustee, to:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
or if by overnight courier, to:
Two International Place
Boston, Massachusetts 02110
Telecopier: (617) 664-5371
with a copy to the Owner Participant
<PAGE>
67
if to the Owner Participant, to:
[____________]
(b) The Company, the Owner Trustee, the Indenture Trustee or the Owner
Participant by notice to the others may designate additional or different
addresses for subsequent notices or communications.
(c) Any notice or communication to Holders of the Certificates shall
be mailed by first-class mail to the addresses for Holders shown on the Register
kept by the Registrar and to addresses filed with the Indenture Trustee for
other Holders. Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency with respect to
other Holders of such Certificates of that or any other Series entitled to
receive notice.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the Holders, it
shall mail a copy to the Indenture Trustee and to each Paying Agent at the same
time.
(f) Notwithstanding the foregoing, all communications or notices to
the Indenture Trustee shall be deemed to be given only when received by a
Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The Indenture
-------------------------------------
Trustee may make reasonable rules for action by or a meeting of the Holders.
The Paying Agent or Registrar may make reasonable rules and set reasonable
requirements for its functions.
Section 12.05. Non-Business Days. If a payment date is not a
-----------------
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE CERTIFICATES
-------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
<PAGE>
68
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS PROVISIONS OF THE STATE OF ILLINOIS.
Section 12.07. No Recourse Against Others. No director, officer,
--------------------------
employee or stockholder, as such, of the Company, the Owner Trustee or the Owner
Participant, as the case may be, shall have any liability for any obligations of
the Company, the Owner Trustee or the Owner Participant, as the case may be,
under this Agreement or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting a Certificate
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which shall be an original but
such counterparts shall together constitute but one instrument.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of Lease. Upon
---------------------------------------------
any of:
(a) the voluntary termination of the Lease by the Company pursuant to
Section 9(b) thereof on the Lease Termination Date, and upon payment to the
Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its option pursuant
to Section 19(b) of the Lease on a Special Purchase Option Date or the EBO
Date as the case may be (unless the Company shall have elected to assume all
of the rights and obligations of the Owner Trustee hereunder as provided for
in Section 8(r) of the Participation Agreement), and upon payment to the
Indenture Trustee of an amount equal to the Redemption Price as at the
applicable Redemption Date of all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss Payment Date,
following an Event of Loss suffered by the Airframe under circumstances
where the Company does not exercise its option to substitute a Replacement
Airframe therefor pursuant to Section 10(a)(ii) of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price
as at the Redemption Date of all Outstanding Certificates, or
<PAGE>
69
(d) the satisfaction, discharge, defeasance and termination of
obligations under this Agreement in accordance with Section 10.01, or
(e) the voluntary termination of the Lease with respect to an Engine
pursuant to Section 10(b) thereof, and upon the payment of Stipulated Loss
Value with respect to such Engine,
the Lien of this Agreement on the Indenture Estate, in the case of (a), (b), (c)
and (d) above, and on such Engine, in the case of (e) above shall terminate
(except for the Lien on funds held by the Indenture Trustee to pay the
Certificates and the Lien on amounts due from the Company under the Lease
necessary to pay the Certificates or the Indenture Trustee) and the Indenture
Trustee shall execute such instruments as may be requested by the Company or the
Owner Trustee to evidence such termination.
<PAGE>
70
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee have
caused this Trust Indenture and Mortgage to be duly executed by their respective
officers thereunto duly authorized.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
except as expressly provided herein,
but solely as Owner Trustee
By: _________________________________
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By: _________________________________
Name:
Title:
<PAGE>
Exhibit A-1 to
Trust Indenture and
Mortgage
Form of Series 1995 777 B Installment Certificates
--------------------------------------------------
$_______________ (Original Issue Price) No. _____
$_______________ (Original Principal Amount)
SERIES 1995 777 B CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 B)
Dated as of May 1, 1995
Issued in connection with Aircraft N766UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1995 MATURITY DATE
-------------
_______ , 20__
INTEREST RATE PER ANNUM: __%
COMMENCEMENT DATE
CASH INTEREST: $_________
State Street Bank and Trust Company, not in its individual capacity,
but solely as owner trustee (the "Owner Trustee") under that certain Trust
Agreement (1995 777 B), dated as of May 1, 1995, between the Owner Trustee in
its individual capacity and the institution referred to therein as the "Owner
Participant" (herein as such Trust Agreement may be amended or supplemented from
time to time called the "Trust Agreement") for value received, hereby promises
to pay to _________________ or registered assigns the principal sum in Dollars
equal to the Original Principal Amount specified above in installments on each
Installment Payment Date as provided for herein below with the final installment
due and payable on the Maturity Date specified above (provided, however, that,
-------- -------
if the obligations evidenced by this Certificate shall become due and payable
(upon redemption or acceleration or otherwise) and shall be paid during the Pre-
Commencement Date Period, the principal amount hereof to be paid shall be the
Original Issue Price specified above, together with the portion of the
difference between such Original Issuer Price and the Original Principal Amount
specified above which corresponds to the period from the date of issuance hereof
to
<PAGE>
2
the date of such payment) and to pay interest (x) in the amount of the
Commencement Date Cash Interest specified above, payable on the Commencement
Date, and (y) at the Interest Rate Per Annum specified above on the Original
Principal Amount specified above from time to time outstanding in respect of the
period commencing on and including the Commencement Date and ending on the date
when the principal amount hereof shall have been paid in full, payable on each
October 19 and April 19 in each year, commencing on October 19, 1995 (provided,
--------
however, that, if the obligations evidenced by this Certificate shall become due
- -------
and payable (upon redemption or acceleration or otherwise) and shall be paid
during the Pre-Commencement Date Period, the amount thereof in respect of
interest shall be an amount equal to the portion of such Commencement Date Cash
Interest which corresponds to the period from the date of issuance hereof to the
date of such payment). All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Mortgage (1995 777 B), dated as of May 1, 1995 (as
the same may hereafter be further amended or supplemented from time to time, as
the "Indenture", the defined terms therein not otherwise defined herein being
used herein with the same meanings), by and among the Owner Trustee and First
Security Bank of Utah, National Association, as Indenture Trustee thereunder,
shall be made only from the income and proceeds of the Indenture Estate. Each
Holder hereof, by its acceptance of this Certificate, agrees that (a) it will
look solely to the income and proceeds of the Indenture Estate for payment of
such amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) none of the Owner Participant, the Owner
Trustee or the Indenture Trustee is or shall be personally liable to the Holder
hereof for any amount payable hereunder or under the Indenture or, except as
provided in the Indenture in the case of the Indenture Trustee and the Owner
Trustee, for any liability under the Indenture.
The interest or Installment Payment Amount (other than that payable on
the Maturity Date hereof) so payable, and punctually paid or duly provided for,
on the applicable Interest Payment Date or Installment Payment Date, as the case
may be, will, as provided in the Indenture, be paid to the Person in whose name
this Certificate (or one or more predecessor Certificates) is registered at the
close of business on the Record Date for payment of such interest or Installment
Payment Amount, which shall be the fifteenth day (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith cease
to be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a special record date
for the payment of such Defaulted Installment or Defaulted Interest to be fixed
by the Indenture Trustee pursuant to Section 2.08 of the Indenture, notice
whereof shall be given to Holders of Certificates entitled thereto not less than
10 days prior to such special record date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Certificates may
<PAGE>
3
be listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture.
Payment of the principal of, premiums if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
- -------- -------
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed to the address of
the Holder entitled thereto as such address shall appear on the Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02 of
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 thereby conveyed,
pledged and assigned, the nature and extent of the security, the respective
rights thereunder of the Owner Trustee, the Indenture Trustee and the Holders of
the Certificates, and the terms upon which the Certificates are, and are to be,
executed and delivered, as well as for a statement of the terms and conditions
of the trust created by the Indenture, to all of which terms and conditions in
the Indenture each Holder hereof agrees by its acceptance of this Certificate.
As more fully provided in the Indenture, on each Installment Payment
Date, the Holder hereof will receive a payment of principal equal to the
Installment Payment Date, the Holder hereof will receive a payment of principal
equal to the Installment Payment Percentage for such Installment Payment Date as
specified on Exhibit B-1 hereto (provided that, after the occurrence of any
--------
partial redemption or redemption pursuant to clause (ii) of Section 6.01(a) of
the Indenture, the "Installment Payment Percentage" for each Installment Payment
Date subsequent to the applicable Redemption Date shall be redetermined as
provided for in the Indenture) multiplied by the Original Principal Amount of
this Certificate specified above.
As more fully provided in the Indenture, the Certificates are subject
to redemption or partial redemption on not less than 25 nor more than 60 days'
notice by mail, under the circumstances set forth in the Indenture, at a
redemption price equal to the unpaid
<PAGE>
4
principal amount thereof, premium if any, plus accrued interest thereon to the
Redemption Date.
If an Indenture Event of Default shall occur and be continuing, the
principal amount remaining unpaid of the Certificates may be declared due and
payable in the manner and with the effect provided in the Indenture. If, and
only if, such an event of default constitutes an event of default by the Company
under the Lease, the Indenture Trustee may declare the Lease to be in default,
and may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Basic Rent plus
an amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term for
the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated Loss
Value of the Aircraft over the fair market sales value thereof or (iii) if the
Aircraft has been sold, any unpaid Basic Rent plus the excess of the Stipulated
Loss Value thereof over the net sales proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in the
performance of its Obligations under the Lease which can be cured by the payment
of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premiums, if any, and interest on
<PAGE>
5
the Outstanding Certificates on the dates such payments are due in accordance
with the terms of such Certificates and (b) certain other conditions are
satisfied, including the publication by the United States Internal Revenue
Service of a ruling to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by, the Holder or his attorney duly authorized in
writing, one or more new Certificates of the same maturity and type and of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that is
not an integral multiple of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Certificates are exchangeable for a like
aggregate principal amount of Certificates of the same maturity and type and of
authorized denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office of
the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer
or exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue, and
neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
<PAGE>
6
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to be
duly executed.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
but solely as Owner Trustee
By: __________________________________
Title:
<PAGE>
7
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By: __________________________________
Authorized officer and signatory
<PAGE>
Exhibit A-2 to
Trust Indenture and
Mortgage
Form of Series 1995 777 B Serial Certificates
---------------------------------------------
$________ (Original Issue Price) No. _____
$_________ (Original Principal Amount)
SERIES 1995 777 B CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 B)
Dated as of May 1, 1995
Issued in connection with Aircraft N766UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1995 MATURITY DATE
-------------
_______ , 199__
INTEREST RATE PER ANNUM: ____%
COMMENCEMENT DATE
CASH INTEREST: $__________
State Street Bank and Trust Company, not in its individual capacity,
but solely as owner trustee (the "Owner Trustee") under that certain Trust
Agreement (1995 777 B), dated as of May 1, 1995, between the Owner Trustee in
its individual capacity and the institution referred to therein as the "Owner
Participant" (herein as such Trust Agreement may be amended or supplemented from
time to time called the "Trust Agreement"), for value received, hereby promises
to pay to _________________ or registered assigns the principal sum in dollars
equal to the Original Principal Amount specified above on the Maturity Date
specified above (provided, however, that, if the obligations evidenced by this
-------- -------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
principal amount hereof to be paid shall be the Original Issue Price specified
above, together with the portion of the difference between such Original Issue
Price and the Original Principal Amount specified above which
1
<PAGE>
2
corresponds to the period from the date of issuance hereof to the date of such
payment) and to pay interest (x) in the amount of the Commencement Date Cash
Interest specified above, payable on the Commencement Date, and (y) at the
Interest Rate Per Annum specified above on the Original Principal Amount
specified above from time to time outstanding in respect of the period
commencing on and including the Commencement Date and ending on the date when
the principal amount hereof shall have been paid in full, payable on each
October 19 and April 19 in each year, commencing on October 19, 1995 (provided,
--------
however, that, if the obligations evidenced by this Certificate shall become due
- -------
and payable (upon redemption or acceleration or otherwise) and shall be paid
during the Pre-Commencement Date Period, the amount thereof in respect of
interest shall be the amount equal to the portion of such Commencement Date Cash
Interest which corresponds to the period from the date of issuance hereof to the
date of such payment the accrual at the Interest Rate Per Annum specified above
of interest on the Original Issue Price specified above from the date of
issuance of this Certificate to the date of such payment). All amounts payable
by the Owner Trustee hereunder and under the Trust Indenture and Mortgage (1995
777 B), dated as of May 1, 1995 (as the same may hereafter be further amended or
supplemented from time to time, as the "Indenture", the defined terms therein
not otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and First Security Bank of Utah, National Association,
as Indenture Trustee thereunder, shall be made only from the income and proceeds
of the Indenture Estate. Each Holder hereof, by its acceptance of this
Certificate, agrees that (a) it will look solely to the income and proceeds of
the Indenture Estate for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) none of
the Owner Participant, the Owner Trustee or the Indenture Trustee is or shall be
personally liable to the Holder hereof for any amount payable hereunder or under
the Indenture or, except as provided in the Indenture in the case of the
Indenture Trustee and the Owner Trustee, for any liability under the Indenture.
The interest so payable and punctually paid or duly provided for, on
the applicable Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on the Record Date for
payment of such interest, which shall be the fifteenth day (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on the such Record Date (or
to the Person in whose name this Certificate is registered upon issuance) and
may be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a special
record date for the payment of such Defaulted Interest to be fixed by the
Indenture Trustee pursuant to Section 2.08 of the Indenture, notice whereof
shall be given to Holders of Certificates entitled thereto not less than 10 days
prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Certificates may be listed, and
<PAGE>
3
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture.
Payment of the principal of, premium if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
- -------- -------
Indenture Trustee or the Paying Agent by check mailed to the address of the
Holder entitled thereto as such address shall appear on the Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02 of
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 thereby conveyed,
pledged and assigned, the nature and extent of the security, the respective
rights thereunder of the Owner Trustee, the Company, the Indenture Trustee and
the Holders of the Certificates, and the terms upon which the Certificates are,
and are to be, executed and delivered, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, the Certificates are subject
to redemption or partial redemption, on not less than 25 nor more than 60 days'
notice by mail, under the circumstances set forth in the Indenture, at a
redemption price equal to the unpaid principal amount thereof, premium, if any,
plus accrued interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be continuing, the
principal of the Certificates may be declared due and payable in the manner and
with the effect provided in the Indenture. If, and only if, such an event of
default constitutes an event of default by the Company under the Lease, the
Indenture Trustee may declare the Lease to be in default, and may, to the
exclusion of the Owner Trustee, exercise one or more of the remedies of the
Owner Trustee provided in the Lease. Such remedies include the right to
repossess and use or operate the Aircraft, to sell or relet the Aircraft free
and clear of the Company's rights and retain the proceeds and to require the
Company to pay as liquidated damages (i) any
<PAGE>
4
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent plus
the excess of the Stipulated Loss Value thereof over the net sales proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in the
performance of its obligations under the Lease which can be cured by the payment
of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premium, if any, and interest on the Outstanding
Certificates on the dates such payments are due in accordance with the terms of
such Certificates and (b) certain other conditions are satisfied, including the
publication by the United States Internal Revenue Service of a ruling to the
effect that the deposit and related defeasance would not cause the Holders of
the Certificates to recognize income, gain or loss for Federal income tax
purposes.
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Registrar duly executed by, the Holder or his attorney duly authorized in
<PAGE>
5
writing, one or more new Certificates of the same maturity and type and of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that is
not an integral multiple of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Certificates are exchangeable for a like
aggregate principal amount of Certificates of the same maturity and type and of
authorized denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office of
the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer
or exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue, and
neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to be
duly executed.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity,
but solely as Owner Trustee
By: __________________________________
Title:
<PAGE>
6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
as Indenture Trustee
By ___________________________________
Authorized Officer or signatory
Title:
<PAGE>
Exhibit B to
Trust Indenture and
Mortgage
MATURITY DATES, PRINCIPAL AMOUNTS AND
-------------------------------------
INTEREST RATES OF SERIES 1995 777 B CERTIFICATES
------------------------------------------------
<TABLE>
<CAPTION>
ORIGINAL COMMENCEMENT
PRINCIPAL ISSUE DATE CASH INTEREST RATE
MATURITY DATE AMOUNT PRICE INTEREST PER ANNUM
------------- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Series 1995 777 B1 [________] $[_____] $[_____] $[________] $[_______]
Series 1995 777 B2 [________] $[_____] $[_____] $[________] $[_______]
</TABLE>
<PAGE>
Trust Indenture and
Mortgage
Installment Payment Dates and Installment Payment Percentages
-------------------------------------------------------------
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: [_________]
<TABLE>
<CAPTION>
Corresponding
Installment Payment Installment Payment Aggregate Installment
Date Percentage Payment Amount
- -------------------------------- ------------------------- ------------------------------
<S> <C> <C>
[ ] [ ]% $[ ]
[ ] [ ]% [ ]
TOTAL 100.00000000% $[ ]
------------- --------------------------
</TABLE>
<PAGE>
B-1-2
Installment Certificate No. 2 - Maturity Date: [_________]
Corresponding
-------------
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
%
TOTAL 100.00000000% $
------------- -----------------
<PAGE>
Exhibit B-2 to
Trust Indenture and
Mortgage
Issuance of Series 1995 777 B Certificates
------------------------------------------
The Series 1995 777 B Certificates issued hereunder shall be issued to
and shall be payable to each of the Pass Through Trustees under the Pass Through
Trust Agreements with respect to the grantor trusts created thereby, in each
case as set forth below:
1995-Al Trust:
[_____]% Certificate due [_________]
1995-A2 Trust:
[_____]% Certificate due [_________]
<PAGE>
[Trust Indenture and Mortgage (1995 777 B)]
EXHIBIT C
---------
TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT
(1995 777 B)
This TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1995
777 B), dated May __, 1995 (herein called the "Trust Supplement") of STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1995 777 B), dated as of May 1, 1995 (herein called the "Trust Agreement") ,
between the Owner Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery
of one or more supplements thereto substantially in the form hereof, which shall
particularly describe the Aircraft (such term and other terms defined in the
Trust Indenture referred to below used herein as therein defined) included in
the property covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Mortgage (1995 777 B), dated as of
May 1, 1995 (herein called the "Trust Indenture"), between the Owner Trustee and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, as Indenture Trustee (herein
called the "Indenture Trustee"), provides for the execution and delivery of a
supplement thereto substantially in the form hereof, which shall particularly
describe the Aircraft, and shall specifically mortgage such Aircraft to the
Indenture Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement Witnesseth, that the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
<PAGE>
C-2
[Trust Indenture and Mortgage (1995 777 B)]
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------ -------------
The Boeing Company 777-222 N766UA 26917
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated take-
off horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the Airframe or any other airframe, identified as
follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ -------------- -------------
<S> <C> <C>
Pratt & Whitney PW4084 [ ]
Pratt & Whitney PW4084 [ ]
</TABLE>
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and secured
by the Trust Indenture and hereby, the Owner Trustee hereby confirms that the
Lien of the Trust Indenture over the Trust Indenture Estate includes the Lease
Supplement of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the equal and proportionate
benefit and security of the and the holders from time to time of the
Certificates outstanding, without any
<PAGE>
C-3
[Trust Indenture and Mortgage (1995 777 B)]
preference, distinction or priority of any one Certificate over any other by
reason of series, priority of time of issue, sale, negotiation, date of maturity
thereof or otherwise for any reason whatsoever, and for the uses and purposes
and subject to the terms and provisions set forth in the Trust Indenture.
This Trust supplement shall be construed as Supplemental to the Trust
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
* * *
<PAGE>
C-4
[Trust Indenture and Mortgage (1995 777 B)]
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Supplement
to be duly executed by one of its officers, thereunto duly authorized, on the
day and year first above written.
STATE STREET BANK AND TRUST
COMPANY
not in its individual capacity but solely
as Owner Trustee
By:__________________________
Title:
<PAGE>
EXHIBIT 4.1
===============================================
THIRD AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
(1993 747 A)
Dated as of May 1, 1995
between
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except as expressly set forth herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Indenture Trustee
One Boeing 747-422 Aircraft N189UA
United Air Lines, Inc.
Series 1993 747 A Certificates
===============================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................................... 1
GRANTING CLAUSE............................................................ 2
HABENDUM CLAUSE............................................................ 5
ARTICLE 1 DEFINITIONS.................................................... 7
1.01. Definitions.................................................. 7
ARTICLE 2 THE CERTIFICATES............................................... 20
2.01. Certificates; Title and Terms................................ 20
2.02. Execution and Authentication................................. 21
2.03. Registrar and Paying Agent................................... 22
2.04. Transfer and Exchange........................................ 22
2.05. Holder Lists; Ownership of Certificates...................... 23
2.06. Mutilated, Destroyed, Lost or Stolen Certificates............ 23
2.07. Cancellation................................................. 23
2.08. Payment on Certificates; Defaulted Principal and Interest.... 24
2.09. Payment from Indenture Estate Only; Non-Recourse Obligations. 25
2.10. Execution, Delivery and Dating of Certificates upon Original
Issuance..................................................... 26
ARTICLE 3 RECEIPT, DISTRIBUTION AND APPLICATION OF FUNDS IN THE INDENTURE
ESTATE................................................... 26
3.01. [Reserved for Potential Future Use]........................... 26
3.02. Payment in Case of Redemption or Purchase of Certificates.... 26
3.03. Application of Rent When No Indenture Event of Default Is
Continuing................................................... 27
3.04. Application of Certain Payments in Case of Requisition or
Event of Loss............................................... 27
3.05. Payments During Continuance of Indenture Event of Default.... 28
3.06. Payments for Which Application Is Provided in Other Documents 29
3.07. Payments for Which No Application Is Otherwise Provided...... 29
ARTICLE 4 COVENANTS OF OWNER TRUSTEE................................... 30
4.01. Covenants of the Owner Trustee............................... 30
ARTICLE 5 DISPOSITION, SUBSTITUTION AND RELEASE OF PROPERTY
INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE..................................... 31
<PAGE>
ii
5.01. Disposition, Substitution and Release of Property Included
in the Indenture Estate During Continuation of Lease........ 31
ARTICLE 6 REDEMPTION OF CERTIFICATES................................... 32
6.01. Redemption of Certificates upon Certain Events............... 32
6.02. Redemption or Purchase of Certificates upon Certain Indenture
Events of Default............................................ 34
6.03. Notice of Redemption to Holders.............................. 35
6.04. Deposit of Redemption Price.................................. 35
6.05. Certificates Payable on Redemption Date...................... 36
ARTICLE 7 MATTERS CONCERNING THE COMPANY............................... 36
7.01. Repayment of Monies for Certificate Payments Held by the
Indenture Trustee............................................ 36
7.02. Change in Registration....................................... 36
7.03. Assumption of Obligations of Owner Trustee by the Company.... 37
ARTICLE 8 DEFAULTS AND REMEDIES........................................ 39
8.01. Indenture Events of Default.................................. 39
8.02. Acceleration; Rescission and Annulment....................... 42
8.03. Other Remedies Available to Indenture Trustee................ 43
8.04. Waiver of Owner Trustee...................................... 50
8.05. Waiver of Existing Defaults.................................. 51
8.06. Control by Majority.......................................... 51
8.07. Limitation on Suits by Holders............................... 51
8.08. Rights of Holders to Receive Payment......................... 52
8.09. Indenture Trustee May File Proofs of Claim................... 52
ARTICLE 9 INDENTURE TRUSTEE............................................ 52
9.01. Duties of Indenture Trustee.................................. 52
9.02. Rights of Indenture Trustee.................................. 53
9.03. Individual Rights of Indenture Trustee....................... 53
9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments.................................................. 53
9.05. Notice of Defaults........................................... 54
9.06. Compensation and Indemnity................................... 55
9.07. Replacement of Indenture Trustee............................. 55
9.08. Successor Indenture Trustee, Agents by Merger, etc........... 57
9.09. Eligibility; Disqualification................................ 57
9.10. Trustee's Liens.............................................. 57
9.11. Withholding Taxes; Information Reporting..................... 57
<PAGE>
iii
9.12. Additional Collateral........................................ 58
ARTICLE 10 SATISFACTION AND DISCHARGE; DEFEASANCE; TERMINATION OF
OBLIGATIONS.............................................. 58
10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations................................. 58
10.02. Survival of Certain Obligations............................. 60
10.03. Monies to Be Held in Trust.................................. 60
10.04. Monies to Be Returned to Owner Trustee...................... 61
ARTICLE 11 AMENDMENTS AND WAIVERS...................................... 61
11.01. Amendments to this Agreement Without Consent of Holders..... 61
11.02. Amendments to this Agreement with Consent of Holders........ 62
11.03. Revocation and Effect of Consents........................... 63
11.04. Notation on or Exchange of Certificates..................... 63
11.05. Indenture Trustee Protected................................. 63
11.06. Amendments, Waivers, etc. of Other Operative Documents...... 63
ARTICLE 12 MISCELLANEOUS............................................... 67
12.01. Notices..................................................... 67
12.02. [Reserved for Potential Future Use].......................... 69
12.03. [Reserved for Potential Future Use].......................... 69
12.04. Rules by Indenture Trustee and Agents....................... 69
12.05. Non-Business Days........................................... 69
12.06. GOVERNING LAW............................................... 69
12.07. No Recourse Against Others.................................. 69
12.08. Execution in Counterparts................................... 69
ARTICLE 13 ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE............... 70
13.01. Actions to Be Taken upon Termination of Lease............... 70
<PAGE>
iv
SIGNATURES................................................................. 71
Exhibit A-1 Form of Series 1993 747 A Installment Certificates
Exhibit A-2 Form of Series 1993 747 A Serial Certificates
Exhibit B Maturity Dates, Original Issue Prices, Principal Amounts and
Interest Rates of Series 1993 747 A Certificates
Exhibit B-1 Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 Issuance of Series 1993 747 A Certificates
Exhibit C Form of Trust Agreement and Third Amended and Restated Trust
Indenture and Mortgage Supplement
<PAGE>
THIRD AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE (1993 747 A)
This THIRD AMENDED AND RESTATED TRUST INDENTURE AND MORTGAGE (1993
747 A), dated as of May 1, 1995, between STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company corporation, not in its individual capacity except
as otherwise expressly provided herein, but solely as Owner Trustee under the
Trust Agreement (capitalized terms used herein having the respective meanings
specified therefor in Article 1), and FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, a national banking association, as Indenture Trustee hereunder.
W I T N E S S E T H:
-------------------
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Certificates issued hereunder, and (ii) the
Owner Trustee has been authorized and directed pursuant to the Redemption and
Refinancing Agreement to execute and deliver this Third Amended and Restated
Trust Indenture and Mortgage;
WHEREAS, all capitalized terms used herein shall have the
respective meanings set forth or referred to in Article 1 hereof;
WHEREAS, the Owner Trustee and the Indenture Trustee entered into
that certain Trust Indenture and Mortgage (1993 747 A), dated as of April 1,
1993 (the "Original Indenture"), which Original Indenture was recorded with the
Federal Aviation Administration on April 21, 1993 and was assigned Conveyance
No. FF08935;
WHEREAS, the Owner Trustee and the Indenture Trustee entered into
that certain First Amended and Restated Trust Indenture and Mortgage (1993 747
A), dated as of April 1, 1993 (the "First Amended and Restated Indenture"),
thereby amending and restating in its entirety the Original Indenture, which
First Amended and Restated Indenture was recorded with the Federal Aviation
Administration on May 6, 1993 and was assigned Conveyance No. VV003010;
WHEREAS, the Owner Trustee and the Indenture Trustee entered into
that certain Second Amended and Restated Trust Indenture and Mortgage (1993 747
A), dated as of July 1, 1994, thereby amending and restating in its entirety
the Original Indenture, which
<PAGE>
2
Second Amended and Restated Indenture was recorded with the Federal Aviation
Administration on August 10, 1994 and was assigned Conveyance No. ZZ006617 and
which was further amended by the First Amendment to Second Amended and Restated
Trust Indenture and Mortgage (1993 747 A) dated September 27, 1994 and assigned
conveyance No. JJ12459 (the "Amended Indenture");
WHEREAS, the parties desire by this Agreement, among other things,
(i) to further amend and restate in its entirety the Amended Indenture, (ii) to
provide for the issuance by the Owner Trustee of the Series 1993 747 A
Certificates evidencing the loans made by the Pass Through Trustees to finance
the Owner Trustee's payment of Lessor's Cost, as provided in the Redemption and
Refinancing Agreement, and (iii) to provide for the assignment, mortgage and
pledge by the Owner Trustee to the Indenture Trustee, as part of the Indenture
Estate hereunder, among other things, of certain of the Owner Trustee's right,
title and interest in and to the Aircraft and the Operative Documents and
certain payments and other amounts received hereunder or thereunder in
accordance with the terms hereof, as security for, among other things, the
Owner Trustee's obligations to the Indenture Trustee, for the ratable benefit
and security of the Holders;
WHEREAS, all things have been done to make the Certificates, when
executed by the Owner Trustee and authenticated and delivered by the Indenture
Trustee hereunder, the valid, binding and enforceable obligations of the Owner
Trustee; and
WHEREAS, all things necessary to make this Agreement the legal,
valid and binding obligation of the Owner Trustee and the Indenture Trustee,
for the uses and purposes herein set forth, in accordance with its terms, have
been done and performed and have happened;
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND MORTGAGE WITNESSETH, that,
to secure the prompt payment of the principal of, premium, if any, and interest
on, and all other amounts due with respect to, all Certificates from time to
time Outstanding and the performance and observance by the Owner Trustee of all
the agreements, covenants and provisions contained herein and in the Operative
Documents to which it is a party, for the benefit of the Holders, and for the
uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of other good and valuable
consideration the receipt and adequacy whereof are hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its
successors and assigns, for the
<PAGE>
3
security and benefit of the Holders from time to time, a 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, rights, interests and
privileges (which collectively, including all property hereafter specifically
subjected to the lien of this Agreement by any instrument supplemental hereto,
but excluding the Excluded Payments, are herein called the "Indenture Estate"):
(1) the Airframe and Engines (each such Engine having 750 or more
rated take-off horsepower or the equivalent thereof) and all replacements
thereof and substitutions therefor in which the Owner Trustee shall from
time to time acquire an interest in accordance with the Lease, as more
particularly described in the Trust Supplement and the Lease Supplement
executed and delivered with respect to the Aircraft or any such
replacements or substitutions therefor, as provided in this Agreement and
the Lease;
(2) the Lease and all Rent thereunder, including, without
limitation, all amounts of Basic Rent, Supplemental Rent, and payments of
any kind required to be made by the Company thereunder; all amounts
payable to the Owner Trustee under the Participation Agreement that do
not constitute Excluded Payments; the Purchase Agreement (to the extent
assigned by the Owner Trustee's Purchase Agreement), the Owner Trustee's
Purchase Agreement, the Owner Trustee's Bill of Sale, the Owner Trustee's
FAA Bill of Sale and any and all contracts relating to the Airframe and
Engines or any rights or interest therein to which the Owner Trustee is
now or may hereafter be a party; including, without limitation, all
rights of the Owner Trustee to receive any payments or other amounts or
to exercise any election or option or to make any decision or
determination or to give or receive any notice, consent, waiver or
approval or to take any other action under or in respect of any such
document or to accept surrender or redelivery of the Aircraft or any part
thereof, as well as all the rights, powers and remedies on the part of
the Owner Trustee, whether acting under any such document or by statute
or at law or in equity, or otherwise, arising out of any Lease Event of
Default (other than the rights of the Owner Trustee provided for
hereunder);
(3) all rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Lien of this
Agreement;
(4) all requisition 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) and all insurance proceeds with
respect to the Aircraft or any part thereof from insurance required to be
maintained by the Company under Section 11 of the Lease, but excluding
any insurance maintained by the Company and not required under Section 11
of the Lease;
<PAGE>
4
(5) all moneys and securities 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 Document and held or required to be held by the Indenture
Trustee hereunder;
(6) all proceeds of the foregoing; and
(7) the Additional Collateral, if any.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest granted by
this Agreement all Excluded Payments;
(b) (i) whether or not a Lease Event of Default or 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 Excluded Payments and to commence an
action at law to obtain such Excluded Payments, (b) to adjust Basic Rent
and the percentages relating to Stipulated Loss Value and Termination
Value, the Special Termination Value Percentage and the EBO Percentages
as provided in Section 3(c) of the Lease and Section 18 of the
Participation Agreement, (c) 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, Excluded Payments, (d) to
retain the rights of the "Lessor" with respect to solicitations of bids,
and the election to retain the Aircraft pursuant to Section 9 of the
Lease, (e) to exercise the right of "Lessor" to determine the fair market
rental value or fair market sales value pursuant to Section 19 of the
Lease, (f) to exercise all rights with respect to insurance maintained
for its own account which Section 11(e) of the Lease specifically confers
on the "Lessor" and (g) to exercise, to the extent necessary to enable it
to exercise its rights under Section 8.03(e)(i) hereof, the rights of the
"Lessor" under Section 21 of the Lease;
(ii) whether or not a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee and the
Indenture Trustee shall each have the right separately but not to the
exclusion of the other, (a) to receive from the Company all notices,
certificates, reports, filings, Opinions of Counsel, copies of all
documents and all information which the Company 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 Document, (b) to exercise
inspection rights pursuant to Section 12 of the Lease, (c) to maintain
separate insurance pursuant to Section 11(e) of the Lease and to retain
all rights with respect to such insurance maintained for its own account,
<PAGE>
5
(d) to give any notice of default under Section 15 of the Lease and to
declare the Lease in default in respect thereof, (e) to cause the Company
to take any action and execute and deliver such documents and assurances
as the "Lessor" may from time to time reasonably request pursuant to
Section 16 of the Lease; (f) to consent (with the concurrent consent of
the other such party to the extent such consent is required) to changes
to the list of countries on Exhibit F or G to the Lease and (g) to
purchase an engine pursuant to Section 5(e) of the Lease;
(iii) so long as no Indenture Event of Default shall have occurred
and be continuing (but subject to the provisions of Section 11.06), the
Owner Trustee shall retain the right, to the exclusion of the Indenture
Trustee, to exercise the following rights of the "Lessor" under the
Lease: (a) the right to approve as satisfactory any accountants,
engineers or counsel to render services for or issue opinions to the
Owner Trustee pursuant to express provisions of the Operative Documents,
(b) the right to waive the opinion required pursuant to Section
8(e)(ii)(C) of the Participation Agreement in connection with an Event of
Loss relating only to one or more Engines and (c) the right to elect (or
not to elect) under Section 10(b) of the Lease to require the Company to
pay the amounts set forth in clauses (A) and (B) of Section 10(b);
(c) the leasehold interest granted to the Company by the Lease
shall not be subject to the security interest granted by this Agreement,
and nothing in this Agreement shall affect the rights of the Company
under the Lease so long as no Lease Event of Default has occurred and is
continuing; and
(d) as between the Owner Trustee and the Indenture Trustee,
nothing contained in this Granting Clause shall prevent the Owner
Trustee, as the "Lessor" under the Lease, from seeking specific
performance of the covenants of the Company under the Lease relating to
the protection, insurance, maintenance, possession and use of the
Aircraft and from maintaining separate insurance with respect to the
Aircraft to the extent permitted by Section 11 of the Lease.
None of the payments and rights described in the foregoing clauses
(a) through (d) shall be included in the Indenture Estate.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property unto
the Indenture Trustee, its successors and assigns, in trust for the benefit and
security of the Indenture Trustee and the Holders from time to time, without
any priority of any one Certificate over any other, and for the uses and
purposes and subject to the terms and provisions set forth in this Agreement.
<PAGE>
6
1. The Owner Trustee agrees that this Agreement creates and
grants and is intended to and shall create and grant a security interest in the
Aircraft to the Indenture Trustee, which security interest attached on the
Delivery Date. The security interest created by this Agreement and granted to
the Indenture Trustee hereunder in the Indenture Estate other than in the
Aircraft attached upon the delivery of the Original Indenture Agreement.
2. It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Documents to which it is a party to perform all of its
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Documents to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee (except as to the
Indenture Trustee, if the Indenture Trustee shall have become the "Lessor"
under the Lease) or the Holders be required or obligated in any manner to
perform or fulfill any obligations of the Owner Trustee under any of the
Operative Documents to which the Owner Trustee is a party, or, except as herein
expressly provided, 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.
3. The Owner Trustee does hereby constitute the Indenture
Trustee the true 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 moneys and claims for moneys due and to
become due to the Owner Trustee (other than Excluded Payments) under or arising
out of the Lease (subject to Section 11.06(b)(1)), the Purchase Agreement and
the Owner Trustee's Purchase Agreement, to endorse any checks or other
instruments or orders in connection therewith and, to file any claims or take
any action or institute any proceedings which the Indenture Trustee may deem to
be necessary or advisable in the premises. The Owner Trustee has directed the
Company to make all payments of Rent (other than Excluded Payments) payable to
the Owner Trustee by the Company and all other amounts 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 as the Indenture Trustee shall specify,
for application as provided in this Agreement. The Owner Trustee agrees that
promptly on receipt thereof, it will transfer to the Indenture Trustee any and
all moneys from time to time received by it constituting part of the Indenture
Estate, for distribution by the Indenture Trustee pursuant to this Agreement,
except that the Owner Trustee shall accept for distribution pursuant to the
Trust Agreement any amounts distributed to it by the Indenture Trustee as
expressly provided in this Agreement and any Excluded Payments.
<PAGE>
7
4. 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
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 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 and 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 pursuant to any Operative Document.
5. The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to any Person other than the
Indenture Trustee, and that it will not, except as provided in or permitted by
this Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Documents, execute any waiver or
modification of, or consent under the terms of any of the Operative Documents,
settle or compromise any claim (other than claims in respect of Excluded
Payments) against the Company arising under any of the Operative Documents, or
submit or consent to the submission of any dispute, difference or other matter
arising under or in respect of any of the Operative Documents, to arbitration
thereunder.
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this
-----------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1, and include the plural as well as the
singular;
<PAGE>
8
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and
(4) all references in this Agreement to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following capitalized
terms have the following respective meanings:
"Actual Knowledge" means, (i) as it applies to the Owner
----------------
Trustee or Indenture Trustee, as the case may be, actual knowledge of a
responsible officer in the Corporate Trust Department or the Corporate Trust
Office, as the case may be, and (ii) as it applies to the Owner Participant,
actual knowledge of a Vice President or more senior officer of the Owner
Participant or other officer of the Owner Participant in each case having
responsibility for the transactions contemplated by the Operative Documents;
provided that each of the Owner Trustee, the Indenture Trustee and the Owner
Participant shall be deemed to have "Actual Knowledge" of any matter as to
which it has been given notice by any of Lessee, the Owner Participant, any
Holder, the Owner Trustee or the Indenture Trustee, such notice having been
given pursuant to and in accordance with Section 12.01.
"Additional Collateral" means any property in addition to the
---------------------
collateral listed in clauses (1) through (5) of the Granting Clause which may
be added to the Indenture Estate from time to time by the Owner Participant in
accordance with Section 9.12 hereof for so long as such property is to be
included in the Indenture Estate in accordance with the grant made in said
Section 9.12.
"Affiliate" with respect to a specified Person, means any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Paying Agent or Registrar.
-----
"Aircraft" shall have the meaning specified therefor in the
--------
Lease.
<PAGE>
9
"Airframe" shall have the meaning specified therefor in the
--------
Lease.
"Appraiser" means a Person engaged in the business of making
---------
appraisals and, in the case of the Aircraft, familiar with commercial aviation
equipment.
"Bankruptcy Code" shall have the meaning specified therefor in
---------------
the Lease.
"Basic Rent" shall have the meaning specified therefor in the
----------
Lease.
"Business Day" shall have the meaning specified therefor in the
------------
Lease.
"Certificate" or "Certificates" means any Certificate
----------- ------------
issued under this Agreement, including the Series 1993 747 A Certificates
issued hereunder substantially in the form of Exhibits A-1 and A-2 hereto as
such form may be varied pursuant to the terms hereof and any and all
Certificates issued in replacement or exchange therein in accordance with the
provisions hereof.
"Certificate Holder" shall have the meaning specified for the
------------------
term "Holder" hereunder.
"Citizen of the United States" shall have the meaning specified
----------------------------
therefor in the Lease.
"Commencement Date" shall have the meaning specified therefor
-----------------
in the Lease.
"Commencement Date Cash Interest" when used with respect to a
-------------------------------
Certificate, shall be such Certificate's pro rata portion of the
--- ----
aggregate commencement date cash interest as determined on the basis of the
data included in Exhibit B.
"Company" means United Air Lines, Inc., a Delaware corporation,
-------
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
---------------
executed on its behalf by a Responsible Company Officer.
"Co-Registrar" shall have the meaning specified therefor in
------------
Section 2.03.
"Debt" shall mean any liability for borrowed money, or any
----
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
<PAGE>
10
"Defaulted Installment" shall have the meaning specified
---------------------
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
------------------
in Section 2.08.
"Delivery Date" shall have the meaning specified therefor in
-------------
the Lease.
"EBO Date" shall have the meaning specified therefor in the
--------
Lease.
"Engine" shall have the meaning specified therefor in the
------
Lease.
"Event of Loss" shall have the meaning specified therefor in
-------------
the Lease.
"Excess Amount" shall have the meaning specified therefor in
-------------
the Lease.
"Excluded Payments" means (i) any right, title or interest of
-----------------
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective successors, permitted assigns,
directors, officers, employees, servants and agents to any payment which by the
terms of Section 7(b) or 7(c) of the Participation Agreement, Section 5.03 or
7.01 of the Trust Agreement or any section of the Tax Indemnity Agreement or
any corresponding payment under Section 3(d) of the Lease is payable to such
Person, (ii) any insurance proceeds payable under insurance maintained by the
Owner Trustee in its individual capacity or the Owner Participant (whether
directly or through the Owner Trustee), or to their respective Affiliates,
successors, permitted assigns, directors, officers, employees, servants and
agents, (iii) any insurance proceeds (or proceeds of governmental indemnities
in lieu thereof) payable to the Owner Trustee in its individual capacity or to
the Owner Participant, or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, under any
liability insurance maintained by the Company pursuant to Section 11 of the
Lease or by any other Person (or proceeds of governmental indemnities in lieu
thereof), (iv) any rights of the Owner Participant or the Owner Trustee to
demand, collect, sue for, or otherwise receive and enforce payment of the
foregoing amounts (including interest thereon to the extent provided in the
applicable provisions of the Operative Documents) and the right to declare an
Event of Default under the Lease in respect of any of the foregoing amounts,
but not including the right to exercise any remedies under the Lease except for
those specifically provided for in this clause (iv), (v) payments to the Owner
Participant by the Owner Trustee pursuant to Section 2 of the Participation
Agreement and any funds held by the Owner Trustee or payable to the Owner
Participant pursuant to any funding letter entered into in lieu of the
provisions of Section 2 of the Participation Agreement, (vi) if the Lessee has
assumed the obligations of the Owner Trustee in respect of the Certificates in
accordance with Section 7.03 hereof and Section 8(r) of the Participation
Agreement, the amount payable as purchase price pursuant to Section 19(b) of
the Lease, (vii) Transaction Expenses or other
<PAGE>
11
amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (viii) the respective
rights of the Owner Trustee in its individual capacity or the Owner Participant
to the proceeds of the foregoing and (ix) any right to demand, collect or
otherwise receive and enforce the payment of any amount described in clauses
(i) through (viii) above.
"Federal Aviation Act" shall have the meaning specified
--------------------
therefor in the Lease.
"Federal Aviation Administration" and "FAA" shall have the
------------------------------- ---
meaning specified therefor in the Lease.
"Holder" means a person in whose name a Certificate is
------
registered on the Register including, so long as it holds any Certificate
issued hereunder, the respective Pass Through Trustee under each Pass Through
Trust Agreement.
"Indenture Default" means any event which is, or after
-----------------
notice or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified therefor in
----------------
the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning
--------------------------
specified therefor in Article 8.
"Indenture Trustee" means (x) with respect to any time
-----------------
prior to the execution and delivery of the Redemption and Refinancing
Agreement, State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, and (y) at the time of the
execution and delivery of the Redemption and Refinancing Agreement and
thereafter, First Security Bank of Utah, National Association, a national
banking association, each and each other Person which may from time to time be
acting as Indenture Trustee in accordance with the provisions of this
Agreement.
"Independent" when used with respect to an engineer,
-----------
Appraiser or other expert, means an engineer, Appraiser or other expert who (i)
is in fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company, and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" shall mean an independent
-----------------------------
investment banking institution of national standing appointed by (i) the
Company on behalf of the Owner Trustee or (ii) in the case of a redemption or
purchase of the Certificates under
<PAGE>
12
Section 6.01(b) pursuant to Section 8.03(e)(ii), the Owner Trustee;
provided that, if the Indenture Trustee shall not have received written
- --------
notice of such an appointment at least 10 days prior to the relevant Redemption
Date or if a Lease Event of Default shall have occurred and be
continuing,"Independent Investment Banker" shall mean such an institution
-----------------------------
appointed by the Indenture Trustee.
"Installment Certificate" shall mean a Certificate
-----------------------
substantially in the form of Exhibit A-1, should any such Certificate be issued
hereunder.
"Installment Payment Amount" means, with respect to each
--------------------------
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
------------------------
installment payment of principal is due and payable on any Installment
Certificate, as set forth in Exhibit B-1.
"Installment Payment Percentage" means, with respect to
------------------------------
each Installment Payment Date, the percentage set forth opposite such
Installment Payment Date in Exhibit B-1;
provided that, after the occurrence of any partial redemption or
- --------
redemptions pursuant to clause (ii) of Section 6.01(a), the "Installment
------------
Payment Percentage" for each Installment Payment Date subsequent to the
- ------------------
applicable Redemption Date shall be equal to the percentage obtained from the
following calculation:
(p - n) x y
-----------
p x s
where, for Installment Certificates maturing on the same Maturity Date:
p = the sum of the original principal amounts of all Installment
Certificates maturing on such Maturity Date as reflected on
Exhibit B hereto;
n = the sum of the principal amounts paid to all holders of
Installment Certificates maturing on such Maturity Date as a
result of all such partial redemptions (excluding any
Installment Payment Amounts paid on a Redemption Date as a
result of any such Redemption Date occurring on an
Installment Payment Date) and all payments of principal paid
on Installment Payment Dates on or prior to the applicable
Redemption Date;
<PAGE>
13
y = the Installment Payment Percentage set forth in such Exhibit
B-1 applicable to the Installment Payment Date for which this
calculation is being performed; and
s = the sum of the Installment Payment Percentages for
Installment Payment Dates related to such Installment
Certificates maturing on such Maturity Date and subsequent to
the applicable Redemption Date.
"Interest Payment Date" means each [October 19] and
---------------------
[April 19], commencing on the Commencement Date.
"Lease" means (x) with respect to any time prior to the
-----
execution and delivery of the Redemption and Refinancing Agreement, that
certain Lease Agreement (1993 747 A), dated as of April 1, 1993, between the
Original Owner Trustee, as lessor, and the Company, as lessee, recorded by the
FAA on April 21, 1993, and assigned Conveyance No. FF08936, as amended and
restated by the First Amended and Restated Lease Agreement (1993 747 A), dated
as of April 1, 1993, between the Original Owner Trustee, as lessor, and the
Company, as lessee, recorded by the FAA on May 6, 1993 and assigned Conveyance
No. VV003011 and as amended by the First Amendment to First Amended and
Restated Lease Agreement (1993 747 A), dated as of April 19, 1994, between the
Original Owner Trustee, as lessor, and the Company, as lessee, recorded by the
FAA on June 15, 1994 and assigned Conveyance No. HK002085, and as amended by
the Second Amendment to First Amended and Restated Lease Agreement (1993 747
A), dated as of July 1, 1994, between the Original Owner Trustee, as lessor,
and the Company, as lessee, recorded by the FAA on August 10, 1994 and assigned
Conveyance No. ZZ000018, as amended by the Third Amendment to First Amended and
Restated Lease Agreement (1993 747 A), dated July 22, 1994, between the
Original Owner Trustee, as lessor, and the Company, as lessee, recorded by the
FAA on August 18, 1994 and assigned Conveyance No. ZZ006619 (the "Restated
Lease") and (y) at the time of the execution and delivery of the Redemption and
Refinancing Agreement and thereafter, the Restated Lease, as Amended and
Restated by the Second Amended and Restated Lease Agreement (1993 747 A), dated
May 1, 1995, as such Lease Agreement may from time to time be further
supplemented, amended or modified in accordance with the terms thereof and this
Agreement. The term "Lease" shall also include each Lease Supplement
-----
entered into pursuant to the terms of the Lease.
"Lease Event of Default" shall have the meaning specified
----------------------
for the term "Event of Default" in the Lease.
"Lease Loss Payment Date" shall have the meaning specified
-----------------------
for the term "Loss Payment Date" in the Lease.
"Lease Supplement" shall have the meaning specified
----------------
therefor in the Lease.
<PAGE>
14
"Lease Termination Date" shall have the meaning
----------------------
specified for the term "Termination Date" in the Lease.
"Lessor Liens" shall have the meaning specified therefor in
------------
the Lease.
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
----
lease, exercise of rights, security interest or claim.
"Loan Certificate" shall have the meaning specified for
----------------
the term "Certificate" hereunder.
"Maturity Date" means each of the dates specified in
-------------
Exhibit B as a maturity date of one or more of the Certificates.
"Officers' Certificate" means a certificate signed, in the
---------------------
case of the Company, by (i) the Chairman of the Board of Directors, the
President, or any Senior Vice President of the Company, signing alone, or (ii)
any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company or, in the
case of the Owner Trustee, a Responsible Officer of the Owner Trustee.
"Operative Documents" means this Agreement, the
-------------------
Participation Agreement, the Redemption and Refinancing Agreeement, the Lease,
the Tax Indemnity Agreement, the Consent and Agreement, the Owner Trustee's
Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Acceptance Certificate,
the Purchase Agreement (to the extent assigned by the Owner Trustee's Purchase
Agreement), the Owner Trustee's Purchase Agreement, the Certificates, the Trust
Agreement, the Trust Supplement and the Redemption and Refinancing Agreement.
"Opinion of Counsel" means a written opinion of legal
------------------
counsel, who in the case of counsel for the Company may be (i) the senior
attorney employed by the Company, (ii) Vedder, Price, Kaufman & Kammholz or
(iii) other counsel designated by the Company and who shall be reasonably
satisfactory to the Indenture Trustee or, in the case of legal counsel for the
Owner Trustee, may be (x) Bingham, Dana & Gould or (y) other counsel designated
by the Owner Trustee and who shall be reasonably satisfactory to the Indenture
Trustee.
"Original Issue Price", when used with respect to a
--------------------
Certificate, shall be such Certificate's pro rata portion of the
--- ----
aggregate original issue price as determined on the basis of the data included
in Exhibit B hereto.
<PAGE>
15
"Outstanding", when used with respect to Certificates,
-----------
means, as of the date of determination, all Certificates theretofore executed
and delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture Trustee
or delivered to the Indenture Trustee for cancellation pursuant to
Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided that
--------
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement;
provided, however, that in determining whether the Holders of the
- -------- -------
requisite aggregate principal amount of Certificates Outstanding have given any
request, demand, authorization, declaration, direction, notice, consent or
waiver hereunder, Certificates owned by or pledged to the Company or any
Affiliate of the Company or the Owner Trustee or the Owner Participant or any
Affiliate thereof, shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Indenture Trustee shall be protected in
relying upon any such request, demand, authorization, declaration, direction,
notice, consent or waiver, only Certificates which the Indenture Trustee knows
to be so owned or so pledged shall be disregarded. Certificates owned by the
Company, or the Owner Trustee or the Owner Participant, which have been pledged
in good faith may be regarded as Outstanding if the Company, or the Owner
Trustee or the Owner Participant, as the case may be, establishes to the
satisfaction of the Indenture Trustee the pledgee's right to act with respect
to such Certificates and that the pledgee is not the Company, or the Owner
Trustee or the Owner Participant or any Affiliate thereof.
"Owner Participant" shall be the party specified as the
-----------------
"Owner Participant" in the Participation Agreement, its successors and, to the
extent permitted by Article VIII of the Trust Agreement and Section 8(l) of the
Participation Agreement, its permitted successors and assigns.
"Owner Trustee" means (x) with respect to any time prior to
-------------
the execution and delivery of the Redemption and Refinancing Agreement,
Wilmington Trust Company, a Delaware banking corporation, and (y) at the time
of the execution and delivery of the Redemption and Refinancing Agreement and
thereafter, State Street Bank and Trust Company, a Massachusetts trust company,
not in its individual capacity, but solely as trustee
<PAGE>
16
under the Trust Agreement, and each other Person which may from time to time be
acting as Owner Trustee in accordance with the provisions of the Operative
Documents.
"Owner Trustee's Purchase Agreement" shall have the meaning
----------------------------------
specified therefor in the Lease.
"Participation Agreement" shall have the meaning specified
-----------------------
therefor in the Lease.
"Parts" shall have the meaning specified therefor in the
-----
Lease.
"Pass Through Certificates" means any of the Pass Through
-------------------------
Certificates issued pursuant to any of the Pass Through Trust Agreements.
"Pass Through Trust" means each pass through trust created
------------------
pursuant to the related Pass Through Trust Agreement.
"Pass Through Trust Agreements" means the Pass Through Trust
-----------------------------
Agreement, dated as of February 1, 1992, as amended and restated as of May 1,
1995, between the Company and the Pass Through Trustee as supplemented by each
of the two Pass Through Trust Supplements Nos. 1995 A-1 and 1995 A-2, each
dated as of May [ ], 1995, as the same may from time to time be further
amended, supplemented or otherwise modified.
"Pass Through Trust Supplement" shall have the meaning
-----------------------------
specified for the term "Trust Supplement" in the Pass Through Trust Agreement.
"Pass Through Trustee" means First Security Bank of Utah,
--------------------
National Association in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be acting as
successor trustee under any such Pass Through Trust Agreement.
"Paying Agent" means any person acting as Paying Agent
------------
hereunder pursuant to Section 2.03.
"Permitted Investment" means each of (i) obligations of, or
--------------------
guaranteed by, the United States Government or agencies thereof, (ii) open
market commercial paper of any corporation incorporated under the laws of the
United States of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent
by Standard & Poor's Corporation, (iii) certificates of deposit issued by
commercial banks organized under the laws of the United States or of any
political subdivision thereof having a combined capital and surplus in excess
of $500,000,000 which banks or their holding companies have a rating of A or
its equivalent by Moody's Investors
<PAGE>
17
Service or Standard & Poor's Corporation; provided, however, that
-------- -------
the aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not exceed 5% of such bank's capital and surplus,
(iv) U.S. dollar denominated offshore certificates of deposit issued by, or
offshore time deposits with, any commercial bank described in clause (iii) or
any subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $500,000,000 with
any of the obligations described in clauses (i) through (iv) as collateral.
"Permitted Lien" shall have the meaning specified therefor
--------------
in the Lease.
"Person" means any individual, corporation, partnership,
------
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Pre-Commencement Date Period" means, with respect to any
----------------------------
Certificate, the period commencing on the date of the original issuance of such
Certificate and ending on and including the day immediately preceding the
Commencement Date.
"Premium" or "premium" shall have the meaning specified
------- -------
in Section 6.01(b) hereto.
"Premium Termination Date" means, with respect to a
------------------------
Certificate, the date set forth below opposite the Maturity Date of such
Certificate:
Premium
Certificates Maturity Date Termination Date
------------ ------------- ----------------
Series [1993 747 A-1]
Certificate [_________] [_________]
Series [1993 747 A-2]
Certificate [_________] [_________]
"Purchase Agreement" shall have the meaning specified
------------------
therefor in the Lease.
"Purchase Option Date" shall have the meaning specified
--------------------
therefor in the Lease.
"Record Date" for the interest or Installment Payment
-----------
Amount payable on any Certificate on any Interest Payment Date or Installment
Payment Date (other than the Maturity Date) for such Certificate, as the case
may be, means the calendar day (whether or not a Business Day) which is 15
calendar days prior to the related Interest Payment Date or the related
Installment Payment Date.
<PAGE>
18
"Redemption and Refinancing Agreement" shall have the meaning
------------------------------------
specified therefor in the lease.
"Redemption Date" means the date on which the Certificates
---------------
are to be redeemed or purchased pursuant to Section 6.01 or Section 6.02, as
the case may be, as specified in the notice delivered pursuant to Section 6.03
hereof.
"Redemption Price" means the price at which the
----------------
Certificates are to be redeemed or purchased, determined as of the applicable
Redemption Date, pursuant to Section 6.01 or Section 6.02, as the case may be;
provided, however, that in the case of a Certificate which is
- -------- -------
issued at a discount which shall become due and payable (upon redemption,
acceleration or otherwise) and shall be paid or shall be purchased during the
Pre-Commencement Date Period, the Redemption Price or purchase price therefor
shall be the amount payable upon such Certificate becoming due and payable and
being paid during the Pre-Commencement Date Period as specified therein.
"Refinancing Date" shall mean the date designated by the
----------------
Lessee as the date for a refinancing of the Certificates in accordance with
Section 17 of the Participation Agreement.
"Register" shall have the meaning specified therefor in
--------
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
---------
pursuant to Section 2.03.
"Rent" shall have the meaning specified therefor in the Lease.
----
"Replacement Airframe" shall have the meaning specified
--------------------
therefor in the Lease.
"Replacement Engine" shall have the meaning specified
------------------
therefor in the Lease.
"Responsible Company Officer" means, with respect to the
---------------------------
Company, its Chairman of the Board, its President, any Senior Vice President,
the Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Senior Vice President, Chief Financial Officer, Vice
President or Treasurer and (b) whose responsibilities include the
administration of the transactions and agreements, including the Lease,
contemplated by the Participation Agreement.
"Responsible Officer", with respect to the Owner Trustee or
-------------------
the Indenture Trustee, shall mean any officer in its Corporate Trust
Administration Department or any
<PAGE>
19
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with a
particular subject.
"SEC" means the Securities and Exchange Commission.
---
"Series 1993 747 A Certificate" means any Certificate
-----------------------------
issued by the Owner Trustee under this Agreement substantially in the form of
Exhibit A-1 or A-2, and any and all of the Series 1993 747 A Certificates
issued in replacement or exchange thereof in accordance with the provisions
hereof.
"Special Purchase Option Date" shall have the meaning
----------------------------
specified therefor in the Lease.
"Stipulated Loss Value" shall have the meaning specified
---------------------
therefor in the Lease.
"Supplemental Rent" shall have the meaning specified
-----------------
therefor in the Lease.
"Tax Indemnity Agreement" shall have the meaning specified
-----------------------
therefor in the Lease.
"Termination Value" shall have the meaning specified
-----------------
therefor in the Lease.
"Treasury Yield" means, with respect to each Certificate to be
--------------
redeemed or purchased, (x) in the case of a Certificate having a maturity less
than one year after the applicable redemption or purchase date, the average
yield to stated maturity on a government bond equivalent basis of the
applicable United States Treasury Bill due the week of the maturity of such
Certificate or (y) in the case of a Certificate having a maturity of one year
or more after the applicable redemption or purchase date, the average yield to
stated maturity of the most comparable United States Treasury Notes or Bonds as
identified by an independent investment banker, corresponding in maturity to
the Remaining Weighted Average Life (as defined below) of such Certificate (or,
if there is no maturity corresponding to such Remaining Weighted Average Life,
an interpolation of maturities by such independent investment banker), in each
case under (x) and (y) above determined by such independent investment banker
based on the average of the yields to stated maturity determined from the bid
prices on the fourth Business Day preceding the applicable redemption or
purchase date. For purposes hereof, "Remaining Weighted Average Life" means,
for any Certificate, at the redemption or purchase date of such Certificate,
the number of years obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the maturity date of such Certificate,
by (ii) the number of years (calculated to the
<PAGE>
20
nearest one-twelfth) which will elapse between the redemption or purchase date
and the regular distribution dates as of such scheduled payments of principal,
by (b) the then outstanding principal amount (including accretion of discount)
of such Certificate.
"Trust Agreement" shall have the meaning specified therefor
---------------
in the Lease.
"Trust Indenture Act" means the Trust Indenture Act of
-------------------
1939, as amended.
"Trust Indenture and Mortgage" or "this Agreement"
----------------------------
means this Third Amended and Restated Trust Indenture and Mortgage (1993 747
A), as the same may from time to time be supplemented, amended or modified.
"Trust Indenture Estate" shall have the meaning specified
----------------------
for the term "Indenture Estate" hereunder.
"Trust Office" shall mean the principal corporate trust
------------
office of the Owner Trustee located at 225 Franklin Street, Boston,
Massachusetts 02110, Attention: Corporate Trust Department, or at such other
office at which the Owner Trustee's corporate trust business shall be
administered which the Owner Trustee shall have specified by notice in writing
to the Company, the Indenture Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust
----------------
Agreement and this Agreement in the form of Exhibit C hereto.
"Trustee's Liens" shall have the meaning specified therefor
---------------
in Section 9.10.
"United States" or "U.S." means the United States of
------------- ----
America.
"U.S. Government Obligations" means securities that are
---------------------------
direct obligations of the United States or agencies or instrumentalities
thereof for the payment of which the full faith and credit of the United States
are pledged which are not callable or redeemable, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt so long as such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
<PAGE>
21
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. The
-----------------------------
Certificates issued hereunder shall be designated as Series 1993 747 A
Certificates. The Installment Certificates and the Serial Certificates shall
be substantially in the form set forth in Exhibit A-1 or A-2, respectively.
The Certificates originally issued hereunder shall be dated the date of
issuance thereof and shall be issued in the maturities and principal amounts
and at the Original Issue Prices, shall provide for Commencement Date Cash
Interest, if any, and shall bear interest during and after the Pre-Commencement
Date Period at the rates per annum, in each case as specified in or determined
pursuant to Exhibit B. The principal of each Certificate, other than
Installment Certificates, shall be payable in full on the Maturity Date for
such Certificate. The principal of each Installment Certificate shall be
payable in installments, on each Installment Payment Date, in amounts equal to
the Installment Payment Amount for such Installment Payment Date. Each
Certificate shall be issued to the Pass Through Trustee under each of the Pass
Through Trust Agreements, as set forth in Exhibit B-2.
The Certificates shall be issued in registered form only. The
Certificates shall be issued in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that
is not an integral multiple of $1,000.
The Certificates are not redeemable or subject to purchase prior to
maturity except as provided in this Agreement. Interest accrued on the
Certificates shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.02. Execution and Authentication. (a)
----------------------------
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its President, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates no longer holds that office at the time the Certificate is
executed on behalf of the Owner Trustee, the Certificate shall be valid
nevertheless.
(c) At any time and from time to time after the execution of the
Certificates, the Owner Trustee may deliver such Certificates to the Indenture
Trustee for authentication and, subject to the provisions of Section 2.10, the
Indenture Trustee shall authenticate the Certificates by manual signature upon
written orders of the Owner Trustee. Certificates shall be authenticated on
behalf of the Indenture Trustee by any authorized officer or signatory of the
Indenture Trustee.
<PAGE>
22
(d) A Certificate shall not be valid or obligatory for any
purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of an officer
of the Owner Trustee as provided in Section 2.02(a) and until authenticated on
behalf of the Indenture Trustee by the manual signature of an authorized
officer or signatory of the Indenture Trustee as provided in Section 2.02(c).
Such signatures shall be conclusive evidence that such Certificate has been
duly executed, authenticated and issued under this Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
--------------------------
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and Paying
Agent.
Section 2.04. Transfer and Exchange. At the option of the
---------------------
Holder thereof, Certificates may be exchanged for an equal aggregate principal
amount of other Certificates of the same maturity and type and of any
authorized denominations or transferred upon surrender of the Certificates to
be exchanged or transferred at the principal corporate trust office of the
Indenture Trustee, or at any office or agency maintained for such purpose
pursuant to Section 2.03. Whenever any Certificates are so surrendered for
exchange, the Owner Trustee shall execute, and the Indenture Trustee shall
authenticate and deliver, the replacement Certificates, dated the same date as
the Certificate or Certificates being replaced which the Holder making the
exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing.
<PAGE>
23
No service charge shall be made to a Holder for any registration of
transfer or exchange of Certificates, but the Registrar may, as a condition to
any transfer or exchange hereunder, require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Certificates.
The Registrar shall not be required to register the transfer of or
to exchange any Certificate called for redemption or purchase pursuant to such
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates.
---------------------------------------
(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, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semi-annually on or before each
Interest Payment Date, and 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.
(b) Ownership of the Certificates shall be proved by the Register
kept by the Registrar. Prior to due presentment for registration of transfer
of any Certificate, the Owner Trustee, the Owner Participant, the Company, the
Indenture Trustee, the Paying Agent and the Registrar may deem and treat the
Person in whose name any Certificate is registered as the absolute owner of
such Certificate for the purpose of receiving payment of principal (including,
subject to the provisions herein regarding the applicable Record Dates,
Installment Payment Amounts) of, premium, if any, and interest on such
Certificate and for all other purposes whatsoever, whether or not such
Certificate is overdue, and none of the Owner Trustee, the Indenture Trustee,
the Paying Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
-------------------------------------
Certificates. If any Certificate shall become mutilated, destroyed, lost
- ------------
or stolen, the Owner Trustee shall, upon the written request of the Holder of
such Certificate, issue and execute, and the Indenture Trustee shall
authenticate and deliver, in replacement thereof, as applicable, a new
Certificate of the same type and having the same maturity, payable to the same
Holder in the same principal amount and dated the same date as the Certificate
so mutilated, destroyed, lost or stolen. If the Certificate being replaced has
become mutilated, such Certificate shall be surrendered to the Indenture
Trustee. If the Certificate being replaced has been destroyed, lost or stolen,
the Holder of such Certificate shall furnish to the Owner Trustee and the
Indenture Trustee such security or indemnity as may be required by it to save
the Owner Trustee and the Indenture Trustee harmless and evidence satisfactory
to the Owner
<PAGE>
24
Trustee and the Indenture Trustee of the destruction, loss or theft of such
Certificate and of the ownership thereof.
Section 2.07. Cancellation. The Registrar and any Paying
------------
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal and
------------------------------------------------
Interest. (a) The Indenture Trustee will arrange directly with any
- --------
Paying Agent for the payment, or the Indenture Trustee will make payment, all
pursuant to Section 2.09, of the principal of, premium, if any, and interest on
the Certificates at the principal corporate trust office of the Indenture
Trustee or at any office or agency maintained for such purpose to Section 2.03
hereof. All payments in respect of the Certificates shall be made in such coin
or currency of the United States as at the time of payment in legal tender for
payment of public and private debts. Payments (other than on the Maturity Date
therefor or on the Redemption Date in respect of the redemption in whole
thereof) on Certificates shall be made to the Holder thereof at the close of
business on the relevant Record Date; provided, however, that the
-------- -------
Paying Agent will, at the request of the Indenture Trustee and may, at its
option, pay such interest, premium or principal by check mailed to such
Holder's address as it appears on the Register. Principal of Certificates and
premium, if any, with respect thereto, shall (except as provided pursuant to
the immediately preceding sentence) be payable only against presentation and
surrender thereof at the principal corporate trust office of the Indenture
Trustee or at the office of the Paying Agent maintained for such purpose
pursuant to Section 2.03.
A Holder shall have no further interest in, or other right with
respect to, the Indenture Estate when and if the principal amount of, premium,
if any, and interest on all Certificates held by such Holder and all other sums
payable to such Holder hereunder, under such Certificates and under the
Participation Agreement shall have been paid in full.
(b) Any Installment Payment Amount payable on an Installment
Payment Date (other than the Maturity Date with respect to a Certificate) or
any interest payable on an Interest Payment Date on any Certificate which is
not punctually paid on such Installment Payment Date or such Interest Payment
Date, as the case may be (herein called, respectively, a "Defaulted
Installment" and "Defaulted Interest"), shall forthwith cease to be payable to
the Holder on the relevant Record Date by virtue of his having been such
Holder; and such Defaulted Installment or Defaulted Interest may be paid by the
Indenture Trustee, at its election in each case, as provided in clause (1) or
(2) below:
<PAGE>
25
(1) The Indenture Trustee may elect to make payment of any
Defaulted Installment or Defaulted Interest, as the case may be, to the
person in whose name any Certificate is registered at the close of
business on a special record date for the payment of such Defaulted
Installment or Defaulted Interest, as the case may be, which shall be
fixed in the following manner. The Indenture Trustee shall notify the
Paying Agent in writing of the amount of Defaulted Installment or
Defaulted Interest, as the case may be, proposed to be paid on each such
Certificate and the date of the proposed payment, and at the same time
the Indenture Trustee shall make arrangements to set aside an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Installment or Defaulted Interest, as the case may be,
prior to the date of the proposed payment, to be held in trust for the
benefit of the Persons entitled to such Defaulted Installment or
Defaulted Interest, as the case may be, as this clause provides and shall
fix a special record date for the payment of such Defaulted Installment
or Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner Trustee,
the Company and the Registrar of such special record date and shall cause
notice of the proposed payment of such Defaulted Installment or Defaulted
Interest, as the case may be, and the special record date therefor to be
mailed, first class postage prepaid, to each Holder at its address as it
appears in the Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor having been mailed, as aforesaid, such Defaulted
Installment or Defaulted Interest, as the case may be, shall be paid to
the Persons in whose names the applicable Certificates are registered on
such special record date and shall no longer be payable pursuant to the
following clause (2).
(2) The Indenture Trustee may make, or cause to be made, payment
of any Defaulted Installment or Defaulted Interest, as the case may be,
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which Certificates may be listed, and upon such
notice as may be required by such exchange, if such payment shall be
deemed practicable by the Indenture Trustee.
(c) The Indenture Trustee shall require each Paying Agent to
agree in writing that such Paying Agent will hold in trust, for the benefit of
the Holders of the Certificates and the Indenture Trustee, all money held by
the Paying Agent for the payment of the principal of, premium, if any, or
interest and shall give to such Indenture Trustee notice of any default in the
making of any such payment upon the Certificates. The Indenture Trustee at any
time may require a Paying Agent to repay to the Indenture Trustee all money
held by it. Upon so doing the Paying Agent shall have no further liability for
the money so paid.
<PAGE>
26
Section 2.09. Payment from Indenture Estate Only; Non-Recourse
-------------------------------------------------
Obligations. All amounts payable by the Indenture Trustee and the Owner
- -----------
Trustee under the Certificates and this Agreement shall be made only from the
income and proceeds of the Indenture Estate. Each Holder of a Certificate, by
its acceptance of such Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate for the payment of such amounts, to
the extent available for distribution to it as herein provided, and (b) none of
the Owner Trustee, the Owner Participant or the Indenture Trustee is or shall
be personally liable to the Holder of any Certificate for any amount payable
under such Certificate or this Agreement or, except as expressly provided in
this Agreement in the case of the Owner Trustee and the Indenture Trustee, for
any liability thereunder.
State Street Bank and Trust Company is entering into this Agreement
solely as Owner Trustee under the Trust Agreement and not in its individual
capacity, and in no case whatsoever shall State Street Bank and Trust Company
(or any entity acting as successor trustee under the Trust Agreement) be
personally liable for, or for any loss in respect of, any statements,
representations, warranties, agreements or obligations hereunder or thereunder;
provided that State Street Bank and Trust Company shall be liable hereunder
- --------
in its individual capacity, (i) for the performance of its agreements in its
individual capacity under Section 8 of the Participation Agreement, (ii) for
its own willful misconduct or gross negligence, and (iii) for the failure to
use ordinary care in the disbursement of funds. If a successor Owner Trustee
is appointed in accordance with the terms of the Trust Agreement and the
Participation Agreement, such successor Owner Trustee shall, without any
further act, succeed to all of the rights, duties, immunities and obligations
hereunder, and its predecessor Owner Trustee and State Street Bank and Trust
Company shall be released from all further duties and obligations hereunder,
without prejudice to any claims against State Street Bank and Trust Company or
such predecessor Owner Trustee for any default by State Street Bank and Trust
Company or such predecessor Owner Trustee, respectively, in the performance of
its obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of Certificates
----------------------------------------------
upon Original Issuance. The Owner Trustee shall issue and execute, and
- ----------------------
the Indenture Trustee shall authenticate and deliver, the Certificates for
original issuance upon payment to the Indenture Trustee of an amount equal to
its Original Issue Price. Each Certificate shall (except for those issued
pursuant to Section 2.04 or Section 2.06) be dated the date of its issuance.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
<PAGE>
27
Section 3.02. Payment in Case of Redemption or Purchase of
---------------------------------------------
Certificates. Except as otherwise provided in Section 3.05, in the event the
- ------------
Certificates are redeemed or purchased in accordance with the provisions of
Section 6.01 or 6.02, the Indenture Trustee will apply on the Redemption Date
any amounts then held by it in the Indenture Estate and received by it from or
on behalf of the Company or the Owner Trustee in the following order of
priority:
first, so much thereof as was received by the Indenture
-----
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to
------
pay an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01 or 6.02, as the case may be, on the
Redemption Date shall be applied to the redemption or purchase of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter
-----
shall be distributed to the Owner Trustee to be held or distributed to
the Owner Participant in accordance with the terms of the Trust
Agreement.
Section 3.03. Application of Rent When No Indenture Event of
-----------------------------------------------
Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04,
- ---------------------
3.05 or 3.06, each amount of Excess Amount or Rent received by the Indenture
Trustee from the Owner Trustee or the Company, together with any amount
received by the Indenture Trustee pursuant to Section 8.03(e) shall be
distributed by the Indenture Trustee in the following order of priority:
first, so much of such aggregate amount as shall be
-----
required to pay in full the interest, principal of, premium (to the
extent received by the Indenture Trustee from the Company as Supplemental
Rent), if any, then due on, all Outstanding Certificates shall be
distributed to the Persons entitled thereto; and in case such payments or
amounts shall be insufficient to pay in full the whole amount so due and
unpaid, then to the payment of such interest, principal and premium, if
any, without any preference or priority of one Certificate over another,
ratably according to the aggregate amount so due for interest, principal
and premium, if any, at the date fixed by the Indenture Trustee for the
distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall
------
be required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such amounts;
and
<PAGE>
28
third, the balance, if any, of such aggregate amount
-----
remaining thereafter shall be distributed to the Owner Trustee to be held
or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
Section 3.04. Application of Certain Payments in Case of
------------------------------------------
Requisition or Event of Loss. Except as otherwise provided in Section 3.05,
- ----------------------------
any amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other party pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not at the time required to be paid to the Company pursuant to
said Section 10, and any amounts of insurance proceeds for damage to the
Indenture Estate received directly or otherwise pursuant to the Lease from any
insurer pursuant to Section 11 of the Lease with respect thereto as the result
of an Event of Loss, to the extent such amounts are not at the time required to
be paid to the Company pursuant to said Section 11, shall, except as otherwise
provided in the next sentence, be applied by the Indenture Trustee on behalf of
the Owner Trustee in reduction of the Company's obligations to pay Stipulated
Loss Value and the other amounts payable by the Company pursuant to Section 10
of the Lease and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease. Any portion of any such amount
referred to in the preceding sentence which is not required to be so paid to
the Company pursuant to the Lease, solely because a Lease Event of Default
shall have occurred and be continuing, shall be held by the Indenture Trustee
on behalf of the Owner Trustee as security for the obligations of the Company
under the Lease and at such time as there shall not be continuing any Lease
Event of Default or such earlier time as shall be provided for in the Lease,
such portion shall be paid to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease, unless the Indenture Trustee (as
assignee from the Owner Trustee of the Lease) shall have theretofore declared
the Lease to be in default pursuant to Section 15 thereof, in which event such
portion shall be distributed forthwith upon such declaration in accordance with
the provisions of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture Event of
-------------------------------------------------
Default. All payments (except Excluded Payments) received and amounts
- -------
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and be continuing (including any amounts realized by the
Indenture Trustee from the exercise of any remedies pursuant to Article 8), as
well as all payments or amounts then held or thereafter received by the
Indenture Trustee as part of the Indenture Estate while such Indenture Event of
Default shall be continuing, shall be 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 the Indenture Trustee all amounts then due it pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such amounts;
<PAGE>
29
second, so much of such payments or amounts remaining as
------
shall be required to pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or services
rendered or contracted for if the amount of such expenses is liquidated)
in using, operating, storing, leasing, controlling or managing the
Indenture Estate, and of all maintenance, insurance, repairs,
replacements, alterations, additions and improvements of and to the
Indenture Estate and to make all payments which the Indenture Trustee may
be required or may elect to make, if any, for taxes, assessments,
insurance or other proper charges upon the Indenture Estate or any part
thereof (including the employment of engineers and accountants to examine
and make reports upon the properties, books and records of the Owner
Trustee and, to the extent permitted under the Lease, the Company), all
in accordance with Section 8.03(c), shall be applied for such purposes;
third, so much of such payments or amounts remaining as
-----
shall be required to pay the principal of, premium, if any, to the extent
payable by the Owner Trustee pursuant to Section 6.0l(b)(ii) or to the
extent received by the Indenture Trustee from the Company as Supplemental
Rent, and accrued interest, on all Certificates Outstanding, whether by
declaration of acceleration pursuant to Section 8.02 or otherwise, shall
be applied to the payment of such interest, principal and premium, if
any, and in case such payments or amounts shall be insufficient to pay in
full the whole amount so due and unpaid, then to the payment of such
interest principal and premium, if any, without any preference or
priority of one Certificate over another, ratably according to the
aggregate amount so due for interest, principal and premium, if any, at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
------
remaining thereafter shall be held by the Indenture Trustee as collateral
security for the obligations secured hereby until such time as no
Indenture Event of Default shall be continuing hereunder or the
Certificates have been accelerated and all amounts due thereon have been
paid, at which time such payments or amounts shall be distributed to the
Owner Trustee to be held or distributed in accordance with the terms of
the Lease, the Participation Agreement and the Trust Agreement;
provided that at such time as one or more Lease Events of Default
--------
shall have occurred and any such Lease Event of Default shall have
continued for a period of 180 days during which time the Certificates
could, but shall not, have been accelerated pursuant to Section 8.02,
such amounts shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the Participation
Agreement and the Trust Agreement so long as no Indenture Event of
Default exists other than by virtue of such Lease Event of Default.
Section 3.06. Payments for Which Application Is Provided in
---------------------------------------------
Other Documents. Except as otherwise provided in this Agreement, any payment
- ---------------
received by the
<PAGE>
30
Indenture Trustee for which provision as to the application thereof is made in
the Lease or any other Operative Document shall be distributed to the Person
for whose benefit such payments were made. The Indenture Trustee shall be
obligated to distribute any Excluded Payments received by the Indenture Trustee
promptly upon receipt thereof by the Indenture Trustee to the Person entitled
thereto.
Section 3.07. Payments for Which No Application Is Otherwise
----------------------------------------------
Provided. Except as otherwise provided in Section 3.05:
- --------
(a) any payment received by the Indenture Trustee for which no
provision as to the application thereof is made elsewhere in this
Agreement, and
(b) any payment received and amounts realized by the Indenture
Trustee with respect to the Aircraft to the extent received or realized
at any time after the conditions set forth in Article 10 for the
satisfaction and discharge of this Agreement or for the defeasance of the
Certificates shall have been satisfied, as well as any other amounts
remaining as part of the Indenture Estate after such satisfaction shall
be distributed by the Indenture Trustee in the following order of
priority:
first, so much of such aggregate amount as shall be
-----
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance if any, of such aggregate amount
------
remaining thereafter shall be distributed to the Owner Trustee to
be held or distributed in accordance with the terms of the Trust
Agreement.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
------------------------------
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually pay the principal
of, premium, if any, and interest on and other amounts due under the
Certificates, provided it or the Indenture Trustee has funds in the Trust
Estate for this purpose;
(ii) the Owner Trustee will, in its individual capacity, not
directly or indirectly create, incur, assume or suffer to exist any
Lessor Lien attributable to it in
<PAGE>
31
its individual capacity with respect to any of the properties or assets
of the Indenture Estate;
(iii) in the event an officer in the Corporate Trust Department of
the Owner Trustee shall have Actual Knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee will
give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant and the Company;
(iv) except as contemplated by the Operative Documents, the Owner
Trustee will not contract for, create, incur, assume or permit to exist
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 be or become contingently liable, directly or indirectly, in
connection with the Debt of any other Person; and
(v) the Owner Trustee will not enter into any business or other
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby and
by the Participation Agreement, the Trust Agreement and the other
Operative Documents.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of Property
-------------------------------------------------
Included in the Indenture Estate During Continuation of Lease. So long
- -------------------------------------------------------------
as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided
--------
that, to the extent permitted by and as provided in the Lease, the
Company shall have the right, at any time and from time to time, without
any release from or consent by the Owner Trustee or the Indenture
Trustee, to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee agrees that, to the extent permitted by and as provided
in the Lease, title to any such Part shall vest in the Company. The
Indenture Trustee shall from time to time execute an appropriate written
instrument or instruments to confirm the release of the security interest
of the
<PAGE>
32
Indenture Trustee in any Part as provided in this Section 5.01, in each
case upon receipt by the Indenture Trustee of a Company Request stating
that said action was duly taken by the Company in conformity with this
Section 5.01 and that the execution of such written instrument or
instruments is appropriate to evidence such release of a security
interest under this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
--------------------------------------------------
Occurring to Airframe or Engines or upon Voluntary Termination of Lease
-----------------------------------------------------------------------
with Respect to Engines. Upon (i) the occurrence of an Event of Loss
-----------------------
occurring to the Airframe or an Engine, or (ii) a voluntary termination
of the Lease with respect to an Engine, the Company, in accordance with
the Lease, may, in the case of an Event of Loss which has occurred to the
Airframe, or shall, except as provided in Section 10(b) of the Lease, in
the case of an Event of Loss which has occurred to or termination of the
Lease with respect to an Engine, substitute an airframe or engine, as the
case may be, in which case, upon satisfaction of all conditions to such
substitution specified in Section 10 of the Lease, the Indenture Trustee
shall release all of its right, interest and lien in and to the Airframe
or such Engine in accordance with the provisions of the following two
sentences. The Indenture Trustee shall execute and deliver to the Owner
Trustee an instrument releasing its lien in and to the Airframe or such
Engine and shall execute for recording in public offices, at the expense
of the Owner Trustee (if requested by the Owner Trustee) or the Company
(if requested by the Company), such instruments in writing as the Owner
Trustee or the Company shall reasonably request and as shall be
reasonably acceptable to the Indenture Trustee in order to make clear
upon public records that such lien has been released under the laws of
the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company.
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
---------------------------------------
Events. (a) (i) If there shall be an Event of Loss to the Aircraft and
the Aircraft is not replaced pursuant to Section 10(a)(ii) of the Lease, each
Outstanding Certificate shall be redeemed in whole at a
<PAGE>
33
Redemption Price equal to 100% of the outstanding principal amount of such
Certificate plus accrued and unpaid interest thereon to but excluding the
applicable Redemption Date.
(ii) If there shall be an Event of Loss to any Engine under
circumstances in which there has not occurred an Event of Loss with respect to
the Airframe and, as a result of such an Event of Loss, Lessor elects to
receive payment for such Engine from Lessee pursuant to Section 10(b) of the
Lease and Lessee shall not have elected to replace such Engine notwithstanding
such election by Lessor, a portion of the principal of each Outstanding
Certificate equal to the product obtained by multiplying the unpaid principal
amount of such Certificate on the Redemption Date applicable to such partial
redemption (assuming, only for the purposes of this calculation, that, if such
Redemption Date is coincident with a Maturity Date or an Installment Payment
Date, the scheduled principal payment due on such Redemption Date is paid prior
to the time the Redemption Price is calculated pursuant to this Section
6.0l(a)(ii) and applied to principal in accordance with Section 3.03 hereof) by
_________________. The Redemption Price for each such Certificate shall be the
sum of such portion of principal being redeemed plus the amount of interest
accrued and unpaid to such Redemption Date on the principal amount of such
Certificate to be redeemed on such Redemption Date (assuming, only for the
purposes of this calculation, that, if, such Redemption Date is coincident with
an Interest Payment Date, the interest due on such Interest Payment Date is
paid prior to the time such Redemption Price is calculated pursuant to this
Section 6.0l(a)(ii) and applied to interest in accordance with Section 3.03
hereof); provided that each Certificate shall receive, as to the principal
--------
thereof, the same portion of such Redemption Price as the principal value of
such Certificate at such Redemption Date represents of the total principal
value of all Certificates Outstanding at such Redemption Date. Upon the
occurrence of any partial redemption or redemptions pursuant to the preceding
sentence the principal amount of each Outstanding Certificate shall be adjusted
to take account of any such partial redemption or redemptions, and the
Installment Payment Percentages applicable to any Installment Certificates
issued hereunder shall be adjusted as provided for in the definition thereof.
The Redemption Date for Certificates to be redeemed pursuant to this Section
6.01(a) shall be the Lease Loss Payment Date.
(b) If (i) the Lease shall be terminated by the Company at its
option pursuant to Section 9(b) of the Lease or upon the purchase of the
Aircraft by the Company at its option on a Special Purchase Option Date or the
EBO Date pursuant to Section 19(b) of the Lease (unless the Company shall have
elected to assume the rights and obligations of the Owner Trustee hereunder to
the extent and as provided for in Section 8(r) of the Participation Agreement)
or (ii) the Owner Trustee or the Owner Participant shall have given notice of
redemption or purchase to the Indenture Trustee pursuant to Section 8.03(e)(ii)
at any time after one or more Lease Events of Default shall have occurred and
be continuing for a period of 180 days or more but less than one year (or a
period of less than 180 days if any such Lease Event of Default shall be a
Lease Event of Default under Section 14(a) of the Lease) and the Certificates
shall not have been accelerated, each Outstanding Certificate shall be
<PAGE>
34
redeemed or purchased in whole on the Redemption Date and at the Redemption
Price determined below. Prior to the Premium Termination Date applicable to
such Certificate, the Redemption Price applicable to a redemption or purchase
pursuant to this Section 6.01(b) shall be equal to an amount which an
Independent Investment Banker (or, in the case of the deposit of estimated
premium pursuant to Section 8.03(e)(ii), the Owner Trustee) determines to be
equal to the greater of (x) the unpaid principal amount of such Certificate as
at such Redemption Date together (assuming, only for the purposes of this
calculation, that, if such Redemption Date is coincident with an Interest
Payment Date, the interest due on such Interest Payment Date is paid prior to
the time such Redemption Price is calculated pursuant to this Section 6.01(b)
and applied to interest in accordance with Section 3.03 hereof) with an amount
equal to the interest accrued thereon from the immediately preceding Interest
Payment Date to such Redemption Date and (y) the present value (computed in
accordance with generally accepted financial practices on a semiannual basis at
a discount rate equal to the Treasury Yield applicable to such Certificate as
of such Redemption Date) as at such Redemption Date of (A) the regularly
scheduled future payments of interest on such Certificate as required by the
terms thereof and of this Agreement and (B) the regularly scheduled future
payments of principal payable on such Certificate (the excess, if any, of the
amount referred to in clause (y) of this sentence over the amount referred to
in clause (x) constituting a "premium" or a "Premium"), plus, in either case,
interest on the principal of such Certificate accrued as at the immediately
preceding Interest Payment Date and unpaid as of such Redemption Date. On or
after the Premium Termination Date applicable to such Certificate, the
Redemption Price applicable to a redemption or purchase pursuant to this
Section 6.01(b) shall equal the unpaid principal amount of such Certificate as
at such Redemption Date together with an amount equal to the interest accrued
thereon from the immediately preceding Interest Payment Date to such Redemption
Date plus interest on the principal of such Certificate accrued as at the
immediately preceding Interest Payment Date and unpaid as of such Redemption
Date and, in the case of either of the two immediately preceding sentences (but
without duplication), if such Redemption Date is coincident with an Interest
Payment Date, the regularly scheduled interest payment due on such Interest
Payment Date. The Redemption Date for Certificates to be redeemed or purchased
(x) pursuant to clause (i) of this Section 6.01(b) shall be (A) in the case of
a termination of the Lease pursuant to Section 9(b) thereof, the third Business
Day following the Lease Termination Date, if any, or, in the case of purchase
of the Aircraft by the Company pursuant to Section 19(b) of the Lease, the
applicable Special Purchase Option Date or EBO Date and (y) pursuant to clause
(ii) of this Section 6.01(b), shall be the same date as if the redemption had
occurred pursuant to Section 6.02. If the Owner Trustee elects to purchase the
Certificates under Section 8.03(e)(ii), nothing herein, including use of the
terms "Redemption Date" and "Redemption Price" shall be deemed to result in a
redemption of the Certificates.
(c) Certificates may be redeemed if the Company shall have
requested the Owner Trustee and the Owner Participant to effect a redemption
thereof pursuant to
<PAGE>
35
Section 17 of the Participation Agreement as part of a refunding or
refinancing, and if all the conditions to such refunding or refinancing set
forth in such Section 17 of the Participation Agreement shall have been
satisfied. In such event, each Outstanding Certificate may be so redeemed at a
Redemption Price determined in accordance with the procedures described above
in Section 6.01(b); provided, however, that the applicable Redemption
-------- -------
Date for Certificates to be redeemed pursuant to this Section 6.01(c) shall be
the applicable Refinancing Date under Section 17 of the Participation
Agreement.
Section 6.02. Redemption or Purchase of Certificates upon
-------------------------------------------
Certain Indenture Events of Default. If the Owner Trustee or the Owner
- -----------------------------------
Participant shall have given notice of redemption or purchase to the Indenture
Trustee pursuant to Section 8.03(e)(ii) at any time after the Certificates
shall have been accelerated pursuant to Section 8.02 or after one or more Lease
Events of Default shall have occurred and be continuing for a period of one
year or more (or a period of 180 days or more if any such Lease Event of
Default shall be a Lease Event of Default under Section 14(a) of the Lease) and
the Certificates shall not have been accelerated, each Outstanding Certificate
shall be redeemed or purchased in whole at a Redemption Price equal to 100% of
its principal amount plus accrued and unpaid interest thereon to but excluding
the applicable Redemption Date as determined below. The Redemption Date for
Certificates to be redeemed or purchased pursuant to this Section 6.02 shall be
the date specified in the notice given by the Owner Trustee to the Indenture
Trustee pursuant to Section 8.03(e)(ii). If the Owner Trustee elects to
purchase the Certificates under Section 8.03(e)(ii), nothing herein, including
use of the terms "Redemption Date" and "Redemption Price" shall be deemed to
result in a redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. Notice of
-------------------------------
redemption or purchase shall be given by first-class mail, postage prepaid,
mailed not less than 25 nor more than 60 days prior to the Redemption Date, to
each Holder of Certificates to be redeemed or purchased, at such Holder's
address appearing in the Register; provided that, in the case of a
--------
redemption pursuant to Section 6.01(b)(1) related to Lessee's exercise of its
option pursuant to Section 9(b) of the Lease, such notice shall be revocable
and shall be deemed revoked in the event the Lease does not in fact terminate
on the related Lease Termination Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption Price,
(3) that on the Redemption Date, the Redemption Price will become
due and payable upon each such Certificate, and that interest on
Certificates shall cease to accrue on and after such Redemption Date, and
<PAGE>
36
(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
Section 6.04. Deposit of Redemption Price. On or before
---------------------------
the Redemption Date, the Owner Trustee (or any person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 noon in immediately available
funds the Redemption Price of the Certificates to be redeemed or purchased on
the Redemption Date.
Section 6.05. Certificates Payable on Redemption Date.
---------------------------------------
Notice of redemption or purchase having been given as aforesaid (and not deemed
revoked as contemplated in the proviso to Section 6.03), the Certificates
shall, on the applicable Redemption Date, become due and payable at the
principal corporate trust office of the Indenture Trustee or at any office or
agency maintained for such purposes pursuant to Section 2.03, and from and
after such Redemption Date (unless there shall be a default in the payment of
the Redemption Price) any Certificates then Outstanding shall cease to bear
interest. Upon surrender of any such Certificate for redemption or purchase in
accordance with said notice such Certificate shall be paid at the Redemption
Price.
If any Certificate called for redemption or purchase shall not be
so paid upon surrender thereof for redemption or purchase, the principal amount
thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments Held
-------------------------------------------------
by the Indenture Trustee. Any money held by the Indenture Trustee or any
- ------------------------
Paying Agent in trust for any payment of the principal of, premium, if any, or
interest on any Certificate, including without limitation any money deposited
pursuant to Article 10 and remaining unclaimed for two years and eleven months
after the due date for such payment, shall be paid to the Owner Trustee; and
the Holders of any Outstanding Certificates shall thereafter, as unsecured
general creditors, look only to the Company on behalf of the Owner Trustee for
payment thereof, and all liability of the Indenture Trustee or any such Paying
Agent with
<PAGE>
37
respect to such trust money shall thereupon cease; provided that the
--------
Indenture Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be mailed to each such
Holder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
Section 7.02. Change in Registration. The Indenture
----------------------
Trustee shall, upon the request of the Company, consent to the deregistration
of the Aircraft under the laws of the jurisdiction in which it is at the time
registered and the registration of the Aircraft under the laws of another
jurisdiction (herein called a "change in registration") provided that the
following conditions are met:
(a) such change in registration complies with the provisions of
the Participation Agreement or the Lease;
(b) no Lease Event of Default and no event which, with lapse of
time or notice, or both, would become a Lease Event of Default shall have
occurred and be continuing at the date of such request or at the
effective date of the change in registration, provided that it shall not
be necessary to comply with this condition (b) if the change in
registration results in the registration of the Aircraft under the laws
of the United States or if the Indenture Trustee in its discretion
believes the change in registration would be advantageous to the Holders;
and
(c) the Indenture Trustee shall have received an opinion of
counsel reasonably satisfactory to the Indenture Trustee to the effect
that:
(i) after giving effect to the change in registration, the
Lien on the Aircraft and the other property included in the
Indenture Estate shall continue as a fully perfected lien and that
all filing, recording or other action necessary to perfect and
protect the lien of this Indenture has been accomplished (or if
such opinion cannot be given at the time by which the Indenture
Trustee has been requested to consent to a change in registration,
(x) the opinion shall detail what filing, recording or other action
is necessary and (y) the Indenture Trustee shall have received a
certificate from the Company that all possible preparations to
accomplish such filing, recording and other action shall have been
done, and such filing, recording and other action shall be
accomplished and a supplemental opinion to that effect shall be
delivered to the Indenture Trustee on or prior to the effective
date of the change in registration); and
(ii) the terms of the Lease and this Agreement (including
the governing law clauses) being legal, valid and binding and
enforceable in such
<PAGE>
38
jurisdiction, 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 and except as limited by applicable laws which
may affect the remedies provided in the Lease and this Agreement,
respectively, which laws, however, do not in the opinion of such
counsel make the remedies provided in the Lease and this Agreement,
respectively, inadequate for the practical realization of the
rights and benefits provided thereby.
The Indenture Trustee shall execute such documents as the Company or the Owner
Trustee shall reasonably request in order to satisfy the above conditions and
upon satisfaction of such conditions to effect the change in registration.
Section 7.03. Assumption of Obligations of Owner Trustee by the
-------------------------------------------------
Company. In the event that the Company shall have elected to assume all
- -------
of the rights and obligations of the Owner Trustee under this Agreement in
respect of the Certificates in connection with the purchase by the Company of
the Aircraft pursuant to Section 8(r) of the Participation Agreement and, if on
or prior to the Purchase Option Date:
(a) the Company shall have delivered to the Indenture Trustee a
certificate, dated the Purchase Option Date, of a Responsible Company
Officer stating that the Company has paid to the Owner Trustee all
amounts required to be paid to the Owner Trustee pursuant to Section
19(b) of the Lease in connection with such purchase and assumption;
(b) no event which constitutes or, with the lapse of time or
notice, or both, would become, an Event of Default under this Agreement
after giving effect to the indenture supplement referred to below shall
have occurred and be continuing immediately subsequent to such purchase
or assumption and the Indenture Trustee shall have received a
certificate, dated the Purchase Option Date, of a Responsible Company
Officer to such effect;
(c) the Indenture Trustee shall have received, on or prior to the
Purchase Option Date, evidence of all filings, recordings and other
action referred to in the Opinion or Opinions of Counsel referred to
below;
(d) the Indenture Trustee shall have received an Opinion or
opinions of Counsel for the Company, dated the Purchase Option Date,
which without unusual qualification shall be to the effect that, after
giving effect to the indenture supplement referred to below:
<PAGE>
39
(i) this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company 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, and except as limited by applicable
laws which may affect the remedies provided for in this Agreement,
which laws, however, do not in the opinion of such counsel make the
remedies provided for in this Agreement inadequate for the
practical realization of the rights and benefits provided for in
this Agreement;
(ii) the Aircraft is duly registered in compliance with
applicable law;
(iii) the Lien on the Aircraft constitutes a fully perfected
Lien and all filing, recording or other action (specifying the
same) necessary to perfect and protect the Lien of this Agreement
has been accomplished;
(iv) the Indenture Trustee would be entitled to the benefits
of Section 1110 of the Bankruptcy Code with respect to the
Aircraft; provided that such opinion may contain qualifications
--------
of the tenor contained in the opinion of special counsel for the
Company delivered pursuant to Section 4(a)(xi)(b) of the
Participation Agreement on the Delivery Date; and
(v) no Holder will be required to recognize gain or loss
for tax purposes in connection with such assumption; and
(e) an indenture supplement reasonably satisfactory to the
Indenture Trustee, dated the Purchase Option Date, shall have been
executed by the Indenture Trustee and any other parties necessary thereto
and shall have been delivered to the Indenture Trustee;
then, automatically and without the requirement of further action by any
Person, effective as of the Purchase Option Date, the Owner Trustee shall be
released from all of its obligations under the Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Purchase
Option Date or arising out of or based upon events occurring on or prior to the
Purchase Option Date, which obligations and liabilities shall remain the sole
responsibility of the Owner Trustee).
If, concurrent with an assumption pursuant to this Section 7.03,
the Aircraft is being reregistered the Company must comply with the provisions
of Section 7.02 hereof.
<PAGE>
40
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
---------------------------
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event 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) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
remedied:
(a) any amount of interest upon any Certificate or of principal
of any Certificate or of premium, if any, in respect of any Certificate
shall not be paid when due and payable (whether upon redemption or
purchase, final maturity, acceleration or otherwise) and such default in
payment shall continue for more than 10 days after such amount shall have
become due and payable; or
(b) any failure by the Owner Trustee, in its individual capacity
or as Owner Trustee, as the case may be, to observe or perform in any
material respect any covenant or obligation required pursuant to Article
4 or clauses 1-5 under the Habendum Clause hereof or Section 8(b), 8(c),
8(g), 8(n) or 10 of the Participation Agreement or the failure by the
Owner Participant to observe or perform in any material respect any
covenant or obligation of it required pursuant to Section 8(b), 8(g) or
10 of the Participation Agreement, or, to the extent that the interest of
the Indenture Trustee or any Holder of an Outstanding Certificate is
adversely affected by such failure, in Section 4.01(a) of the Trust
Agreement or the termination or revocation by the Owner Participant of
the trust created by the Trust Agreement without the Indenture Trustee's
prior written consent if, but only if, such failure or termination or
revocation is not remedied within a period of 30 days after there has
been given to the Owner Trustee and the Owner Participant by registered
or certified mail, a written notice specifying such failure and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder, by the Indenture Trustee or by the Holders of at least 25% in
principal amount of Outstanding Certificates; provided that no
--------
Indenture Event of Default shall arise under this Section 8.01(b) solely
as a result of a failure by the Owner Participant or the Owner Trustee to
observe or perform any covenant contained in Section 8(g) of the
Participation Agreement if all action necessary to discharge all Lessor
Liens referred to in such Section shall have been taken and the Indenture
Trustee and the Indenture Estate shall have been compensated for all
claims, losses and expenses arising from the failure of the Owner Trustee
or the Owner Participant, as the case may be, to observe and perform any
such covenant; or
<PAGE>
41
(c) any failure by the Owner Trustee, in its individual capacity
or as Owner Trustee, to observe or perform any other covenant or
obligation of the Owner Trustee contained in this Agreement or in the
Participation Agreement or any failure by the Owner Participant to
observe or perform any other covenant or obligation of the Owner
Participant contained in the Participation Agreement which failure, in
any case and either individually or together with other then existing
failures, shall have a material adverse effect on the rights and
interests of the Holders and is not remedied within a period of 30 days
after there has been given to the Owner Trustee and the Owner Participant
by registered or certified mail, a written notice specifying such failure
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder, by the Indenture Trustee or by the Holders of at
least 25% in principal amount of Outstanding Certificates; provided,
--------
however, that, if the Owner Trustee, in its individual capacity or as
-------
Owner Trustee, or the Owner Participant shall have undertaken to cure any
such failure and, notwithstanding the reasonable diligence of any of them
in attempting to cure such failure, such failure is not cured within said
30 day period but is curable with future due diligence, there shall exist
no Indenture Event of Default as a consequence of such failure so long as
the Owner Trustee in its individual capacity or as Owner Trustee or the
Owner Participant is proceeding with due diligence to cure such failure,
there exists no adverse effect on the Lien of this Agreement and such
failure is in fact cured within a further period of 30 days; or
(d) any material representation or warranty made by the Owner
Trustee, in its individual capacity or as Owner Trustee, or by the Owner
Participant under the Participation Agreement or the Redemption and
Refinancing Agreement, or by the Owner Trustee hereunder, or by the Owner
Trustee, in its individual capacity or as Owner Trustee, or by the Owner
Participant in any document or certificate furnished to the Indenture
Trustee in connection herewith or therewith or pursuant hereto or hereto,
shall prove at any time to have been incorrect in any material respect as
of the date made and such incorrectness shall remain material at the date
of the notice referred to below and such incorrectness shall continue
unremedied for a period of 30 days after there has been given to the
Owner Trustee and the Owner Participant by registered or certified mail,
a written notice specifying such incorrectness and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder,
by the Indenture Trustee or by the Holders of at least 25% in principal
amount of Outstanding Certificates; or
(e) there shall be a Lease Event of Default other than any such
Lease Event of Default arising by reason of nonpayment of any Excluded
Payments when due; provided that any Lease Event of Default shall be
--------
deemed to exist and continue so long as, but only so long as, it shall
not be remedied; or
<PAGE>
42
(f) either the Indenture Estate or the Owner Trustee with respect
thereto (and not in its individual capacity) or the Owner Participant, as
the case may be, shall (i) file, or consent by answer or otherwise to the
filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction,
(ii) make an assignment for the benefit of its creditors, or (iii)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or any substantial part of its
property; provided that an event referred to in this Section 8.01(f)
--------
with respect to the Owner Participant shall not constitute an Indenture
Event of Default if (A) an order, judgment or decree shall be entered in
a proceeding by a court or a trustee, custodian, receiver or liquidator
which is either final and non-appealable or has not been stayed pending
any appeal, or (B) an opinion of counsel satisfactory to the Indenture
Trustee shall be provided by the Owner Participant, in each case to the
effect that no part of the Trust Estate created by the Trust Agreement
(except for the Owner Participant's beneficial interest in such Trust
Estate) and no right, title or interest under the Indenture Estate shall
be included in, or be subject to, any declaration or adjudication of, or
proceedings with respect to the bankruptcy, insolvency or liquidation of
the Owner Participant referred to in this Section 8.01(f); or
(g) a court or governmental authority of competent jurisdiction
shall enter an order appointing, without consent by the Indenture Estate
or the Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant, as the case may be, a custodian,
receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization
or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Indenture
Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant, as the case may be, and
any such order or petition is not dismissed or stayed within 90 days
after the earlier of the entering of any such order or the approval of
any such petition; provided that an event referred to in this
----
Section 8.01(g) with respect to the Owner Participant shall not
constitute an Indenture Event of Default if (A) an order, judgment or
decree shall be entered in a proceeding by a court or a trustee,
custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending an appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by Owner Participant, in each case to the effect that no part of
the Trust Estate created by the Trust Agreement (except for the Owner
Participant's beneficial interest in such Trust Estate) and no right,
title or interest under the Indenture Estate shall be included in, or be
subject to, any declaration or adjudication of, or proceedings with
respect
<PAGE>
43
to, the bankruptcy, insolvency or liquidation of the Owner Participant
referred to in this Section 8.01(g).
Section 8.02. Acceleration; Rescission and Annulment. If an
--------------------------------------
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee, the Owner Trustee and the Owner
Participant, may declare the principal of all the Certificates to be due and
payable. Upon such declaration, the principal of all Certificates together
with accrued interest thereon from the date in respect of which interest was
last paid hereunder to the date payment of such principal has been made or duly
provided for, shall be immediately due and payable. At any time after such
declaration and prior to the sale or disposition of the Indenture Estate, the
Holders of a majority in aggregate principal amount of all of the Outstanding
Certificates, by notice to the Indenture Trustee, the Company, the Owner
Trustee and the Owner Participant, may rescind such a declaration and thereby
annul its consequences if (i) an amount sufficient to pay all principal on any
Certificates which have become due otherwise than by such declaration and any
interest thereon and interest due or past due, if any, and all sums due and
payable to the Indenture Trustee have been deposited with the Indenture
Trustee, (ii) the rescission would not conflict with any judgment or decree and
(iii) all existing Indenture Defaults and Indenture Events of Default under
this Agreement have been cured or waived except nonpayment of principal of, or
interest on, the Certificates that has become due solely because of such
acceleration.
Section 8.03. Other Remedies Available to Indenture
-------------------------------------
Trustee. (a) After an Indenture Event of Default shall have occurred
- -------
and so long as such Indenture Event of Default shall be continuing, then and in
every such case the Indenture Trustee, as trustee of an express trust and as
assignee hereunder of the Lease or as holder of a security interest in the
Aircraft or Engines or otherwise, may, and when required pursuant to the
provisions of Article 9 shall, exercise, subject to Sections 8.03(b), 8.03(e),
8.03(f) and 8.03(h), any or all of the rights and powers and pursue any and all
of the remedies accorded to the Owner Trustee pursuant to Section 15 of the
Lease and this Article 8, may recover judgment in its own name as Indenture
Trustee against the Indenture Estate and may take possession of all or any part
of the Indenture Estate and may exclude the Owner Trustee and the Owner
Participant and all persons claiming under any of them wholly or partly
therefrom.
(b) After an Indenture Event of Default shall have occurred and
so long as such Indenture Event of Default shall be continuing, subject to
Sections 8.03(e), 8.03(f) and 8.03(h), the Indenture Trustee may, if at the
time such action may be lawful and always subject to compliance with any
mandatory legal requirements, either with or without taking possession, and
either before or after taking possession and without instituting any legal
proceedings whatsoever, and having first given notice of such sale by
registered mail to the Owner Trustee, the Owner Participant and the Company
once at least 30 days prior to the
<PAGE>
44
date of such sale, and any other notice which may be required by law, sell and
dispose of the Indenture Estate, or any part thereof, or interest therein, at
public auction to the highest bidder, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that, notwithstanding any
-------- -------
provision herein to the contrary, the Indenture Trustee may not provide the
notice provided for above of its intention to sell any of the Indenture Estate,
exercise remedies under the Lease or exercise other remedies against the
Indenture Estate seeking to deprive the Owner Trustee or the Owner Participant
of its rights therein unless a declaration of acceleration has been made
pursuant to Section 8.02 or the Certificates have otherwise theretofore become
due and payable through redemption or otherwise. Any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
notice, and the Indenture Trustee and the Holder or Holders of any
Certificates, or any interest therein, may bid and become the purchaser at any
such sale. No such sale may be consummated if the Owner Trustee shall, prior
to the consummation thereof, have given notice pursuant to and made the deposit
required by Section 8.03(e)(ii). The Indenture Trustee may exercise such right
without possession or production of the Certificates or proof of ownership
thereof, and as representative of the Holders may exercise such right without
notice to the Holders or including the Holders as parties to any suit or
proceeding relating to foreclosure of any property in the Indenture Estate.
The Owner Trustee hereby irrevocably constitutes the Indenture Trustee the true
and lawful attorney-in-fact of the Owner Trustee (in the name of the Owner
Trustee or otherwise) for the purpose of effectuating any sale, assignment,
transfer or delivery for enforcement of the lien created under this Agreement,
whether pursuant to foreclosure or power of sale or otherwise, to execute and
deliver all such bills of sale, assignments and other instruments as the
Indenture Trustee may consider necessary or appropriate, with full power of
substitution, the Owner Trustee hereby ratifying and confirming all that such
attorney or any substitute shall lawfully do by virtue hereof. 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.
(c) Subject to Sections 8.03(e) and 8.03(f), if an Indenture
Event of Default has occurred and is continuing, the Owner Trustee shall, at
the request of the Indenture Trustee, promptly execute and deliver to the
Indenture Trustee such instruments of title or other documents as the Indenture
Trustee may 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. If the Owner Trustee
shall for any reason fail to execute and deliver such instruments and documents
after such request by the
<PAGE>
45
Indenture Trustee, the Indenture Trustee shall be entitled, in a proceeding to
which the Owner Trustee will be a necessary party, to a judgment for specific
performance of the covenants contained in the foregoing sentence, conferring
upon the Indenture Trustee the right to immediate possession and requiring the
Owner Trustee to execute and deliver such instruments and documents to the
Indenture Trustee. The Indenture Trustee shall also be entitled to pursue all
or any part of the Indenture Estate wherever it may be found and may enter any
of the premises of the Owner Trustee or any other Person wherever the Indenture
Estate may be or be supposed to be and search for the Indenture Estate and take
possession of any item of the Indenture Estate pursuant to this Section
8.03(c). The Indenture Trustee may, from time to time, at the expense of the
Indenture Estate, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Indenture Estate, as it may deem proper. In each such case, the Indenture
Trustee shall have the right to use, operate, store, lease, control or manage
the Indenture Estate, and to exercise all rights and powers of the Owner
Trustee relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the use, operation, storage, leasing, control or management of the
Indenture Estate or any part thereof; and the Indenture Trustee shall be
entitled to collect and receive directly all tolls, rents (including Rent),
issues, profits, products, pursuant to this Section 8.03(c). The Indenture
Trustee may, from time to time, at the expense of the Indenture Estate, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Indenture Estate, as it
may deem proper. In each such case, the Indenture Trustee shall have the right
to use, operate, store, lease, control or manage the Indenture Estate, and to
exercise all rights and powers of the Owner Trustee relating to the Indenture
Estate as the Indenture Trustee shall deem appropriate, including the right to
enter into any and all such agreements with respect to the use, operation,
storage, leasing, control or management of the Indenture Estate or any part
thereof; and the Indenture Trustee shall be entitled to collect and receive
directly all tolls, rents (including Rent), issues, profits, products, revenues
and other income of the Indenture Estate and every part thereof, without
prejudice, however, to the right of the Indenture Trustee under any provision
of this Agreement to collect and receive all cash held by, or required to be
deposited with, the Indenture Trustee hereunder. In accordance with the terms
of this Section 8.03(c), such tolls, rents (including Rent), issues, profits,
products, revenues and other income shall be applied to pay the expenses of
using, operating, storing, leasing, controlling or managing the Indenture
Estate, and of all maintenance, insurance, repairs, replacements, alterations,
additions and improvements, and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes, assessments,
insurance or other proper charges upon the Indenture Estate or any part thereof
(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, to the extent permitted by the Lease, the Company), and all other payments
which the Indenture Trustee may be required or authorized to make under any
provision of this Agreement, including this
<PAGE>
46
Section 8.03(c), as well as just and reasonable compensation for the services
of the Indenture Trustee, and of all persons properly engaged and employed by
the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and the
Indenture Trustee shall have obtained possession of or title to the Aircraft,
the Indenture Trustee shall not be obligated to use or operate the Aircraft or
cause the Aircraft to be used or operated directly or indirectly by itself or
through agents or other representatives or to lease, license or otherwise
permit or provide for the use or operation of the Aircraft by any other Person
unless (i) the Indenture Trustee shall have been able to obtain insurance in
kinds, at rates and in amounts satisfactory to it in its discretion to protect
the Indenture Estate and the Indenture Trustee, as trustee and individually,
against any and all liability for loss or damage to the Aircraft and for public
liability and property damage resulting from use or operation of the Aircraft
and (ii) funds are available in the Indenture Estate to pay for all such
insurance or, in lieu of such insurance, the Indenture Trustee is furnished
with indemnification from the Holders or any other Person upon terms and in
amounts satisfactory to the Indenture Trustee in its discretion to protect the
Indenture Estate and the Indenture Trustee, as trustee and individually,
against any and all such liabilities.
(d) Subject to Sections 8.03(b), 8.03(e) and 8.03(f), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the Lien created under this Agreement or for
the enforcement of any other proper, legal or equitable remedy available under
applicable law.
(e) (i) If the Company shall fail to make any payment of Basic
Rent under the Lease when the same shall become due, and if such failure of the
Company to make such payment of Basic Rent shall not constitute the fourth
consecutive such failure or the seventh or subsequent cumulative such failure,
then as long as no Indenture Event of Default (other than arising from a Lease
Event of Default not involving any failure to make any payments to which the
Indenture Trustee or any Holder is entitled hereunder when due) shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the day which is
the later of (x) the 11th day subsequent to notice of such failure by the
Indenture Trustee to the Owner Trustee or the Owner Participant and (y) the
sixth day subsequent to the expiration of the grace period provided for in
Section 14(a) of the Lease with respect to the payment of Basic Rent (and the
Indenture Trustee shall not (without the prior written consent of the Owner
Trustee) declare the Lease in default pursuant to Section 15 thereof or
exercise any of the rights, powers or remedies pursuant to such Section 15 or
this Section 8 prior to the occurrence of such later date), an amount equal to
the full amount of such payment of Basic Rent, together with any
<PAGE>
47
interest due thereon on account of the delayed payment thereof to the date of
such payment, and such payment by the Owner Participant or the Owner Trustee
shall be deemed to cure as of the date of such payment any Indenture Event of
Default which arose from such failure of the Company (including any Lease Event
of Default arising from the Lessee's failure to pay interest in respect of such
overdue Basic Rent for the period commencing on the date of such payment), but
such cure shall not relieve the Company of any of its obligations. If the
Company shall fail to perform or observe any covenant, condition or agreement
to be performed or observed by it under the Lease, and if (but only if) the
performance or observance thereof can be effected by the payment of money alone
(it being understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long as no
other Indenture Event of Default (other than those arising from a Lease Event
of Default) shall have occurred and be continuing, the Owner Participant or the
Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other
person as may be entitled to receive the same), at any time prior to the day
which is the later of (x) the 11th day subsequent to notice of such failure by
the Indenture Trustee to the Owner Trustee or the Owner Participant and (y) the
sixth day subsequent to the expiration of the grace period, if any, provided
with respect to such failure on the part of the Company in Section 14 of the
Lease (and the Indenture Trustee shall not (without the prior written consent
of the Owner Trustee) declare the Lease in default pursuant to Section 15
thereof or exercise any of the rights, powers or remedies pursuant to such
Section 15 or this Section 8 prior to the occurrence of such later date), all
sums necessary to effect the performance or observance of such covenant or
agreement of the Company, together with any interest due thereon on account of
the delayed payment thereof to the date of such payments and such payment by
the Owner Participant or the Owner Trustee shall be deemed to cure as of the
date of such payment any Indenture Event of Default which arose from such
failure of the Company (including any Lease Event of Default arising from the
Lessee's failure to pay interest in respect of such overdue payment for the
period commencing on the date of such payment), but such cure shall not relieve
the Company of any of its obligations. Upon any payment of Basic Rent by the
Owner Participant or the Owner Trustee in accordance with the first sentence of
this Section 8.03(e)(i), or upon any payment of any other sums by the Owner
Participant or the Owner Trustee in accordance with the second sentence of this
Section 8.03(e)(i), the Owner Participant or the Owner Trustee shall, to the
extent of their respective payments, be subrogated, in the case of any such
payment in accordance with such first sentence, to the rights of the Indenture
Trustee, as assignee hereunder of the Owner Trustee, or, in the case of any
such payment in accordance with such second sentence, to the rights of the
Indenture Trustee or such other person as the case may be, which actually
received such payment, to receive such payment of Basic Rent or such other
payment, as the case may be (and any interest due thereon on account of the
delayed payment thereof), and shall be entitled to receive such payment upon
its receipt by the Indenture Trustee or such other person, as aforesaid (but in
each case only if all amounts of principal of, and interest at the time due and
payable on, the Certificates together with interest due thereon on account of
the delayed payment thereof shall have been paid in full); provided that
--------
neither the Owner
<PAGE>
48
Participant nor the Owner Trustee shall attempt to recover any such amount paid
by it on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of the Company payment of such amount or by proceeding by appropriate
court action against the Company to enforce the payment of such amount pursuant
to Section 15(f), but only said Section 15(f), of the Lease.
(ii) In the event that (A) at any time one or more Lease Events of
Default shall have occurred and be continuing for a period of 180 days or more
but less than one year (or a period of less than 180 days if any such Lease
Event of Default shall be a Lease Event of Default under Section 14(a) of the
Lease) and the Certificates shall not have been accelerated or (B) the
Certificates shall have been accelerated pursuant to Section 8.02 or after one
or more Lease Events of Default shall have occurred and be continuing for a
period of one year or more (or a period of 180 days or more, if such Lease
Event of Default shall be a Lease Event of Default under Section 14(a) of the
Lease), the Owner Trustee or the Owner Participant may, at its option, give at
least 30 days' prior irrevocable notice to the Indenture Trustee that the Owner
Trustee or the Owner Participant will redeem or purchase all Certificates then
outstanding on the Business Day specified in such notice and, concurrently with
such notice, the Owner Trustee or the Owner Participant will deposit with the
Indenture Trustee an amount sufficient to redeem or purchase at the applicable
Redemption Price determined consistently with the applicable provisions of
Article 6 all Certificates then outstanding (including, if Section 6.01(b) is
applicable, an estimate of the premium to be paid on the Redemption Date
computed using the Treasury Yield determined as if the Redemption Date were the
date of such notice) and to pay the Indenture Trustee all amounts then due it
hereunder, which funds shall be held by the Indenture Trustee as provided in
Section 9.04. Upon the giving of such notice and the receipt by the Indenture
Trustee of such deposit, the Indenture Trustee shall deem all instructions
received from the Owner Trustee as having been given by the Holders of 100% of
the outstanding principal amount of Certificates for all purposes of this
Indenture. If such notice is given, the Owner Trustee further agrees that it
will deposit or cause to be deposited with the Indenture Trustee, on or prior
to the Business Day preceding the applicable Redemption Date, whether or not an
Indenture Event of Default is then continuing, funds sufficient, when added to
the funds already held by the Indenture Trustee for such purpose, to redeem or
purchase at the applicable Redemption Price (including the premium actually
payable in respect thereof) on such Redemption Date all Certificates then
outstanding and to pay the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement 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 Lease Event of Default
unless the Indenture Trustee as security assignee of the Owner Trustee shall
have exercised or concurrently be exercising one or more of the remedies
provided for in Section 15(a)-(f) of the Lease with respect to the
<PAGE>
49
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 60
days or such other period as may be specified in section 1110(a)(l)(A) of the
Bankruptcy Code (such 60-day or other 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 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)(1)(A) of the Bankruptcy Code and
continues to perform as required by Section 1110(a)(1)(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)
results from the Company's assumption during the Section 1110 period with the
approval of the relevant court of the Lease pursuant to Section 365 of the
Bankruptcy Code or (D) is the consequence of the Indenture Trustee's own
failure to give any requisite notice to any person or (E) is pursuant to a
judicial stay pending the resolution of litigation with respect to the
applicability of Section 1110 of the Bankruptcy Code and there is either no
Lease Event of Default other than one arising solely from the Company's
bankruptcy or any such other Lease Event of Default has been cured;
provided further, however, that the requirement to exercise one
- -------- ------- -------
or more of such remedies under the Lease during a Continuous Stay Period
subsequent to the expiration of the Section 1110 period based upon a judicial
stay as provided for in this clause (E) shall in any event cease to be
applicable subsequent to the 120th day of such Continuous Stay Period. If the
limitation upon cures of the Lessee's failure to pay Basic Rent as provided in
Section 8.03(e)(i) would otherwise prohibit the Owner Participant or the Owner
Trustee from making a payment to cure a Lease Event of Default for purposes of
clause (E) above, the Owner Participant or the Owner Trustee shall nonetheless
be entitled to make such payment. If the Indenture Trustee shall acquire title
to the Aircraft through foreclosure during a Continuous Stay period without
having exercised one or more of such remedies under the Lease by virtue of the
Continuous Stay Period having continued beyond its 120th day as provided above
in clause (E) and the Indenture Trustee shall have received prior to the 183rd
day subsequent to its acquisition of title to the Aircraft, the proceeds from
its sale of the Aircraft, the Indenture Trustee shall, notwithstanding any
other provision of this Indenture, distribute to the Owner Trustee the amount,
if any, by which such proceeds (net of the Indenture Trustee's costs and
expenses (including the fees and expenses of counsel and other experts and
agents retained by it), commissions and other costs and expenses with respect
to such foreclosure, the maintenance and preservation of the Aircraft and such
sale (including amounts in respect of any thereof paid by others to whom the
Indenture Trustee has a reimbursement obligation) and any other amounts to
which the Indenture Trustee is entitled pursuant to Section 9.06 or otherwise)
<PAGE>
50
exceed an amount equal to the aggregate of the principal amount of the
Certificates outstanding on the date of such foreclosure, together with
interest accrued thereon to such foreclosure date and an amount equal to the
amount of interest that would have accrued (at the rate per annum applicable
under the Certificates) on such principal amount from the date of such
foreclosure to the date of the distribution by the Indenture Trustee of such
proceeds for the benefit of the Holders if such principal amount had remained
outstanding. References in this subsection (iii) to particular sections of the
Bankruptcy Code as in effect on the date of the amendment and restatement of
this Indenture shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to the
contrary, including, without limitation, Sections 8.03(b), 8.03(c) and 8.03(d),
as long as no Lease Event of Default shall have occurred and be continuing,
neither the Indenture Trustee nor the Owner Trustee shall take any action in
violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given to the
Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, 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
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
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 Company or to be
an acquiescence therein.
(h) Notwithstanding anything contained herein to the contrary, so
long as the Pass Through Trustee is a Holder, the Indenture Trustee is not
authorized or empowered to acquire title to the Indenture Estate, or to take
any action with respect to any of the Indenture Estate so acquired by it, if
such acquisition or action would cause any Pass Through Trust to fail to
qualify as a "grantor trust" for federal income tax purposes.
Section 8.04. Waiver of Owner Trustee. To the extent now
-----------------------
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisal of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be
<PAGE>
51
made pursuant to any provision herein contained, or prior to any applicable
decree, judgment or order of any court of competent jurisdiction; nor, after
such sale or sales, claim or exercise any right under any statute now or
hereafter made or enacted by any state or otherwise to redeem the property so
sold or any part thereof, and hereby expressly waives for itself and on behalf
of each and every Person, except decree or judgment creditors of the Owner
Trustee acquiring any interest in or title to the Indenture Estate or any part
thereof subsequent to the date of this Agreement, all benefit and advantage of
any such law or laws, and covenants that it will not invoke or utilize any such
law or laws, but will suffer and permit the execution of every such power as
though no such law or laws had been made or enacted. Nothing in this Section
8.04 shall be deemed to be a waiver by the Owner Trustee of its rights under
Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or, in any
manner whatsoever, claim or take any benefit or advantage of or from any law
now or hereafter in force even if it does not possess any of the Certificates
or does not produce any of them in the proceeding. A delay or omission by the
Indenture Trustee or any Holder in exercising any right or remedy accruing upon
an Indenture Event of Default under this Agreement shall not impair the right
or remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of a
---------------------------
majority in the aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. (a) The Holders of a
-------------------
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would subject the
Indenture Trustee to personal liability.
(b) The Owner Trustee may pursuant to the direction and
instruction of the Owner Participant by delivery of written notice to the
Indenture Trustee set a record date to determine the Holders entitled to give
any consent, request, demand, authorization, direction, notice, waiver or other
act. Such record date shall be the record date specified in such Officers'
Certificate which shall be a date not more than 30 days prior to the first
solicitation of Holders in connection therewith. If such a record date is
fixed, such consent, request,
<PAGE>
52
demand, authorization, direction, notice, waiver or other act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders holding the requisite proportion of certificates
have authorized or agreed or consented to such consent, request, demand,
authorization, direction, notice, waiver or other act, and for that purpose the
Outstanding Certificates shall be computed as of such record date; provided
that no such consent, request, demand, authorization, direction, notice, waiver
or other act by the Holders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Agreement
not later than one year after the record date.
Section 8.07. Limitation on Suits by Holders. A Holder
------------------------------
may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written notice of a
continuing Indenture Event of Default under this Agreement;
(2) the Holders of at least 25% in aggregate principal amount of
the Outstanding Certificates make a written request to the Indenture
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the request within
60 days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in
aggregate principal amount of the Outstanding Certificates do not give
the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, premium, if any, and interest on such
Certificate on or after the respective due dates expressed in such Certificate,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
<PAGE>
53
Section 8.09. Indenture Trustee May File Proofs of Claim.
------------------------------------------
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee. (a) The
---------------------------
Indenture Trustee may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(b) Subject to the provisions of Section 9.04, the Indenture
Trustee shall not be liable for interest on any money received except as
otherwise provided in any other Operative Document. Money held in trust by the
Indenture Trustee need not be segregated from other funds except to the extent
required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
---------------------------
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it
may consult with counsel or require an Officer's Certificate or an Opinion of
Counsel from the Company or the Owner Trustee after which it will take such
action or refrain from acting as it deems appropriate. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith and
in accordance herewith in reliance on a resolution of the Board of Directors of
the Company, the written advice of counsel acceptable to the Owner Trustee, the
Company and the Indenture Trustee, officer's certificates or opinions of
counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any such agent appointed with
due care; provided that, so long as no Lease Event of Default shall have
--------
occurred and be continuing no such agents shall be appointed by the Indenture
Trustee without the consent of the Company and the Owner Trustee, which consent
shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
<PAGE>
54
(e) If an Indenture Event of Default under this Agreement has
occurred and is continuing, the Indenture Trustee shall exercise its rights and
powers under this Agreement, and shall 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.
Section 9.03. Individual Rights of Indenture Trustee. The
--------------------------------------
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise deal with the Owner Trustee, the
Company or an Affiliate of the Owner Trustee or the Company or a subsidiary of
the Owner Trustee or the Company with the same rights it would have if it were
not the Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or Paying
------------------------------------------------
Agent; Investments. Any monies (including without limitation for purpose
- ------------------
of this Section 9.04 Permitted Investments constituting the proceeds of the
maturity, sale or other disposition of any Permitted Investment) held by the
Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its 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 combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the Agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided that the Company
--------
pursuant to Section 22 of the Lease, on behalf of the Owner Trustee, as agent
of the Owner Trustee, shall upon demand pay to the Indenture Trustee the amount
of any loss realized upon maturity, sale or other disposition of any such
Permitted Investment and, so long as no Lease Event of Default shall have
occurred and be continuing, be entitled to receive from the Indenture Trustee,
and the Indenture Trustee shall promptly pay to the Company, on behalf of the
Owner Trustee, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain
<PAGE>
55
was realized are required to be distributed in accordance with the provisions
hereof or of the Lease pursuant to which such amounts were required to be held.
The Indenture Trustee shall not be responsible for any losses on any investments
or sales of Permitted Investments made pursuant to the procedure specified in
this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event
------------------
of Default under this Agreement occurs and is continuing and the Indenture
Trustee has Actual Knowledge of same, the Indenture Trustee shall (i) promptly
send written notice thereof by telecopier to the Company, the Owner Trustee and
the Owner Participant and (ii) within 90 days after it occurs, mail to each
Holder notice of all uncured Indenture Events of Default under this Agreement.
Except in the case of a default in the payment of the principal of, premium, if
any, or interest on any Certificate, the Indenture Trustee shall be protected
in withholding the notice required under clause (ii) above if and so long as
the executive committee or trust committee of directors of the Indenture
Trustee and/or Responsible Officers thereof in good faith determines that
withholding such notice is in the interest of the Holders. In addition, if an
Indenture Default under this Agreement occurs and is continuing and if the
Indenture Trustee has Actual Knowledge of same, the Indenture Trustee shall
promptly send written notice thereof by telecopier to the Company, the Owner
Trustee and the Owner Participant.
Section 9.06. Compensation and Indemnity. (a) The Owner
--------------------------
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the negligence or willful misconduct of the Indenture Trustee or the inaccuracy
of any representation or warranty of the Indenture Trustee in its individual
capacity in Section 8 of the Participation Agreement, (B) as otherwise provided
in Section 9.10 hereof and (C) as otherwise excluded by the terms of Sections
7(b) and 7(c) of the Participation Agreement from the Company's indemnities
under said Sections; provided that the Indenture Trustee shall not make any
--------
claim under this Section 9.06(a) for any claim or expense indemnified against
by the Company under the Participation Agreement without first making demand on
the Company for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Company promptly of any claim for which it is
entitled to be indemnified hereunder. Subject to the conditions and procedures
equivalent to those set forth in Sections 7(b) and 7(c) of the Participation
Agreement, the Owner Trustee shall defend the claim and the Indenture Trustee
shall cooperate in the defense. The Indenture Trustee may have separate
counsel and the Owner Trustee shall pay the reasonable
<PAGE>
56
fees and expenses of such counsel. The Owner Trustee need not pay for any
settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner Trustee
pursuant to this Section 9.06, the Indenture Trustee shall have a lien prior to
that of the Holders of the Certificates on all money or property held or
collected by the Indenture Trustee, except that held in trust to pay the
principal of and interest and premium, if any, on the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
--------------------------------
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least 30 days'
prior written notice to the Company and the Owner Trustee. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
remove the Indenture Trustee by giving at least 30 days' prior written notice
to the Indenture Trustee, the Owner Trustee and the Company and may appoint a
successor Indenture Trustee for such Certificates with the Owner Trustee's and
(so long as no Lease Event of Default is continuing) the Company's consent.
The Owner Trustee may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with Section 9.09;
(2) the Indenture Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or public officer takes charge of the Indenture
Trustee or its property; or
(4) the Indenture Trustee becomes incapable of acting.
(c) If the Indenture Trustee resigns or is removed, or if a
vacancy exists in the office of Indenture Trustee for any reason, the Owner
Trustee shall promptly appoint a successor Indenture Trustee which will (so
long as no Lease Event of Default is continuing) be approved by the Company.
(d) If a successor Indenture Trustee does not take office within
30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
<PAGE>
57
(e) If the Indenture Trustee fails to comply with Section 9.09,
any Holder may petition any court of competent jurisdiction for the removal of
such Indenture Trustee and the appointment of a successor Indenture Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The Company shall
give notice of each appointment of a successor Indenture Trustee if there are
Certificates outstanding, by mailing written notice of such event by
first-class mail to the Holders.
(g) All provisions of this Section 9.07 except subparagraphs
(b)(l) and (e) and the words "subject to the lien provided for in Section 9.06"
in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by Merger,
----------------------------------------------
etc. If the Indenture Trustee or any Agent consolidates with, merges or
- ---
converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This
-----------------------------
Agreement shall at all times have an Indenture Trustee which (i) shall have a
combined capital and surplus of at least $75,000,000 or (ii) shall have a
combined capital and surplus in excess of $5,000,000 and the obligations of
which, whether now in existence or hereafter incurred, are fully and
unconditionally guaranteed by a corporation organized and doing business under
the laws of the United States, any State or Territory thereof or of the
District of Columbia and having a combined capital and surplus of at least
$75,000,000, and which, in any case, shall be a Citizen of the United States.
If such corporation publishes reports of conditions at least annually, pursuant
to law or to the requirements of Federal, State, Territorial, or District of
Columbia supervising or examining authority, then for the purposes of this
Section 9.09, 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 conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
<PAGE>
58
Section 9.10. Trustee's Liens. The Indenture Trustee in
---------------
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Documents, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
----------------- ---------------------
The Indenture Trustee shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Certificates 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 to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
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 Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law.
Such withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
Section 9.12. Additional Collateral. (a) From time to time
---------------------
the Owner Participant may pledge Additional Collateral to the Indenture Trustee
as part of the Indenture Estate and in connection with such Additional
Collateral shall deliver to the Indenture Trustee evidence of such filings and
recordings necessary to establish and perfect the Lien of this Indenture in
such Additional Collateral. Such Additional Collateral shall be held in trust
by the Indenture Trustee as part of the Indenture Estate until released by the
Indenture Trustee pursuant to clause (b) below or otherwise in accordance with
the applicable security agreement.
(b) Provided that all payments of principal and interest on the
Certificates due and payable on the tenth Interest Payment Date have been made,
on such Interest Payment Date, the Indenture Trustee shall, unless otherwise
directed by the Owner Trustee or the Owner Participant, release any Additional
Collateral from the Lien of this Indenture, provided, however, that the
-------- -------
Owner Trustee or the Owner Participant shall be responsible for the preparation
and recording of all filings and recordings necessary to release such
Additional Collateral from the Lien of this Indenture.
<PAGE>
59
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
----------------------------------------
Defeasance; Termination of Obligations. Subject to Section 10.02, this
- --------------------------------------
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations with respect to the Certificates
(and the Indenture Trustee, on demand and at the expense of the Owner Trustee,
shall execute proper instruments acknowledging satisfaction and discharge of
this Agreement in respect of the Certificates), when
(a) (i) all Certificates theretofore executed and delivered
(other than (A) Certificates which have been mutilated, destroyed, lost
or stolen and which have been replaced or exchanged as provided in
Section 2.06 and (B) Certificates for the payment of which money held in
trust hereunder has been paid and discharged from such trust, as provided
in Section 7.01) have been delivered to the Indenture Trustee for
cancellation; or
(ii) all Certificates not theretofore delivered to the Indenture
Trustee for cancellation
(A) have become due and payable (whether upon stated
maturity or as a result of redemption), or
(B) will become due and payable (including as a result of
redemption in respect of which irrevocable notice has been given to
the Indenture Trustee on or prior to the date of such deposit and
such redemption either is a redemption without possibility of
premium or, as of the date of such deposit, any premium which may
be payable in connection therewith has been actually determined) at
maturity or on a Redemption Date within one year,
and there has been deposited with the Indenture Trustee in trust for the
purpose of paying and discharging the entire indebtedness on the
Certificates not theretofore cancelled by the Indenture Trustee or
delivered to the Indenture Trustee for cancellation, an amount sufficient
to discharge such indebtedness, including the principal of, the actual
premium, if any, and interest on the Certificates to the date of such
deposit (in the case of Certificates which have become due and payable),
or to the maturity thereof or to the Redemption Date thereof, as the case
may be; or
<PAGE>
60
(iii) (A) the Owner Trustee, subsequent to the Commencement Date,
has deposited or caused to be deposited irrevocably (except as provided
in Section 10.04) with the Indenture Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders, (1) money in an amount, or (2) U.S. Government
Obligations which, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide (not later
than one Business Day before the due date of any payment referred to
below in this paragraph) money in an amount, or (3) a combination of
money and U.S. Government Obligations referred to in the foregoing clause
(2), sufficient, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Indenture Trustee, to pay and
discharge each installment of principal of and interest on the
Outstanding Certificates on the dates such payments of principal or
interest are due (including as a result of redemption without the
possibility of the payment of premium in respect of which irrevocable
notice has been given to the Indenture Trustee on or prior to the date of
such deposit), and no Lease Event of Default under either Section 14(f)
or 14(g) of the Lease shall have occurred and be continuing on the date
of such deposit or at any time during the period ending on the 91st day
after such date; provided, however, that, upon the making of the
-------- -------
deposit referred to above in this clause (A), the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been
given) shall terminate;
(B) such deposit will not result in a breach or violation of, or
constitute an Indenture Default or Indenture Event of Default under, this
Agreement or a default or event of default under any other agreement or
instrument to which the Owner Trustee or the Company is a party or by
which it is bound; and
(C) the Company on behalf of the Owner Trustee has delivered to
the Indenture Trustee an Officer's Certificate and an Opinion of Counsel
to the effect that there has been published by the Internal Revenue
Service a ruling to the effect that Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of the exercise
by the Owner Trustee of its option under this Section 10.01(a)(iii) and
will be subject to Federal income tax on the same amount and in the same
manner and at the same times, as would have been the case if such option
had not been exercised;
(b) all other amounts then due and payable hereunder have been
paid and no notice of a redemption of the Certificates with the
possibility of the payment of premium has been delivered by the Indenture
Trustee; and
<PAGE>
61
(c) the Company on behalf of the Owner Trustee has delivered to
the Indenture Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent provided for relating to the
satisfaction and discharge of this Agreement contemplated by this Section
10.01, have been complied with.
Section 10.02. Survival of Certain Obligations.
-------------------------------
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, Section 7.01,
Section 9.11, Section 10.03 and Section 10.04, the rights, duties, immunities
and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and
--------------------------
U.S. Government Obligations deposited with the Indenture Trustee pursuant to
Section 10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment either
directly or through any Paying Agent, as the Indenture Trustee may determine,
to the Holders, of all sums due and to become due thereon for principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The
--------------------------------------
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or U.S. Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or U.S. Government Obligations have been deposited pursuant to Section
10.01.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of
-----------------------------------------------
Holders. The Owner Trustee and the Indenture Trustee may enter into one
- -------
or more agreements supplemental hereto without the consent of any Holder for
any of the following purposes:
(1) to correct any mistake or cure any ambiguity, defect or
inconsistency herein or in the Certificates or to make any change not
inconsistent with the provisions hereof; provided that such change
--------
does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party as the Owner
Trustee in accordance with the terms of the Trust Agreement or to
evidence (in accordance with Article 9) the succession of a new trustee
hereunder, the removal of the trustee
<PAGE>
62
hereunder or the appointment of any co-trustee or co-trustees or any
separate or additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee or to make any other provisions with
respect to matters or questions arising hereunder so long as such action
shall not adversely affect the interests of the Holders;
(4) to correct or amplify the description of any property at any
time subject to the lien of this Agreement or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subject to the lien of this Agreement or to subject to the lien of
this Agreement the Airframe or Engines or airframe or engines substituted
for the Airframe or Engines in accordance herewith or with the Lease;
provided that Trust Supplements entered into for the purpose of
--------
subjecting to the lien of this Agreement the Airframe or Engines in
accordance with the Lease need only be executed by the Owner Trustee and
the Indenture Trustee;
(5) to add to the covenants of the Owner Trustee, for the benefit
of the Holders, or to surrender any rights or power herein conferred upon
the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company of the
obligations of the Owner Trustee hereunder in accordance with the terms
and conditions applicable thereto specified in Section 7.03; or
(8) to include on the Certificates any legend as may be required
by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
--------------------------------------------
Holders. (a) With the written consent of the Holders of a majority of
- -------
the aggregate principal amount of the Outstanding Certificates, the Owner
Trustee and the Indenture Trustee may enter into such supplemental agreements
to add any provisions to or to change or eliminate any provisions of this
Agreement or of any such supplemental agreements or to modify the rights of the
Holders; provided, however, that, an amendment under this Section 11.02
-------- -------
may not:
(1) reduce the principal amount of, premium, if any, or any
installment of interest on, any Certificate; or
<PAGE>
63
(2) change the date on which any principal amount of, any
Installment Payment Amount payable with respect to, premium, if any, or
interest on any Certificate, is due or payable; or
(3) create any Lien on the Indenture Estate prior to or pari
----
passu with the Lien thereon under this Agreement except such as are
-----
permitted by this Agreement, or deprive any Holder of the benefit of the
Lien on the Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of the Outstanding
Certificates, the consent of whose holders is required for any such
supplemental agreement, or the consent of whose holders is required for
any waiver (of compliance with certain provisions of this Agreement or of
certain defaults hereunder or their consequences) provided for in this
Agreement; or
(5) make any change in Sections 8.05, 8.08 or Section 11.02(a).
(b) It is not necessary under this Section 11.02 for the Holders
to consent to the particular form of any proposed supplemental agreement, but
it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and the
Indenture Trustee of any supplemental agreement pursuant to the provisions of
this Section 11.02, the Indenture Trustee shall transmit by first-class mail a
notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. 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 agreement.
Section 11.03. Revocation and Effect of Consents. Until
---------------------------------
an amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder, even if notation
of the consent is not made on any Certificate. However, any such Holder or
subsequent Holder may revoke the consent as to his Certificate if the Indenture
Trustee receives the notice of revocation before the date the amendment or
waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Holder affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates.
---------------------------------------
The Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
<PAGE>
64
Section 11.05. Indenture Trustee Protected. The Indenture
---------------------------
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, etc. of Other Operative
--------------------------------------------
Documents. (a) Subject to Section 11.01, without the consent of the
- ---------
Holders of a majority in principal amount of Outstanding Certificates, the
respective parties to the Participation Agreement, the Lease and the Trust
Agreement may not modify, amend or supplement any of said agreements, 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 11.06 may be taken without the consent of the
Indenture Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this Section
11.06, the respective parties to the Participation Agreement, the Lease and the
Trust Agreement, 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 11.06 the
parties to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval 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 originally executed: Section 2, Section 3(a) (if the
result thereof would be to shorten the Term of the Lease to a period
shorter than the period ending with the Maturity Date of the
Certificates), Section 3(d) (except to the extent such Section relates to
amounts payable (whether directly or pursuant to the Indenture) to
Persons other than Holders and the Indenture Trustee in its individual
capacity), Section 3(e) (except insofar as it relates to the address or
account information of the Owner Trustee or the Indenture Trustee) (other
than as such Sections 3(a), 3(d) and 3(e) may be amended pursuant to
Section 3(c) of the Lease as originally executed), Section 4, Section 6,
Sections 9(b) through (d) (except that further restrictions may be
imposed on the Company), Section 10 (except that additional requirements
may be imposed on the Company), Section 11 (except for Section 11(e) and
except that additional insurance requirements may be imposed on the
Company), Section 12 (except in order to increase the Company's
liabilities or enhance the Lessor's rights thereunder), Section 13
(except in the case of an assignment by the Lessor in circumstances where
the Aircraft shall remain registrable under the Federal Aviation Act),
Section 14 (except to impose additional or more stringent Lease Events of
Default), Section 15 (except to impose
<PAGE>
65
additional remedies), Section 16 (except to impose additional
requirements on the Company), Section 18, Section 20, Section 22 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 in
--------
the event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as "Lessor" under the Lease to modify, amend or supplement the
Lease 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 "Lessor" thereunder; provided further that
-------- -------
without the prior consent of the Owner Trustee, and whether or not an
Indenture Event of Default shall have occurred and be continuing, no such
action shall be taken with respect to any of the provisions of Sections 1
(to the extent any modification of a definition contained therein would
result in a modification of the Lease not permitted by this proviso),
3(c), 4, 5, 6 (to the extent such action would reduce the Company's
obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 (insofar as it relates
to the Lessor), 18, 19 and 21 of the Lease, or any other Section of the
Lease to the extent such action shall affect the amount or timing of any
amounts payable by the Company under the Lease as originally executed (or
as subsequently modified with the consent of the Owner Trustee) which,
absent the occurrence and continuance of an Indenture Event of Default,
will be distributable to the Owner Trustee under Article 3; and
provided further that the parties to the Lease 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 Company's rights or
obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust Agreement, or give any
consent, waiver, authorization or approval with respect thereto, in each
case only to the extent any such action shall not 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 11.06
the parties to the Participation Agreement shall not modify, amend or
supplement, or give any consent, waiver, authorization or approval 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 Participation Agreement as originally
executed: Sections 1(b), Section 7 (insofar as such Section 7 relates to
the Indenture Trustee and the Holders), Section 8, Section 11 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
<PAGE>
66
(4) modify, amend or supplement any of said agreements 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
Agreement which shall not be inconsistent with the provisions of this
Agreement, 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 (a) or pursuant to
subsection (b) of this Section 11.06 and anything in such subsections or
elsewhere in this Agreement to the contrary notwithstanding, shall, without the
consent of the Holder of each Outstanding Certificate affected thereby,
(1) modify, amend or supplement the Lease in such a way as to
extend the time of payment of Basic Rent or stipulated Loss Value or any
other amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to clause (iii) of
Section 3(c) of the Lease) upon the occurrence of an Event of Loss or
Termination Value and any other amounts payable to the Indenture Trustee
for its own account or for the account of the Holders (subject in any
event to clause (iii) of Section 3(c) of the Lease) upon termination of
the Lease with respect to the Aircraft, payable under, or as provided in,
the Lease as originally executed, or reduce the amount of any installment
of Basic Rent or Supplemental Rent so that the same is less than the
payment of principal of, premium, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
Basic Rent or Supplemental Rent, or reduce the aggregate amount of
Stipulated Loss Value, EBO Percentage, Special Termination Value
Percentages, or any other amounts payable under, or as provided in, the
Lease as originally executed upon the occurrence of an Event of Loss so
that the same is less than the accrued interest on and the principal as
of the Lease Loss Payment Date, and premium, if any, of the Certificates
at the time Outstanding or reduce the amount of Termination Value and any
other amounts payable under, or as provided in, the Lease as originally
executed upon termination of the Lease with respect to the Aircraft so
that the same is less than the accrued interest on and principal as of
the Lease Termination Date and premium, if any, of Certificates 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 Company from its
obligations in respect of payment of Basic Rent or Supplemental Rent, or
Stipulated Loss Value and any other amounts payable to the Indenture
Trustee for its own account or the account of the Holders (subject in any
event to clause (iii) of Section 3(c) of the Lease) upon the occurrence
of an Event
<PAGE>
67
of Loss, or Termination Value and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to clause (iii) of Section 3(c) of the Lease) of
the Lease with respect to the Aircraft, payable under, or as provided in,
the Lease as originally executed, except for any such assignment pursuant
to Section 8(u) of the Participation Agreement, and except as provided in
the Lease as originally executed.
For the purposes of this Article 11, during the Pre-Commencement
Date Period, the "principal amount" of Outstanding Certificates shall include
the amount equal to that portion of the difference between the Original Issue
Price and the Original Principal. Amount for any Certificate originally issued
at a discount which corresponds to the period from the date of issuance thereof
to and including the Commencement Date.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise
-------
specifically provided for herein, all notices required under the terms and
provisions of this Agreement shall be in English and in writing, and any such
notice may be given by hand-delivery, overnight courier service, mail, telex or
telecopier addressed as indicated below and any such notice shall be effective,
in the case of hand-delivery, when delivered, in the case of overnight courier
service, one Business Day after delivery with charges paid to a courier service
with instructions for overnight delivery, in the case of mail, three Business
Days after delivery to the postal service with certified or registered mail
charges paid, in the case of telex, upon receipt of a telex answerback and, in
the case of telecopier, upon transmittal:
if to the Company, to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attention: Vice President and Treasurer
Telecopier: (708) 952-5204
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
<PAGE>
68
if to the Indenture Trustee, to:
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telecopier: (801) 246-5053
Telex No.: 3789450
if to the Owner Trustee, to:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
or if by overnight courier:
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Telecopier: (617) 664-5371
with a copy to the Owner Participant
if to the Owner Participant, to:
[ ]
-------------
(b) The Company, the Owner Trustee, the Indenture Trustee or the
Owner Participant by notice to the others may designate additional or different
addresses for subsequent notices or communications.
(c) Any notice or communication to Holders of the Certificates
shall be mailed by first-class mail to the addresses for Holders shown on the
Register kept by the Registrar and to addresses filed with the Indenture
Trustee for other Holders. Failure so to mail a notice or communication or any
defect in such notice or communication shall not affect its sufficiency with
respect to other Holders of such Certificates of that or any other Series
entitled to receive notice.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
<PAGE>
69
(e) If the Company mails a notice or communication to the
Holders, it shall mail a copy to the Indenture Trustee and to each Paying Agent
at the same time.
(f) Notwithstanding the foregoing, all communications or notices
to the Indenture Trustee shall be deemed to be given only when received by a
Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The
-------------------------------------
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. If a payment date is
-----------------
not a Business Day at a place of payment, payment may be made at such place on
the next succeeding day that is a Business Day, and no interest shall accrue
for the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
-------------
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF ILLINOIS.
Section 12.07. No Recourse Against Others. No director,
--------------------------
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
-------------------------
may be executed in any number of counterparts, each of which shall be an
original but such counterparts shall together constitute but one instrument.
<PAGE>
70
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
---------------------------------------
Lease. Upon any of:
- -----
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9(b) thereof on the Lease Termination Date, and upon
payment to the Indenture Trustee of an amount equal to the Redemption
Price of all Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its option
pursuant to Section 19(b) of the Lease on a Special Purchase Option Date
or the EBO Date as the case may be (unless the Company shall have elected
to assume all of the rights and obligations of the Owner Trustee
hereunder as provided for in Section 8(r) of the Participation
Agreement), and upon payment to the Indenture Trustee of an amount equal
to the Redemption Price as at the applicable Redemption Date of all
Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss Payment Date,
following an Event of Loss suffered by the Airframe under circumstances
where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10(a)(ii) of the Lease,
and upon payment to the Indenture Trustee of an amount equal to the
Redemption Price as at the Redemption Date of all Outstanding
Certificates, or
(d) the satisfaction, discharge, defeasance and termination of
obligations under this Agreement in accordance with Section 10.01, or
(e) the voluntary termination of the Lease with respect to an
Engine pursuant to Section 10(b) thereof, and upon the payment of
Stipulated Loss Value with respect to such Engine,
the Lien of this Agreement on the Indenture Estate, in the case of (a), (b),
(c) and (d) above, and on such Engine, in the case of (e) above shall terminate
(except for the Lien on funds held by the Indenture Trustee to pay the
Certificates and the Lien on amounts due from the Company under the Lease
necessary to pay the Certificates or the Indenture Trustee) and the Indenture
Trustee shall execute such instruments as may be requested by the Company or
the Owner Trustee to evidence such termination.
<PAGE>
71
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee
have caused this Third Amended and Restated Trust Indenture and Mortgage to be
duly executed by their respective officers thereunto duly authorized.
STATE STREET BANK AND TRUST COMPANY, not in
its individual capacity, except as
expressly provided herein, but solely as
Owner Trustee
By:
-----------------------------------
Name:
Title:
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, as Indenture
Trustee
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit A-1 to
Trust Indenture and
Mortgage
Form of Series 1993 747 A Installment Certificates
--------------------------------------------------
$_______________ (Original Issue Price) No. _____
$_______________ (Original Principal Amount)
SERIES 1993 747 A CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1993 747 A)
Dated as of April 1, 1993, as amended by First
Amendment to Trust Agreement
(1993 747 A) dated __________, 1995,
and as Amended and Restated by the
First Amended and Restated Trust Agreement
(1993 747 A) dated May _, 1995
Issued in connection with Aircraft N189UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1993 MATURITY DATE
-------------
_______ , 20__
INTEREST RATE PER ANNUM: __%
COMMENCEMENT DATE
CASH INTEREST: $
--------
State Street Bank and Trust Company, not in its individual
capacity, but solely as owner trustee (the "Owner Trustee") under that certain
Trust Agreement (1993 747 A), dated as of April 1, 1993, as amended by First
Amendment to Trust Agreement (1993 747 A), dated __________, 1995, and as
amended and restated by the First Amended and Restated Trust Agreement (1993
747 A) dated May _, 1995, between the Owner Trustee in its individual capacity
and the institution referred to therein as the "Owner Participant" (herein as
such Trust Agreement may be amended or supplemented from time to time called
the "Trust Agreement") for value received, hereby promises to pay to
_________________ or registered assigns the principal sum in Dollars equal to
the Original Principal Amount
<PAGE>
2
specified above in installments on each Installment Payment Date as provided
for herein below with the final installment due and payable on the Maturity
Date specified above (provided, however, that, if the obligations
-------- -------
evidenced by this Certificate shall become due and payable (upon redemption or
acceleration or otherwise) and shall be paid during the Pre-Commencement Date
Period, the principal amount hereof to be paid shall be the Original Issue
Price specified above, together with the portion of the difference between such
Original Issuer Price and the Original Principal Amount specified above which
corresponds to the period from the date of issuance hereof to the date of such
payment) and to pay interest (x) in the amount of the Commencement Date Cash
Interest specified above, payable on the Commencement Date, and (y) at the
Interest Rate Per Annum specified above on the Original Principal Amount
specified above from time to time outstanding in respect of the period
commencing on and including the Commencement Date and ending on the date when
the principal amount hereof shall have been paid in full, payable on each
[October 19] and [April 19] in each year, commencing on October 19, 1995
(provided, however, that, if the obligations evidenced by this
-------- -------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
amount thereof in respect of interest shall be an amount equal to the portion
of such Commencement Date Cash Interest which corresponds to the period from
the date of issuance hereof to the date of such payment). All amounts payable
by the Owner Trustee hereunder and under the Third Amended and Restated Trust
Indenture and Mortgage (1993 747 A), dated as of April 1, 1993 (as the same may
hereafter be further amended or supplemented from time to time, as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and First
Security Bank of Utah, National Association, as Indenture Trustee thereunder,
shall be made only from the income and proceeds of the Indenture Estate. Each
Holder hereof, by its acceptance of this Certificate, agrees that (a) it will
look solely to the income and proceeds of the Indenture Estate for payment of
such amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) none of the Owner Participant, the Owner
Trustee or the Indenture Trustee is or shall be personally liable to the Holder
hereof for any amount payable hereunder or under the Indenture or, except as
provided in the Indenture in the case of the Indenture Trustee and the Owner
Trustee, for any liability under the Indenture.
The interest or Installment Payment Amount (other than that payable
on the Maturity Date hereof) so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date or Installment Payment Date, as
the case may be, will, as provided in the Indenture, be paid to the Person in
whose name this Certificate (or one or more predecessor Certificates) is
registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date or Installment Payment Date, as the case may be. Any
such interest or Installment Payment Amount not so punctually paid or duly
provided for shall forthwith cease to be
<PAGE>
3
payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a special record date
for the payment of such Defaulted Installment or Defaulted Interest to be fixed
by the Indenture Trustee pursuant to Section 2.08 of the Indenture, notice
whereof shall be given to Holders of Certificates entitled thereto not less
than 10 days prior to such special record date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Certificates may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
Payment of the principal of, premiums if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment
- -------- -------
Amounts (other than that payable on the Maturity Date hereof) may be made at
the option of the Indenture Trustee or the Paying Agent by check mailed to the
address of the Holder entitled thereto as such address shall appear on the
Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of 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 thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, and the terms upon which the Certificates are,
and are to be, executed and delivered, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, on each Installment
Payment Date, the Holder hereof will receive a payment of principal equal to
the Installment Payment Date, the Holder hereof will receive a payment of
principal equal to the Installment Payment Percentage for such Installment
Payment Date as specified on Exhibit B-1 hereto (provided that, after the
--------
occurrence of any partial redemption or redemption pursuant to clause (ii) of
<PAGE>
4
Section 6.01(a) of the Indenture, the "Installment Payment Percentage" for each
Installment Payment Date subsequent to the applicable Redemption Date shall be
redetermined as provided for in the Indenture) multiplied by the Original
Principal Amount of this Certificate specified above.
As more fully provided in the Indenture, the Certificates are
subject to redemption or partial redemption on not less than 25 nor more than
60 days' notice by mail, under the circumstances set forth in the Indenture, at
a redemption price equal to the unpaid principal amount thereof, premium if
any, plus accrued interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be continuing, the
principal amount remaining unpaid of the Certificates may be declared due and
payable in the manner and with the effect provided in the Indenture. If, and
only if, such an event of default constitutes an event of default by the
Company under the Lease, the Indenture Trustee may declare the Lease to be in
default, and may, to the exclusion of the Owner Trustee, exercise one or more
of the remedies of the Owner Trustee provided in the Lease. Such remedies
include the right to repossess and use or operate the Aircraft, to sell or
relet the Aircraft free and clear of the Company's rights and retain the
proceeds and to require the Company to pay as liquidated damages (i) any unpaid
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in
the performance of its Obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
<PAGE>
5
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premiums, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Holder or his attorney duly
authorized in writing, one or more new Certificates of the same maturity and
type and of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that
is not an integral multiple of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Certificates are exchangeable
for a like aggregate principal amount of Certificates of the same maturity and
type and of authorized denominations, as requested by the Holder surrendering
the same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue,
<PAGE>
6
and neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to
be duly executed.
STATE STREET BANK AND TRUST COMPANY, not in
its individual capacity, but solely as
Owner Trustee
By:
-----------------------------------
Title:
<PAGE>
7
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Indenture
Trustee
By:
-----------------------------------
Authorized officer and signatory
<PAGE>
Exhibit A-2 to
Trust Indenture and
Mortgage
Form of Series 1993 747 A Serial Certificates
---------------------------------------------
$________ (Original Issue Price) No. _____
$_________ (Original Principal Amount)
SERIES 1993 747 A CERTIFICATE
STATE STREET BANK AND TRUST COMPANY
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1993 747 A)
Dated as of April 1, 1993, as amended by
First Amendment to Trust Agreement
(1993 747 A) dated __________, 1995,
and as Amended and Restated by the
First Amendment and Restatement to Trust Agreement
(1993 747 A) dated May _, 1995
Issued in connection with Aircraft N189UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1993 MATURITY DATE
-------------
_______ , 199__
INTEREST RATE PER ANNUM: ____%
COMMENCEMENT DATE
CASH INTEREST: $
--------
State Street Bank and Trust Company, not in its individual
capacity, but solely as owner trustee (the "Owner Trustee") under that certain
Trust Agreement (1993 747 A), dated as of April 1, 1993, as amended by First
Amendment to Trust Agreement (1993 747 A), dated __________, 1995, and as
amended and restated by the First Amendment and Restatement to Trust Agreement
(1993 747 A) dated as of May _, 1995, between the Owner Trustee in its
individual capacity and the institution referred to therein as the "Owner
Participant" (herein as such Trust Agreement may be amended or supplemented
from time to
<PAGE>
2
time called the "Trust Agreement"), for value received, hereby promises to pay
to _________________ or registered assigns the principal sum in dollars equal
to the Original Principal Amount specified above on the Maturity Date specified
above (provided, however, that, if the obligations evidenced by this
-------- -------
Certificate shall become due and payable (upon redemption or acceleration or
otherwise) and shall be paid during the Pre-Commencement Date Period, the
principal amount hereof to be paid shall be the Original Issue Price specified
above, together with the portion of the difference between such Original Issue
Price and the Original Principal Amount specified above which corresponds to
the period from the date of issuance hereof to the date of such payment) and to
pay interest (x) in the amount of the Commencement Date Cash Interest specified
above, payable on the Commencement Date, and (y) at the Interest Rate Per Annum
specified above on the Original Principal Amount specified above from time to
time outstanding in respect of the period commencing on and including the
Commencement Date and ending on the date when the principal amount hereof shall
have been paid in full, payable on each [October 19] and [April 19] in each
year, commencing on October 19, 1995 (provided, however, that, if the
-------- -------
obligations evidenced by this Certificate shall become due and payable (upon
redemption or acceleration or otherwise) and shall be paid during the
Pre-Commencement Date Period, the amount thereof in respect of interest shall
be the amount equal to the portion of such Commencement Date Cash Interest
which corresponds to the period from the date of issuance hereof to the date of
such payment the accrual at the Interest Rate Per Annum specified above of
interest on the Original Issue Price specified above from the date of issuance
of this Certificate to the date of such payment). All amounts payable by the
Owner Trustee hereunder and under the Third Amended and Restated Trust
Indenture and Mortgage (1993 747 A), dated as of April 1, 1993 (as the same may
hereafter be further amended or supplemented from time to time, as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and First
Security Bank of Utah, National Association, as Indenture Trustee thereunder,
shall be made only from the income and proceeds of the Indenture Estate. Each
Holder hereof, by its acceptance of this Certificate, agrees that (a) it will
look solely to the income and proceeds of the Indenture Estate for payment of
such amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) none of the Owner Participant, the Owner
Trustee or the Indenture Trustee is or shall be personally liable to the Holder
hereof for any amount payable hereunder or under the Indenture or, except as
provided in the Indenture in the case of the Indenture Trustee and the Owner
Trustee, for any liability under the Indenture.
The interest so payable and punctually paid or duly provided for,
on the applicable Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on the Record Date for
payment of such interest, which shall be the fifteenth day (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall
<PAGE>
3
forthwith cease to be payable to the registered Holder hereof on the such
Record Date (or to the Person in whose name this Certificate is registered upon
issuance) and may be paid to the Person in whose name this Certificate (or one
or more predecessor Certificates) is registered at the close of business on a
special record date for the payment of such Defaulted Interest to be fixed by
the Indenture Trustee pursuant to Section 2.08 of the Indenture, notice whereof
shall be given to Holders of Certificates entitled thereto not less than 10
days prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Certificates may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
Payment of the principal of, premium if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option
- -------- -------
of the Indenture Trustee or the Paying Agent by check mailed to the address of
the Holder entitled thereto as such address shall appear on the Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of 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 thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Company, the Indenture
Trustee and the Holders of the Certificates, and the terms upon which the
Certificates are, and are to be, executed and delivered, as well as for a
statement of the terms and conditions of the trust created by the Indenture, to
all of which terms and conditions in the Indenture each Holder hereof agrees by
its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption or partial redemption, on not less than 25 nor more than
60 days' notice by mail, under the circumstances set forth in the Indenture, at
a redemption price equal to the unpaid principal amount thereof, premium, if
any, plus accrued interest thereon to the Redemption Date.
<PAGE>
4
If an Indenture Event of Default shall occur and be continuing, the
principal of the Certificates may be declared due and payable in the manner and
with the effect provided in the Indenture. If, and only if, such an event of
default constitutes an event of default by the Company under the Lease, the
Indenture Trustee may declare the Lease to be in default, and may, to the
exclusion of the Owner Trustee, exercise one or more of the remedies of the
Owner Trustee provided in the Lease. Such remedies include the right to
repossess and use or operate the Aircraft, to sell or relet the Aircraft free
and clear of the Company's rights and retain the proceeds and to require the
Company to pay as liquidated damages (i) any unpaid Basic Rent plus an amount
equal to the excess of the Stipulated Loss Value of the Aircraft over the
aggregate fair market rental value thereof for the remainder of the term for
the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated Loss
Value of the Aircraft over the fair market sales value thereof or (iii) if the
Aircraft has been sold, any unpaid Basic Rent plus the excess of the Stipulated
Loss Value thereof over the net sales proceeds.
By acceptance of this Certificate, the Holder hereof agrees to be
bound by the provisions of the Participation Agreement applicable to Holders.
The Owner Trustee or the Owner Participant may, in their sole
discretion, in certain circumstances cure any default by the Company under the
Lease arising from the failure of the Company to make any payment of Basic Rent
under the Lease. The Owner Trustee or the Owner Participant may in their sole
discretion in certain circumstances cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold moneys for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
<PAGE>
5
As provided in the Indenture, in certain circumstances this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Registrar, or at the office or agency maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by, the Holder or his attorney duly
authorized in writing, one or more new Certificates of the same maturity and
type and of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof except that one Certificate of each maturity may be in an amount that
is not an integral multiple of $1,000. As provided in the Indenture and
subject to certain limitations therein set forth, Certificates are exchangeable
for a like aggregate principal amount of Certificates of the same maturity and
type and of authorized denominations, as requested by the Holder surrendering
the same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar and the Company may deem and treat the person in whose name this
Certificate is registered as the absolute owner hereof for the purpose of
receiving payment of the principal of and interest on this Certificate and for
all other purposes whatsoever whether or not this Certificate be overdue, and
neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS CERTIFICATE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to
be duly executed.
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------
Title:
<PAGE>
6
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, as Indenture
Trustee
By:
-----------------------------------
Authorized Officer or signatory
Title:
<PAGE>
Exhibit B to
Trust Indenture and
Mortgage
MATURITY DATES, ORIGINAL ISSUE PRICES, COMMENCEMENT
---------------------------------------------------
DATE CASH INTEREST, PRINCIPAL AMOUNTS AND INTEREST
--------------------------------------------------
RATES OF SERIES 1993 747 A CERTIFICATES
---------------------------------------
ORIGINAL COMMENCEMENT
MATURITY PRINCIPAL ISSUE PRICE DATE CASH INTEREST RATE
DATE AMOUNT AMOUNT INTEREST PER ANNUM
---------- --------- ----------- ------------ -------------
Series 1993
747 A1 [________] $[______] $[______] $[______] [____]%
Series 1993
747 A2
[________] $[______] $[______] $[______] [____]%
<PAGE>
Exhibit B-1 to
Trust Indenture and
Mortgage
Installment Payment Dates and Installment Payment Percentages
-------------------------------------------------------------
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: [_________]
Corresponding
Installment Payment Installment Payment Aggregate Installment
Date Percentage Payment Amount
------------------- ------------------- -------------------------
[ ] [ ]% $[ ]
[ ] [ ]% [ ]
TOTAL 100.00000000% $[ ]
------------- ---------------------
<PAGE>
B-1-2
Installment Certificate No. 2 - Maturity Date: [_________]
Corresponding
-------------
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
%
TOTAL 100.00000000% $
------------- -----------------
<PAGE>
Exhibit B-2 to
Trust Indenture and
Mortgage
Issuance of Series 1993 747 A Certificates
------------------------------------------
The Series 1993 747 A Certificates issued hereunder shall be issued
to and shall be payable to each of the Pass Through Trustees under the Pass
Through Trust Agreements with respect to the grantor trusts created thereby, in
each case as set forth below:
1995 - Al Trust:
[_____]% Certificate due [_________]
1995 - A2 Trust:
[_____]% Certificate due [_________]
<PAGE>
[Trust Indenture and Mortgage (1995 747 A)]
EXHIBIT C
---------
[To Be Reconciled With Exhibit A to the Trust Agreement]
TRUST AGREEMENT AND THIRD AMENDED AND
RESTATED TRUST INDENTURE AND MORTGAGE SUPPLEMENT
(1993 747 A)
This THIRD AMENDED AND RESTATED TRUST AGREEMENT AND TRUST INDENTURE
AND MORTGAGE SUPPLEMENT (1993 747 A), dated April __, 1993 (herein called the
"Trust Supplement") of State Street Bank and Trust Company, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement (1993 747 A), dated as of April 1, 1993,
as amended by First Amendment to Trust Agreement (1993 747 A), dated
__________, 1995 (herein called the "Trust Agreement") , between the Owner
Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below used herein as therein
defined) included in the property covered by the Trust Agreement;
WHEREAS, the Second Amended and Restated Trust Indenture and
Mortgage (1993 747 A), dated as of April 1, 1993 (herein called the "Trust
Indenture"), between the Owner Trustee and First Security Bank of Utah,
National Association, as Indenture Trustee (herein called the "Indenture
Trustee"), provides for the execution and delivery of a supplement thereto
substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement Witnesseth, that the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
<PAGE>
C-2
[Trust Indenture and Mortgage (1995 747 A)]
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------- --------------
The Boeing Company 747-422 N189UA [26878]
together with all Parts which are from time to time incorporated or installed
in or attached thereto or which have been removed therefrom but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
AIRCRAFT ENGINES
Four aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, whether or not such engines
shall be installed in or attached to the Airframe or any other airframe
identified as follows:
Manufacturer's
Manufacturer Model Serial Number
------------ ----- -------------
Pratt & Whitney [PW4056] [P727301]
Pratt & Whitney [PW4056] [P727302]
Pratt & Whitney [PW4056] [P727303]
Pratt & Whitney [PW4056] [P727304]
together with all Parts which are from time to time incorporated or installed
in or attached thereto or which have been removed therefrom but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee hereby confirms
that the Lien of the Trust Indenture over the Trust Indenture Estate includes
the Lease Supplement of even date herewith covering the property described
above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
<PAGE>
C-3
[Trust Indenture and Mortgage (1995 747 A)]
TO HAVE AND TO HOLD all and singular the aforesaid property unto
the Indenture Trustee, its successors and assigns, for the equal and
proportionate benefit and security of holders from time to time of the
Certificates outstanding, without any preference, distinction or priority of
any one Certificate over any other by reason of series, priority of time of
issue, sale, negotiation, date of maturity thereof or otherwise for any reason
whatsoever, and for the uses and purposes and subject to the terms and
provisions set forth in the Trust Indenture.
This Trust supplement shall be construed as Supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
* * *
<PAGE>
C-4
[Trust Indenture and Mortgage (1995 747 A)]
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
STATE STREET BANK AND TRUST COMPANY, not in
its individual capacity but solely as
Owner Trustee
By:__________________________
Title:
<PAGE>
Doc. No. 1.01
Aircraft N777UA
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1995 777 A)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
_________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1995 777 A Equipment Trust
One Boeing 777-222 Aircraft
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft.......... 3
SECTION 2. Lessee's Notice of Delivery Date........ 4
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee...................... 5
SECTION 4. Conditions.............................. 6
(a) Conditions Precedent to the
Participations in the Aircraft.... 6
(b) Conditions Precedent to the
Obligations of Lessee............. 15
SECTION 5. Confidentiality of Purchase Agreement... 16
SECTION 6. Extent of Interest of Certificate
Holders................................ 17
SECTION 7. Lessee's Representations, Warranties
and Indemnities
(a) In General........................ 17
(b) General Tax Indemnity............. 22
(c) General Indemnity................. 34
(d) Withholding....................... 40
SECTION 8. Representations, Warranties and
Covenants.............................. 40
SECTION 9. [Intentionally Omitted]................. 63
SECTION 10. Other Documents; Amendment.............. 63
SECTION 11. Certain Covenants of Lessee............. 64
SECTION 12. Owner for Income Tax Purposes........... 65
SECTION 13. Notices; Consent to Jurisdiction........ 65
SECTION 14. Change of Situs of Owner Trust.......... 66
SECTION 15. Miscellaneous........................... 67
SECTION 16. Invoices and Payment of Expenses........ 69
SECTION 17. Optional Redemption of Certificates..... 70
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 18. Optimization............................ 74
SECTION 19. Nondisclosure.......................... 75
</TABLE>
SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE I -- Names and Addresses
SCHEDULE II -- Commitments
SCHEDULE III -- Legal Opinions
EXHIBIT A-1 -- Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 -- Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B -- Form of Assignment and Assumption Agreement
EXHIBIT C -- Form of Guaranty Agreement
</TABLE>
iii
<PAGE>
PARTICIPATION AGREEMENT
(1995 777 A)
THIS PARTICIPATION AGREEMENT (1995 777 A) dated as of May 1, 1995
among (i) United Air Lines, Inc., a Delaware corporation (the "Lessee"), (ii)
[____________], a corporation organized under the laws of Delaware (the "Owner
Participant"), (iii) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"),
(iv) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as otherwise provided
herein, but solely as trustee under the Pass Through Trust Agreement (the "Pass
Through Trustee"), dated as of February 1, 1992, as amended and restated as of
May 1, 1995 (the "Basic Agreement"), in each case between the Lessee and STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as
supplemented by Trust Supplements Nos. 1995-A1 and 1995-A2, each dated as of May
__, 1995 between the Lessee and the Pass Through Trustee creating the 1995-A1
Pass Through Trust and the 1995-A2 Pass Through Trust, respectively (the Basic
Agreement as so supplemented being the "1995-A1 Pass Through Trust Agreement"
and the "1995-A2 Pass Through Trust Agreement", respectively, each of the 1995-
A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust Agreement
being a "Pass Through Trust Agreement") and (v) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, in its individual capacity
and as Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer, the Manufacturer has agreed to sell to Lessee, among other things,
certain Boeing Model 777-222 aircraft, one of which has been recently purchased
from the Manufacturer by Lessee and is the subject of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
<PAGE>
(i) Lessee and the Owner Trustee are entering into the Owner Trustee's
Purchase Agreement and Assignment (1995 777 A) dated as of May 1, 1995 (the
"Owner Trustee's Purchase Agreement"), whereby Lessee agrees to sell the
Aircraft to the Owner Trustee and assigns to the Owner Trustee certain
rights and interests of Lessee under the Purchase Agreement with respect to
the Aircraft; and
(ii) the Manufacturer has executed the Consent and Agreement (1995
777 A) dated as of May 1, 1995 substantially in the form attached to the
Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Mortgage (1995 777 A) dated as of May 1, 1995 pursuant to which
the Owner Trustee agrees, among other things, to issue one or more Loan
Certificates in the form set forth in Exhibit A-1 or Exhibit A-2 to the Trust
Indenture to each Pass Through Trustee on behalf of the related grantor trusts
created by the applicable Pass Through Trust Agreement as evidence of the Owner
Trustee's indebtedness to each Pass Through Trustee, which Loan Certificates are
to be secured by the mortgage and security interest in the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1995 777 A) dated as of May 1, 1995
whereby, subject to the terms and conditions set forth therein, the Owner
Trustee agrees to lease to Lessee, and Lessee agrees to lease from the Owner
Trustee, the Aircraft on the Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the
2
<PAGE>
"obligor" thereunder, as such term is defined in and solely for purposes of the
Trust Indenture Act of 1939, as amended, with respect to the Pass Through
Certificates and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
-------------------------------------------------------
the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
- ------------
Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context otherwise requires, any reference herein to any of
the Operative Documents refers to such document as it may be amended from time
to time in accordance with its terms and the terms of each other agreement
restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement, (i) each of
the Pass Through Trustees agrees to finance in part, the Owner Trustee's payment
of Lessor's Cost for the Aircraft by making a secured loan to the Owner Trustee
(herein called a "Loan" and collectively, the "Loans") on a date to be
designated pursuant to Section 2 hereof, but in no event later than May 31,
1995, in the amount in Dollars equal to the amount set forth opposite its name
on Schedule II hereto and (ii) the Owner Participant hereby agrees, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated hereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated as set forth
above, but in no event later than May 31, 1995, in an amount in Dollars equal to
the amount set forth opposite its name on Schedule II hereto. To fund its
obligations set out in (i) above, each Pass Through Trustee shall, in accordance
with Section 2.01 of the applicable Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated a date not later than
the Delivery Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the request of the
Company (as defined in the Basic Agreement)
3
<PAGE>
delivered pursuant to such Section 2.01, and deliver such Pass Through
Certificates to the Underwriters (as defined in Section 4(a)(xvii) as specified
in such request against payment by the Underwriters of an amount equal to the
aggregate principal amount of its Loan. In the case of the Owner Participant,
the amount of its participation to be made as provided above in the payment of
Lessor's Cost and, in the case of each Pass Through Trustee, the amount of its
Loan, is hereinafter called such Participant's "Commitment" for the Aircraft.
In case any Participant shall default in its obligation to make the amount of
its Commitment available pursuant to Section 2 hereof in respect of the
Aircraft, the other Participants shall have no obligation to make any portion of
such amount available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participants shall remain subject to the terms
and conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. Lessee agrees to give
--------------------------------
the Owner Participant, the Owner Trustee, the Pass Through Trustees and the
Indenture Trustee at least two Business Days' prior written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than May 31, 1995, which notice shall specify the amount of Lessor's Cost
and the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice. The
Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Indenture Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Loan Certificates in the full amount of the Pass Through
Trustees' Commitments.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, the Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. On the Delivery Date, subject to the terms and conditions of this
Agreement, and in consideration for the transfer of title to the Aircraft to the
Owner Trustee, the Owner Trustee and the Indenture Trustee (on behalf of the
Owner Trustee) shall pay over the funds made available to it equal to Lessor's
Cost to Lessee's account no. ____________ at First Security Bank of Utah,
National Association. In addition, subject to the terms and conditions of this
Agreement, the Owner Trustee shall, on the Delivery Date,
4
<PAGE>
issue to the Pass Through Trustees the Loan Certificates to evidence the Loans
The Owner Participant agrees, subject to the terms and conditions of
this Agreement, to make its Commitment available to the Owner Trustee at the
Owner Trustee's account no. ________ at First Security Bank of Utah, National
Association, and the Pass Through Trustees agree to make their Commitment
available to the Indenture Trustee at the Indenture Trustee's account no.
_________ at First Security Bank of Utah, National Association, at or before
10:00 a.m., New York City time, on the Delivery Date specified in Lessee's
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
-------------------------------------------------------
Subject to the terms and conditions of this Agreement, the Owner Trustee and the
Indenture Trustee, upon their respective receipts in full of the Owner
Participant's and the Pass Through Trustees' Commitments for the Aircraft, as
provided in Section 2 hereof, together with instructions from such Participant
or its special counsel to release such funds to Lessee, shall transfer such
funds to the Lessee and the Owner Trustee shall purchase the Aircraft from the
Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to the
Owner Trustee and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard to
items (b) - (f) below):
(a) to pay to Lessee the Lessor's Cost in the manner set forth in
Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of Lessee
designated by Lessee) to accept delivery of the Aircraft on the Delivery Date
pursuant to the Owner Trustee's Bill of Sale;
(c) to accept from the Lessee the Owner Trustee's Bill of Sale and the
Owner Trustee's FAA Bill of Sale;
(d) to execute an Aircraft Registration Application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow from the Pass Through Trustees amounts equal to their
respective Loans to finance a portion of Lessor's
5
<PAGE>
Cost and to issue to the Pass Through Trustees Loan Certificates in the amounts
specified herein; and
(f) to take such other action as may be required to be taken by the
Owner Trustee on the Delivery Date by the terms of any Operative Document.
SECTION 4. Conditions. (a) Conditions Precedent to the
---------- ---------------------------
Participations in the Aircraft. It is agreed that the respective obligations of
- ------------------------------
the Participants to participate in the payments of Lessor's Cost are subject to
the satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Pass Through Trustees), (xxv), (xxvi) and (xxviii) shall not be a condition
precedent to the obligation of the Pass Through Trustees, and paragraphs (iv),
(x) (insofar as it relates to the Owner Participant), (xiv), (xix) and (xxvii)
shall not be a condition precedent to the obligation of the Owner Participant:
(i) The Participants shall have received due notice with respect
to such participation pursuant to Section 2 hereof (or shall have waived
such notice either in writing or as provided in Section 2).
(ii) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the Pass
Through Trustees, as the case may be, would make it a violation of law or
regulations for (x) the Lessee, the Indenture Trustee, any Participant or
the Owner Trustee to execute, deliver and perform the Operative Documents
to which any of them is a party or (y) the Pass Through Trustees or the
Owner Participant to make their respective Commitments available or, in the
case of any Pass Through Trustee, to acquire a Loan Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Pass Through
Trustees shall have made available the amount of their respective
Commitments for the Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Pass Through Trustees, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
6
<PAGE>
(v) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall
each be satisfactory in form and substance to the Participants and shall be
in full force and effect and executed counterparts shall have been
delivered to the Participants, and their respective counsel, provided that
only the applicable Pass Through Trustee shall receive an executed original
of its Loan Certificate, only the Indenture Trustee, acting on behalf of
the Certificate Holders, shall receive the original counterparts of the
Lease and the Lease Supplement, only the Owner Participant shall receive a
copy of the Purchase Agreement which shall be delivered to and retained by
the Owner Trustee (the Owner Trustee and the Owner Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same until the return of
the Aircraft to Lessor (but only to the extent the Purchase Agreement has
any continued effectiveness on such return date) or unless a Lease Default
or Event of Default shall have occurred and be continuing) and provided
further that only the Lessee and the Owner Participant shall receive copies
of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the Aircraft and dated the
Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the Aircraft and dated the
Delivery Date;
(6) the Owner Trustee's Bill of Sale and the Owner Trustee's
FAA Bill of Sale;
(7) the Owner Trustee's Purchase Agreement;
(8) an acceptance certificate covering the Aircraft in the
form agreed to by the Participants and Lessee (the "Acceptance
Certificate") duly completed and executed by the Owner Trustee or its
agent, which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
7
<PAGE>
(10) the Loan Certificates;
(11) the Consent and Agreement;
(12) the Purchase Agreement;
(13) the Owner Participant Parent Guaranty; and
(14) the Pass Through Trust Agreements.
(vi) A Uniform Commercial Code financing statement or statements
covering all the security interests created by or pursuant to the Granting
Clause of the Trust Indenture shall have been executed and delivered by the
Owner Trustee and the Indenture Trustee, and such financing statement or
statements shall have been duly filed in all places necessary or advisable,
and any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Pass Through Trustees shall have
been executed and delivered by Lessee, the Indenture Trustee or the Owner
Trustee and duly filed.
(vii) Each Participant and the Indenture Trustee shall have
received the following, in each case in form and substance satisfactory to
it, provided that only the Owner Participant shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Trustee and the Owner Participant and their respective
counsel may inspect the Purchase Agreement prior to the Delivery Date but
thereafter shall not have access to the same until the return of the
Aircraft to Lessor (but only to the extent the Purchase Agreement has any
continued effectiveness on such return date) or unless a Lease Default or
Event of Default shall have occurred and be continuing):
(1) a certified copy of the Certificate of Incorporation and
By-Laws of Lessee and a copy of resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of this Agreement, the
Lease, the Owner Trustee's Purchase Agreement, the Owner Trustee's
Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
8
<PAGE>
(2) such other documents and evidence with respect to
Lessee, the Manufacturer, the Owner Trustee, the Indenture Trustee and
the Participants, as the Pass Through Trustees or the Owner
Participant, or their respective counsel, may reasonably request in
order to establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee (i) as to the Person or Persons
authorized to execute and deliver this Agreement, the other Lessee
Documents, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and as to the
signature of such person or persons, and (ii) to the effect that the
application of the proceeds from the Pass Through Certificates as
provided for herein will not be inconsistent with any of the
provisions of the Pass Through Trust Agreements;
(4) a copy of the Purchase Agreement certified by the
Secretary or an Assistant Secretary of Lessee as being a true and
accurate copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations or any
right in such Agreement assigned by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Purchase Agreement;
(5) a copy of the general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent of all of the Operative Documents to which it is a
party, together with such other documents and evidence with respect to
the Indenture Trustee, the Owner Trustee, the Pass Through Trustees,
the Owner Participant and the Owner Participant Parent as either the
Pass Through
9
<PAGE>
Trustees (or their counsel) or the Owner Participant (or its counsel)
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be a
condition precedent as to any Participant as to documents to be
provided by that Participant; and
(6) a copy of the excerpts the "United Air Lines 777
Maintenance Program" referred to in Section 5 of the Lease.
(viii) All appropriate action required to have been taken by the
Federal Aviation Administration, or any governmental or political agency,
subdivision or instrumentality of the United States, on or prior to the
Delivery Date 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, and all such orders,
permits, waivers, authorizations, exemptions and approvals shall be in full
force and effect on the Delivery Date.
(ix) On the Delivery Date, the following statements shall be true,
and the Participants and the Indenture Trustee shall have received evidence
satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and marketable title (subject
to filing and recording of the Owner Trustee's FAA Bill of Sale with
the Federal Aviation Administration) to the Aircraft, free and clear
of Liens other than the rights of Lessee under the Lease and Lease
Supplement covering the Aircraft, the mortgage and security interest
created by the Trust Indenture, the rights of the Owner Participant
under the Trust Agreement and the Trust Supplement and Liens permitted
by clause (iii) (solely for Taxes not yet due) of Section 6 of the
Lease;
(2) application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) and the
Owner Trustee's FAA Bill of Sale have been duly filed with the FAA;
10
<PAGE>
(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement and the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
(4) the Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee of the Owner Trustee's rights under the
Lease Agreement pursuant to the Trust Indenture, are entitled to the
protection of Section 1110 of the Bankruptcy Code in connection with
the Owner Trustee's and the Indenture Trustee's right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Lessee is a debtor; and
(5) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Lease and
has a current, valid U.S. standard certificate of airworthiness issued
by the FAA.
(x) On the Delivery Date, (A) the representations and warranties
of Lessee, the Owner Participant and the Owner Trustee contained in
Sections 7 and 8 of this Agreement and in the Tax Indemnity Agreement and
the Owner Participant Parent contained in the Owner Participant Parent
Guaranty shall be true and accurate as though made on and as of such date
except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date), (B) no event
shall have occurred and be continuing, or would result from the purchase,
sale, lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) an Event
of Default as defined in the Lease or the Trust Indenture, and (C) no event
shall have occurred that might have the effect of materially and adversely
affecting the ability of Lessee to carry on its business as conducted on
December 31, 1994 or to perform its obligations under the Operative
Documents.
(xi) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, and the Owner Trustee from (a)
Francesca M. Maher, Vice President-Law, Deputy General Counsel and
Corporate Secretary for Lessee, in substantially the form of Schedule III-
1(a) hereto and (b) Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, in substantially the form of Schedule III-1(b) hereto.
11
<PAGE>
(xii) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee, the Indenture Trustee and Lessee from
counsel to the Manufacturer, in substantially the form of Schedule III-2
hereto.
(xiii) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Bingham, Dana & Gould, special counsel for the Owner Trustee, in
substantially the form of Schedule III-3 hereto.
(xiv) The Pass Through Trustees shall have received an opinion
addressed to the Indenture Trustee, the Pass Through Trustees, the Owner
Trustee and Lessee from (a) Dewey Ballantine, special counsel to the Owner
Participant and the Owner Participant Parent, in substantially the form of
Schedule III-4(a) hereto and (b) Michael Flynn, Vice President-General
Counsel and Secretary to the Owner Participant and the Owner Participant
Parent in substantially the form of Schedule III-4(b) hereto.
(xv) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, in
substantially the form of Schedule III-5 hereto.
(xvi) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee and Lessee from Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee and the Pass Through Trustees, in
substantially the form of Schedule III-6 hereto.
(xvii) The Owner Participant shall have received an opinion
addressed to it from Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, substantially to the same effect as the opinion delivered
pursuant to Section 5(b)(1) of the Purchase Agreement dated ____________
(the "Underwriting Agreement") among Lessee, Merrill Lynch & Co. and Lehman
Brothers (the "Underwriter").
(xviii) The Participants and the Indenture Trustee shall have
received a certificate signed by the President or any Vice President of
Lessee, dated the Delivery Date, addressed to the Participants and the
Indenture Trustee and certifying as to the fulfillment of all conditions in
this Section 4(a) insofar as they relate to Lessee and as to the matters
stated in paragraphs (viii), (x) (insofar as it relates to Lessee), (xxii)
and (xxiii) (to the knowledge of
12
<PAGE>
Lessee, except in regard to matters relating to the Participants, Indenture
Trustee or the Owner Trustee, in which event such representation shall be
to the knowledge of Lessee without any investigation whatsoever) of this
Section 4(a).
(xix) (a) The Owner Participant shall, by making its Commitment
available as provided in Section 1(b)(ii) of this Agreement, (b) the
Indenture Trustee shall by authenticating the Loan Certificates issued on
the Delivery Date, (c) the Owner Trustee shall, by accepting the Owner
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale and (d) the
Pass Through Trustees shall, by making their respective Commitments
available as provided in Section 1(b)(i) of this Agreement, be respectively
deemed to have reaffirmed as of the Delivery Date the representations and
warranties made by it in Section 8 of this Agreement.
(xx) The Owner Participant shall have received an opinion, in form
and substance reasonably satisfactory to the Owner Participant, from BK
Associates, independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) on the Delivery Date, the fair market value of the Aircraft is equal to
Lessor's Cost; (B) on the Delivery Date, the Aircraft is expected to have
an economic useful life of at least 125% of the aggregate of the Interim
Term and the Basic Term; (C) on the Delivery Date, the Aircraft is expected
to have a residual value at the end of the Basic Term of at least 20% of
Lessor's Cost (without considering the effects of inflation or deflation
and assuming the Aircraft is in compliance with Section 5 of the Lease);
(D) on the Delivery Date, the Aircraft is expected to have a fair market
value on the EBO Date that does not exceed an amount equal to the EBO
Price; (E) the fair market value of each Engine is at least equal to Engine
Cost; and (F) the Aircraft is not limited use property.
(xxi) The Participants and the Indenture Trustee shall have
received an independent insurance broker's report, and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of the
Lease relating to insurance with respect to the Aircraft.
(xxii) On the Delivery Date it shall be true that no Event of Loss
(or event which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine has occurred.
13
<PAGE>
(xxiii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency,
nor shall any order, judgment or decree have been issued or proposed to be
issued by any court or governmental agency at the time of the Delivery Date
to set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Pass Through Trustees contained in Section 8
hereof shall be true and accurate as of the Delivery Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and the Lessee and each Participant shall have
received a certificate signed by the Chairman of the Board, the President,
any Vice President or any Assistant Vice President of the Indenture Trustee
and the Pass Through Trustees certifying as to the foregoing matters with
respect to the Indenture Trustee and the Pass Through Trustees, as
applicable.
(xxv) The Owner Participant shall have received from Dewey
Ballantine, special counsel to the Owner Participant, a favorable opinion,
in form and substance satisfactory to the Owner Participant, with respect
to certain income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, no law (including tax laws), regulation or regulatory order or
holding applicable to the Owner Participant or the Owner Participant's
participation in the transactions contemplated hereby, shall have been
enacted, issued or proposed prior to the Delivery Date that would have a
material adverse impact on the Owner Participant.
(xxvii) The Pass Through Trustees shall have received a letter from
BK Associates to the effect that the fair market value of the Aircraft on
the Delivery Date is not less than 125% of the aggregate amount of the
Loans.
(xxviii) The Lessee shall have executed and delivered to Owner
Participant a letter relating to Lessee's average cost of capital together
with appropriate supporting documentation.
14
<PAGE>
Promptly upon the registration of the Aircraft and the recording of
the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement and
the Trust Supplement covering the Aircraft pursuant to the Federal Aviation Act,
Lessee will cause Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, to deliver to the Owner Participant, the Indenture Trustee, the Pass
Through Trustees, the Owner Trustee and Lessee an opinion as to the due and
valid registration of the Aircraft in the name of the Owner Trustee, the due
recording of the Owner Trustee's FAA Bill of Sale, the Trust Indenture, the
Lease Supplement, the Trust Supplement, the Lease and the Trust Agreement and
the lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
-------------------------------------------------
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, are all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the following
conditions precedent:
(i) The conditions specified in Section 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii) and 4(a)(xxiii) hereof shall have been satisfied,
unless such nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section 4(a)(v) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Lessee) in the manner specified in Section 4(a)(v),
shall each be satisfactory in form and substance to Lessee, shall be in
full force and effect on the Delivery Date, and an executed counterpart of
each thereof (other than the Loan Certificates) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the general authorizing
resolutions of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the Indenture Trustee, the Owner
Trustee, the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary or
an Assistant Secretary of the Indenture Trustee, the Owner Trustee, the
Pass Through Trustees, the Owner Participant and the Owner Participant
Parent, respectively, which authorize the execution, delivery and
performance by the Indenture Trustee, the Owner Trustee, the Pass Through
Trustees, the Owner Participant and the Owner Participant Parent of all the
Operative Documents to which
15
<PAGE>
it is a party, together with such other documents and evidence with respect
to the Indenture Trustee, the Owner Trustee, the Pass Through Trustees, the
Owner Participant and the Owner Participant Parent as Lessee or its counsel
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the conditions
herein set forth.
(iv) The representations and warranties of the Participants, the
Indenture Trustee and the Owner Trustee contained in Section 8 hereof and
the Owner Participant Parent in the Owner Participant Parent Guaranty shall
be true and accurate as of the Delivery Date as though made on and as of
such date except to the extent that such representations and warranties
relate solely to an earlier date (in which event such representations and
warranties shall have been true and accurate on and as of such earlier
date) and Lessee shall have received a certificate signed by the Chairman
of the Board, the President, any Vice President or any Assistant Vice
President or other authorized representative of the Indenture Trustee, the
Owner Participant, the Pass Through Trustees and the Owner Trustee,
respectively, certifying as to the foregoing matters with respect to the
Indenture Trustee, the Owner Participant and the Owner Trustee,
respectively.
(v) Lessee shall have received the opinions set forth in Sections
4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv), and 4(a)(xvi), in each case
addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory authorities which, in
the opinion of Lessee, would make it a violation of law or regulations for
Lessee to enter into any transaction contemplated by the Operative
Documents.
(vii) No law (including tax laws), regulation or regulatory order
or holding applicable to the Lessee or Lessee's participation in the
transactions contemplated hereby, shall have been enacted, issued, or
proposed prior to the Delivery Date that would have a material adverse
impact on Lessee.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
-------------------------------------
Participants, and the Indenture Trustee shall keep
16
<PAGE>
the Purchase Agreement confidential and shall not disclose the same to any
Person, except (A) to prospective and permitted transferees of Lessor's, a Pass
Through Trustee's, the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, (B) to the aforementioned
prospective and permitted transferees', Lessor's, Pass Through Trustees', the
Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such information
confidential, (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation, including Federal or state
banking examiners or tax auditors or (D) as may be necessary or desirable for
purposes of protecting the interest of any such Person or for enforcement of the
Lease by Owner Trustee, the Participants or the Indenture Trustee; provided,
however, that any and all disclosures of all or any part of the Purchase
Agreement which are permitted by (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
-----------------------------------------
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
SECTION 7. Lessee's Representations, Warranties and Indemnities. (a) In
---------------------------------------------------- --
General. Lessee represents and warrants that as of the Delivery Date:
- -------
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its
17
<PAGE>
operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on Lessee or
its business; is a Citizen of the United States and a Certificated Air
Carrier; holds all material licenses, certificates, permits and franchises
from the appropriate agencies of the United States of America and/or all
other governmental authorities having jurisdiction, necessary to authorize
Lessee to engage in air transport and to carry on scheduled passenger
service, in each case as presently conducted; has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Elk Grove Township, Illinois; and has the corporate power and
authority to conduct its business as it is presently being conducted, to
hold under lease the Aircraft and to enter into and perform its obligations
under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2), (C) any normal periodic and other reporting requirements under
the applicable rules and regulations of the FAA to the extent required to
be given or obtained only
18
<PAGE>
after the Delivery Date, (D) the recordings with the FAA described in the
opinion referred to in Section 4(a)(xv) and (E) any normal periodic and
other reporting requirements under the applicable rules and regulations of
the FAA to the extent required to be given or obtained only after the
Delivery Date, it being understood that the registration of the issuance
and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreements under the Securities Act of
1933, as amended, and under the securities laws of any state in which the
Pass Through Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the qualification of
each Pass Through Trust Agreement under the Trust Indenture Act of 1939, as
amended, has been duly obtained;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial
19
<PAGE>
Code of any applicable jurisdiction), is necessary or advisable in order to
establish and perfect the Owner Trustee's title to and interest in the
Aircraft as against the Lessee and the Indenture Trustee's security
interest in the Aircraft as against the Owner Trustee, and in each case as
against any third parties in any applicable jurisdictions in the United
States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1994 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1994, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
20
<PAGE>
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner Participant, and not more than ____________ (__) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, or (B) offered any
interest in the Trust Estate or any Pass Through Certificate or any Loan
Certificate in a manner which would violate the Securities Act of 1933, as
amended, the regulations thereunder, administrative and judicial
interpretation thereof or the securities laws, rules or regulations of any
state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, any Pass Through Trustee, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee 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 any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
21
<PAGE>
(xvii) neither Lessee nor any subsidiary of 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.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
--------------------- ---------
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original
22
<PAGE>
Amount of, or interest or Premium on, or other amounts payable with respect to,
the Loan Certificates or the payment of principal of, interest on or any other
amounts payable with respect to the Pass Through Certificates, (G) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents, or (H) any change in the Owner Trustee or the situs of the
Trust Estate made pursuant to Sections 8(c) or 14 hereof; and (y) any reasonable
out-of-pocket costs and expenses fairly attributed to any of the foregoing
incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
-------------------------------------
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
23
<PAGE>
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B) the earlier discharge in
full of Lessee's obligation to
24
<PAGE>
pay the Stipulated Loss Value or the Termination Value and all other
amounts due under the Lease or (C) placement in storage or parking of
the Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to this Section 7(b) or Section 7(c) hereof or
pursuant to the Tax Indemnity Agreement; provided, however, that this
clause
25
<PAGE>
shall not result in any duplication of any amounts of any gross-up payable
under Section 7(b)(iii) or Section 7(c) hereof or the Tax Indemnity
Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
---------------------------------------------
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant to (I) above would exceed (x)
the amount of all prior payments (determined without regard to any amount
paid in respect of Taxes required to be paid by such Indemnitee in
26
<PAGE>
respect of the receipt or accrual of such amounts received by such
Indemnitee) from Lessee pursuant to this Section 7(b), less (y) the portion
of all prior payments computed pursuant to (I) above by such Indemnitee to
Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
---------------------------------
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's obligation hereunder unless such failure
effectively precludes Lessee's ability to (A) require such Indemnitee to
contest the Tax or (B) contest the Tax itself (in a case
27
<PAGE>
where Lessee cannot require the Indemnitee to contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and
28
<PAGE>
to the extent that the contest results in a determination which clearly and
unambiguously demonstrates that Lessee is not otherwise liable under this
Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee against any
additional net after-tax cost to such Indemnitee with respect to such
advance or payment, (IV) with regard to an Income Tax on an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee,
29
<PAGE>
independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee) plus interest received, if any,
from the relevant taxing authority with respect to such Tax payment (net of
Taxes required to be paid by such Indemnitee in connection with the receipt
of such interest), it being intended that such Indemnitee shall realize a
net
30
<PAGE>
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
--------------------------------
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary to file such returns, statements or reports, and
(ii) in the case of a return, statement or report required (or requested by
the Indemnitee) to be in the name of or filed by such Indemnitee, Lessee
shall prepare and furnish such return, statement or report for filing by
such Indemnitee in such manner as shall be reasonably satisfactory to such
Indemnitee and send the same to such Indemnitee for filing
31
<PAGE>
no later than 10 Business Days prior to the due date; provided, however,
that Lessee shall have no obligation under this clause (ii) to the extent
such Indemnitee after receipt of Lessee's written request shall have failed
to furnish Lessee with such information as is peculiarly within such
Indemnitee's control and is necessary to prepare such return, statement or
report. Lessee shall hold each Indemnitee harmless from and against any
liabilities, including, but not limited to penalties, additions to tax,
fines and interest, arising out of any insufficiency or inaccuracy in any
such return, statement, report or information if such insufficiency or
inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
--------------------------------
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
(vii) Application of Payments During Existence of Default or Event
------------------------------------------------------------
of Default. Any amount payable to Lessee pursuant to the terms of this
----------
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall
not be continuing any Default or Event of Default, such amount shall be
paid to the Lessee to the extent not previously applied against Lessee's
obligations
32
<PAGE>
hereunder as and when due after the Owner Trustee shall have declared the
Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
---------------------------------------
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
-----------
time to time, at the Lessee's request and expense, 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 tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
-----------
Agreement, Lessee may require the Indemnitee to agree to the terms of this
Section 7(b) prior to making any payment to such Indemnitee under this
Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
-----------------
the term "Owner Participant" shall mean and include [__________________]
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which [_____________] (and its permitted
successors and assigns) is a member.
33
<PAGE>
(xii) Income Tax. For purposes of this Section 7, the term Income
----------
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
-----------------
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or copyright infringement; or (D) the offer, sale, holding, transfer
or delivery of the Loan Certificates or the Pass Through Certificates, whether
before, on or after the Delivery Date (the indemnity in this clause (D) to
extend also to any person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act of 1933, as amended); or (E) the offer,
holding, transfer or sale of any interest in the Trust Estate or the Trust
Agreement or any similar interest (a) on or prior to the Delivery Date, or (b)
subsequent to the Delivery Date during the continuation of an Event of Default
under the Lease or in connection with the exercise by the Lessee of its
34
<PAGE>
purchase options under the Lease or in connection with a refinancing pursuant to
Section 17 hereof or in connection with the termination of the Lease or action
or direction of Lessee pursuant to Sections 7, 8, 9, 10, or 19 thereof;
provided, that the foregoing indemnity shall not extend to any Expense to the
extent resulting from or arising out of one or more of the following: (1) any
representation or warranty by such Indemnitee in the Operative Documents or in
any Pass Through Trust Agreement being incorrect, or (2) the failure by such
Indemnitee to perform or observe any agreement, covenant or condition in any of
the Operative Documents or in any Pass Through Trust Agreement including,
without limitation, the creation or existence of a Lessor Lien (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens), or (3) the willful misconduct or the gross
negligence of such Indemnitee (other than gross negligence imputed to such
Indemnitee solely by reason of its interest in the Aircraft), or (4) (A) in the
case of such Indemnitee a disposition (voluntary or involuntary) of all or any
part of its interest in the Airframe or any Engine, (B) in the case of a
Certificate Holder a disposition (voluntary or involuntary) by such Certificate
Holder of all or any part of its interest in any Loan Certificate or (C) in the
case of any Indemnitee a disposition by such Indemnitee of all or any part of
such Indemnitee's interest in the Operative Documents or the Pass Through Trust
Agreements other than in each of (A), (B) and (C) during the continuance of an
Event of Default under the Lease or pursuant to the exercise by the Lessee of
its purchase options under the Lease or in connection with a refinancing
pursuant to Section 17 hereof or in connection with the termination of the Lease
or action or direction of Lessee pursuant to Sections 7, 8, 9, 10 or 19 thereof,
or (5) other than to the extent provided in the succeeding paragraph, any Tax
(as defined in Section 7(b) hereof) whether or not Lessee is required to
indemnify for such Tax pursuant to Section 7(b) hereof (it being understood that
Section 7(b) hereof and the Tax Indemnity Agreement and provisions requiring
payments to be made on an after-tax basis or expressly providing for additional
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust
35
<PAGE>
Indenture any amounts received and distributable by it thereunder to such
Certificate Holder or a failure on the part of any Pass Through Trustee to
distribute in accordance with the applicable Pass Through Trust Agreement any
amounts received and distributable by such Pass Through Trustee under such Pass
Through Trust Agreement, or (8) other than during the continuation of a Default
or an Event of Default under the Lease the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any of the Operative Documents or any Pass Through Trust Agreement
unless such amendments, supplements, waivers or consents (a) are requested by
Lessee or (b) are required or permitted pursuant to the terms of the Operative
Documents (unless the same results from the actions of an Indemnitee) (provided
if Lessee is not responsible for the Expense associated with such amendment,
supplement, waiver or consent, the party requesting the execution of the same
shall be responsible for such expense), or (9) other than to the extent provided
in the succeeding paragraph any loss of tax benefits or increase in tax
liability under any tax law whether or not Lessee is required to indemnify
therefor pursuant to this Agreement or the Tax Indemnity Agreement (it being
understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing
36
<PAGE>
authority or governmental subdivision of a foreign country, or any territory or
possession of the United States or any international authority, shall be equal
to the excess, if any, of (A) the amount of such Expense over (B) the current
net reduction in Taxes actually required to be paid by such recipient resulting
from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use reasonable
efforts to obtain such severance), and (C) in any other case, to be consulted by
such Indemnitee with respect to judicial proceedings subject to the control of
such Indemnitee and to be allowed, at Lessee's sole expense, to participate
therein. Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to assume responsibility for and control of any such judicial or
administrative proceedings if (i) any Default under Section 14(a), (b), (f) or
(g) of the Lease or an Event of Default under the Lease shall have occurred and
be continuing, (ii) if such proceedings will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on, the Aircraft, the Trust Indenture Estate or the Trust Estate or any
part thereof unless Lessee shall have posted a bond or other security reasonably
satisfactory to the relevant Indemnitees in respect to such risk
37
<PAGE>
or (iii) if such proceedings could, in the good faith opinion of the Indemnitee
entail any risk of criminal liability or any material risk of civil liability
(unless, in the case of such civil liability, Lessee has agreed to indemnify
against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
-------- -------
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee
38
<PAGE>
subsequently shall be reimbursed in respect of such indemnified amount from any
other person, such Indemnitee shall, unless a Default under Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or (b)(viii)
of the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing, promptly pay
Lessee but not before Lessee shall have made all payments then due to such
Indemnitee pursuant to this Section 7(c) and any other payments then due under
any of the Operative Documents, an amount equal to the sum of (I) the amount of
such reimbursement, including interest received attributable thereto, net of
taxes required to be paid by such Indemnitee as a result of any reimbursement
including interest received attributable thereto and (II) any tax benefit
actually realized by such Indemnitee as a result of any payment by such
Indemnitee made pursuant to this sentence; provided, however, that in the case
of any Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above shall
not be in excess of the amount of such Expense payment net of any amount paid in
respect of Taxes required to be paid by such Indemnitee in respect of the
receipt or accrual of such payment or advance made by Lessee to such Indemnitee
plus interest received, if any, from the relevant taxing authority with respect
to any such Expense payment, it being intended that such Indemnitee shall
realize a net benefit pursuant to this Section 7(c) only if Lessee shall first
have been reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent appointed in accordance with Section
9.02(c) of the Trust Indenture) and each Pass Through Trustee (including, but
not limited to, the reasonable fees and expenses of its counsel) and, as
provided in Section 6.07 of the Trust Agreement, the Owner Trustee (including,
but not limited to, the reasonable fees and expenses of its counsel), in each
case without cost, on a net after-tax basis, to the Owner Participant, for
acting as such, other than such fees and expenses which constitute Transaction
Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement 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 any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
39
<PAGE>
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
-----------
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall instruct the Indenture Trustee to, and Indenture Trustee shall, withhold
as provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
-----------------------------------------
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
40
<PAGE>
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure to immediately comply with
its obligations pursuant to the second sentence of this Section 8(b) unless such
failure is a result of such party's breach of its obligations to cooperate set
forth in the following sentence (including any damages suffered by any such
party (other than damages suffered by Lessee which Lessee could have mitigated
by taking reasonable steps (Lessee having no obligation to restrict the use of
the Aircraft to so mitigate)) at any time after the fifth Business Day following
the Owner Participant's having obtained Actual Knowledge of such ineligibility
or loss of citizenship). Each party hereto agrees, upon the request and at the
sole expense of the Owner Participant, to reasonably cooperate with the Owner
Participant in complying with its obligations under the provisions of the second
sentence of this Section 8(b) and such request shall not be subject to the
indemnity contained in Section 7(c) hereof. State Street Bank and Trust Company
in its individual capacity, agrees that if at any time a responsible officer of
State Street Bank and Trust Company, shall obtain Actual Knowledge that State
Street Bank and Trust Company has ceased to be a Citizen of the United States,
it will promptly resign as Owner Trustee (if and
41
<PAGE>
so long as such citizenship is necessary under the Federal Aviation Act as in
effect at such time or, if it is not necessary, if and so long as the Owner
Trustee's citizenship would have any adverse effect on a Certificate Holder,
Lessee or the Owner Participant), effective upon the appointment of a successor
Owner Trustee in accordance with Section 9.01 of the Trust Agreement. If the
Owner Participant or State Street Bank and Trust Company, in its individual
capacity, does not comply with the requirements of this Section 8(b), the Owner
Trustee, the Indenture Trustee, the Owner Participant and the Certificate
Holders hereby agree that a Default or an Event of Default shall not have
occurred and be continuing under the Lease due to noncompliance by Lessee with
the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or
42
<PAGE>
the United Kingdom, or (ii) upon 30 days' prior written notice in any other
country with which the United States maintains diplomatic relations at the time
of such request and the Owner Participant has not determined, acting reasonably,
that such other country would not provide substantially equivalent protection
for the rights of owner participants, lessors or lenders in similar transactions
as provided under United States laws, the Owner Participant will not, in the
case of either (i) or (ii), unreasonably withhold its consent to such change of
registration. In addition, such change of registration to a country listed on
Exhibit G shall be permitted only if such change will not result in the
imposition of, or increase the amount of, any Tax for which Lessee is not
required to indemnify or is not then willing to enter into a binding agreement
to indemnify, in a manner satisfactory in form and substance to the indemnified
party, each party referred to in clause (E) of paragraph (i) below. The Owner
Participant further agrees that the inability of Lessee to deliver to the Owner
Participant and, so long as the Lien of the Trust Indenture has not been
released, the Indenture Trustee, an opinion (reasonably satisfactory in form and
substance to the Owner Participant) of counsel reasonably acceptable to the
Owner Participant in such country listed on Exhibit G to the Lease to the effect
that the courts of such country would give effect to the Owner Trustee's title
to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit G, and if said opinion is delivered, the Owner Participant will
instruct the Owner Trustee, and the Indenture Trustee, subject only to
compliance with the provisions of Section 7.02 of the Indenture, shall
cooperate, to make such change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional
43
<PAGE>
indemnities for which Lessee is then willing to enter into a binding
agreement to indemnify) in favor of the Owner Participant, the Owner
Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms (including, without limitation, the governing-law, service-of-process
and jurisdictional-submission provisions thereof) of the Lease and the
Trust Indenture are legal, valid, binding and enforceable in such
jurisdiction, (B) that it is not necessary for the Owner Participant, the
Owner Trustee or the Indenture Trustee to register or qualify to do
business in such jurisdiction, (C) that there is no tort liability of the
owner of an aircraft not in possession thereof under the laws of such
jurisdiction other than tort liability which might have been imposed on
such owner under the laws of the United States or any state thereof (it
being understood that, in the event such latter opinion cannot be given in
a form satisfactory to the Owner Participant, such opinion shall be waived
if insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction
44
<PAGE>
payable in currency freely convertible into Dollars for the loss of use or
title of the Aircraft in the event of the requisition by such government of
such use or title, and (E) to such further effect with respect to such
other matters as the Owner Trustee, in its individual capacity, or the
Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's request to
change the registry of the Aircraft to, or to sublease the Aircraft in, a
country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval
45
<PAGE>
not already obtained of stockholders of the Owner Participant or any
approval or consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been duly
executed and delivered by the Owner Participant, and neither the execution
and delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor compliance
by the Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment, governmental
rule, regulation or order applicable to or binding on the Owner Participant
(it being understood that no representation or warranty is made with
respect to laws, rules or regulations relating to aviation or to the nature
of the equipment owned by the Owner Trustee, other than such laws, rules or
regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Liens provided for or otherwise permitted in the Operative
Documents) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or instrument to
which the Owner Participant is a party or by which it or its properties may
be bound or affected (it being understood that no representation or
warranty is made in this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation 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, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations
46
<PAGE>
relating to the citizenship requirements of the Owner Participant under
applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be necessary duly to
discharge such Lessor Lien attributable to it and (iii) to make restitution to
the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it. The Owner Participant
agrees to make restitution to the Trust Estate for any actual diminution of the
assets of the Trust Estate resulting from any Taxes or Expenses (as such terms
are defined in Section 7 hereof) imposed on the Trust Estate against which
Lessee is not required to indemnify the Trust Estate pursuant to Section 7
hereof, but excluding Taxes or Expenses referred to in Section 7(b)(ii)(5) and
7(b)(ii)(7) and excluding any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity;
provided that if the Owner Participant shall make restitution to the Trust
Estate on account of any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity, then
State Street Bank and Trust Company, in its individual capacity, shall reimburse
the Owner Participant for such amount together with interest thereon at the Past
Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate
47
<PAGE>
pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is in effect), each hereby waives to the fullest
extent permitted by law the benefit of the provisions of Section 1111(b) of
Title 11 of the United States Code with respect to recourse against the Owner
Trustee (in its individual capacity) and the Owner Participant on account of any
amount payable as principal of, Premium, if any, and interest on the Loan
Certificates. If (i) all or any part of the Trust Estate becomes the property
of, or the Owner Participant becomes, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any successor provision, (ii) pursuant to
such reorganization provisions the Owner Trustee (in its individual capacity) or
the Owner Participant is required, by reason of the Owner Trustee (in its
individual capacity) or the Owner Participant being held to have recourse
liability to a Certificate Holder, a Pass Through Trustee or the Indenture
Trustee, directly or indirectly (other than the recourse liability of the Owner
Participant under this Participation Agreement), to make payment on account of
any amount payable as principal, Premium, if any, or interest on the Loan
Certificates and (iii) such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee actually receives any Excess Payment (as hereinafter defined)
which reflects any payment by the Owner Trustee (in its individual capacity) or
the Owner Participant on account of clause (ii) above, then such Certificate
Holder, such Pass Through Trustee or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Trustee or the Owner Participant (whichever
shall have made such
48
<PAGE>
payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the Owner
Participant had not become subject to the recourse liability referred to in
clause (ii) above. Nothing contained in this Section 8(j) shall prevent any
Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
49
<PAGE>
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or
50
<PAGE>
compensation received by a Pass Through Trustee for services rendered in
connection with the transactions contemplated by the respective Pass
Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined
51
<PAGE>
capital, surplus and undivided profits of at least $75,000,000 or a corporation
whose net worth is at least $75,000,000, (B) any subsidiary of such a bank,
financial institution or corporation, provided that such bank, financial
institution or corporation furnishes to the Owner Trustee, the Indenture Trustee
and Lessee a guaranty substantially in the form of Exhibit C hereto with respect
to the Owner Participant's obligations, in the case of the Owner Trustee, under
the Trust Agreement and, in the case of the Indenture Trustee and Lessee, the
Owner Participant's obligations hereunder, or (C) any other entity, provided
such obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee no Transferee shall be an
airline, a commercial air carrier, an air freight forwarder, an entity engaged
in the business of parcel transport by air or other similar person or a
corporation or other entity controlling, controlled by or under common control
with such an airline, a commercial air carrier, an air freight forwarder, an
entity engaged in the business of parcel transport by air or other similar
person. Each such transfer to a Transferee shall be subject to the conditions
that (M) upon giving effect to such transfer, the Transferee is a Citizen of the
United States or the Transferee, at its sole cost and expense on an after-tax
basis (including any continuing costs of the voting trust), shall have entered
into a voting trust or similar arrangement which permits the registration of the
Aircraft under the Federal Aviation Act in the name of the Owner Trustee, (N)
the Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in
52
<PAGE>
the Trust Estate. Upon any such transfer by the Owner Participant as above
provided, (i) the Transferee shall be deemed the Owner Participant for all
purposes hereof and of the other Operative Documents and each reference herein
to the transferor Owner Participant shall thereafter be deemed for all purposes
to be to the Transferee and the transferor Owner Participant shall be relieved
of all obligations of the transferring Owner Participant under the Owner
Participant Documents arising after the date of such transfer except to the
extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in the Aircraft. If the Owner Participant intends to
transfer any of its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than 10 days prior thereto,
to the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee. The Owner Participant shall pay all of the
reasonable costs of the other parties hereto, on a net after-tax basis, of any
such transfer. For purposes of this paragraph, "net worth" shall mean the excess
of total tangible assets over total liabilities, each to be determined in
accordance with generally accepted accounting principles consistently applied.
Notwithstanding anything contained in this Section 8(l) to the contrary, each of
Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustees and,
by its acceptance of a Loan Certificate, each Certificate Holder agrees that the
Owner Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777B Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 B) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between [____________]
and the 777B Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
53
<PAGE>
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company (A) in its individual capacity
("SSBTC") represents and warrants that:
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization,
54
<PAGE>
execution and delivery of the Trust Agreement by the Owner Participant) has
full right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the other
Owner Trustee Documents;
(v) each of the Owner Trustee Documents has 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 Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
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;
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
55
<PAGE>
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC; and
(B) SSBT solely in its capacity as Owner Trustee further represents
and warrants that:
(i) SSBT is a trust company duly organized and validly existing
in good standing under the laws of the Commonwealth of Massachusetts and
has the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Trust Agreement, this
Agreement, the Trust Indenture, the Lease and the Loan Certificates has
been, or on the Delivery Date will have been, duly executed and delivered
by it, and each of this Agreement, the Trust Agreement, the Lease and the
Trust Indenture, on the Delivery Date, will constitute a legal, valid and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms thereof;
(iii) the Owner Trustee has never directly or indirectly
offered any Loan Certificate or any interest in or to the Trust Estate, the
Trust Agreement or any similar interest for sale to, or solicited any offer
to acquire any of the same from, any Person other than the Indenture
Trustee, each of the Pass Through Trustees and the Owner Participant; and
it has not authorized any Person to act on its behalf (other than for
purposes of this paragrpah, the Lessee and the Underwriters) to offer
directly or indirectly any Loan Certificate or any interest in and to the
Trust Estate, the Trust Agreement or any similar interest for sale to, or
to solicit any offer to acquire any of the same from, any Person; and
(iv) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the
56
<PAGE>
case may be, to perform its obligations under any of the Owner Trustee
Documents or any other documents executed by the Owner Trustee or SSBTC in
connection with the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner Trustee, the Indenture Trustee, each
Certificate Holder and the Owner Participant covenants and agrees that, at
Lessee's expense on a net after-tax basis (including, without limitation,
reasonable attorney's fees and expenses of each of such parties), (i) Lessee may
elect to terminate the Lease and to purchase the Aircraft pursuant to Section
19(b) of the Lease and that each of such parties will execute and deliver
appropriate documentation transferring all right, title and interest in the
Aircraft to Lessee (without recourse or warranty except as to Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) with respect to the Owner Participant)
(including without limitation, such bills of sale and other instruments and
documents as Lessee shall reasonably request to evidence (on the public record
or otherwise) such transfer and the vesting of all right, title and interest in
and to the Aircraft in Lessee), and (ii) Lessee, in connection with such
purchase and subject to the provisions of the second paragraph of this Section
8(r), may assume (and receive a credit in an amount equal to the principal
amount of the debt assumed against the purchase price payable by Lessee pursuant
to Section 19(b) of the Lease) the obligations of the Owner Trustee pursuant to
Section 7.03 of the Trust Indenture and the Loan Certificates (and the Lease, to
the extent that the Owner Trustee's obligations thereunder are incorporated into
the Trust Indenture or the Loan Certificates), and Lessee shall confirm that its
obligations under the Lease shall be direct obligations to the Indenture Trustee
as if set forth in the Trust Indenture, and that each of the parties shall
execute and deliver appropriate documentation in form and substance reasonably
satisfactory to such parties under which Lessee will assume such obligations on
the basis of full recourse to Lessee, maintaining the security interest in the
Aircraft created by the Trust Indenture, releasing the Owner Participant and the
Owner Trustee
57
<PAGE>
from all future obligations in respect of the Loan Certificates, the Trust
Indenture and all other Operative Documents and all such other actions
(including the furnishing of legal opinions reasonably requested by any party)
as are reasonably necessary to permit such assumption by Lessee.
If Lessee elects to assume the rights and obligations of the Owner Trustee
in accordance with Section 7.03 of the Trust Indenture in connection with the
purchase by the Lessee of the Aircraft pursuant to Section 19(b) of the Lease
and to pay the EBO Price in installments as permitted thereby, then:
(A) in addition to the provisions contemplated above, the Trust
Indenture shall be amended (a) to provide for an additional series of loan
certificates (the "EBO Certificates") to be issued to the Owner Participant
on the EBO Date to evidence the payment of the EBO Price in installments on
the dates specified in Exhibit H to the Lease (taking into account the
credit provided for above), (2) to provide that the Indenture Trustee will
make no distributions to the Owner Participant or the Owner Trustee or
otherwise in respect of the EBO Certificates prior to the payment in full
of all amounts then due and payable to the other Holders or, if an "Event
of Default" under the Trust Indenture (an "Indenture Event of Default") or
any payment Default under the Trust Indenture shall have occurred and be
continuing, prior (unless such Loan Certificates shall have been purchased
by the Owner Trustee) to the payment in full of the principal amount of,
and interest accrued on, the Loan Certificates other than the EBO
Certificates, (3) to include the failure to pay any installments of the EBO
Certificates within 10 calendar days of when due as an Event of Default,
(4) to include a right so long as the EBO Certificates shall be outstanding
for the Owner Participant to purchase the other Loan Certificates under
circumstances similar to, and on the same terms as provided in, Section
8.03(e)(ii) of the Trust Indenture (it being understood that upon any
assumption pursuant to Section 7.03 of the Trust Indenture, the provisions
of the Trust Indenture intended for the benefit of the Owner Participant
(other than provisions concerning, but only to the extent applicable to,
Excluded Payments), including, without limitation, Sections 8.03(e)(i) and
8.03(e)(iii) of the Trust Indenture providing the Owner Trustee or the
Owner Participant with certain rights, shall be of no further force and
effect), (5) to provide that the Owner Participant and the Owner Trustee
shall have no voting or consent rights under the Trust Indenture by reason
of being the holder of the EBO Certificates or otherwise until all other
Loan Certificates have either been paid in full or been purchased by the
Owner
58
<PAGE>
Participant (pursuant to the provisions contemplated by clause (A)(4) of
this Section 8(r) by the reference therein to Section 8.03(e)(ii) of the
Trust Indenture), except that without the consent of the Owner Participant
------
the Trust Indenture could not be amended, modified or supplemented to
reduce the amount or extend the time of payment of any amount owing or
payable under the EBO Certificates, and (6) to confirm that, although the
Owner Participant cannot participate in the exercise of remedies under the
Trust Indenture, it shall not be precluded form demanding, collecting,
suing for or otherwise receiving and enforcing payment of the EBO
Certificates by demand upon Lessee; and
(B) upon Lessee's payment in full of all amounts due on or prior to
the EBO Date in accordance with Section 19(b) of the Lease and compliance
with all of the conditions to such assumption in accordance with this
Section 8(r) and Section 7.03 of the Trust Indenture, (1) the Owner Trustee
shall assign the right to the remaining installments of the EBO Price to
the Owner Participant, (2) the EBO Certificates shall be issued to the
Owner Participant in aggregate amount of such remaining installments of the
EBO Price and (3) the Owner Trustee (AA) shall transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens) and on an
"as is" basis, all right, title and interest of the Owner Trustee in and to
the Aircraft and (BB) shall furnish to or at the direction of Lessee one or
more bills of sale in form and substance reasonably satisfactory to Lessee
evidencing such transfer.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
59
<PAGE>
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as Lessee herein and therein. No such
conveyance, transfer or lease of substantially all of the assets of Lessee as an
entirety shall have the effect of releasing Lessee or any successor corporation
or Person which shall theretofore have become such in the manner prescribed in
this Section 8(s) from its liability in respect of any Operative Document to
which it is a party or any Pass Through Trust Agreement. 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.
60
<PAGE>
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through Trustee to act within its own discretion), it
shall not, without the prior written consent of the Owner Trustee, direct the
Indenture Trustee to take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization, direction or
consent of, or notice from, the Certificate Holders holding a specified
percentage in principal amount of Outstanding (as defined in the Trust
Indenture) Loan Certificates unless such Pass Through Trustee receives a
Direction (as defined in the relevant Pass Through Trust Agreement) to so direct
the Indenture Trustee from Certificate Holders (as defined in the relevant Pass
Through Trust Agreement) holding the same percentage of Certificates (as defined
in the
61
<PAGE>
relevant Pass Through Trust Agreement) evidencing Fractional Undivided Interests
(as defined in the relevant Pass Through Trust Agreement) in the Trust (as
defined in the relevant Pass Through Trust Agreement) holding the Loan
Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that Article X
of each Pass Through Trust Agreement (to the extent relating to the
Certificates) shall not be amended without the prior written consent of the
Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and
62
<PAGE>
reinvest all money so held by it in such Permitted Investments as Lessee deems
appropriate. Lessee will apply such money to the payment of previously
unclaimed payments with respect to the Loan Certificates when and as claims for
payment are made by the Holders of such Loan Certificates. As compensation for
its services pursuant to this Section 8(z), Lessee shall be entitled to an
annual fee from the Owner Participant in an amount to be agreed to at the time
by Lessee and the Owner Participant but in no event shall such fee exceed at any
time the amount of earnings on the monies so held in trust distributable at such
time to the Owner Participant. Any net losses on such investment shall be for
the account of Lessee. Any net earnings on such investment shall be distributed
from time to time by Lessee to the Owner Participant after deducting therefrom
any portion of such fee then due and unpaid. Upon the date required by
applicable law dealing with unclaimed property, Lessee will distribute to the
Owner Participant any amount held by it pursuant to this Section 8(z) and not
previously applied to the payment of the Loan Certificates, after deducting
therefrom any portion of such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no adverse impact upon the rights or interests of the Owner
Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner Participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
--------------------------
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture
63
<PAGE>
Trustee not to amend, supplement or otherwise modify any provision of the Trust
Agreement in a manner adversely affecting such party without the prior written
consent of such party. Notwithstanding the foregoing, unless an Event of
Default shall have occurred and be continuing and so long as the Lease has not
been terminated, the Indenture Trustee and the Owner Participant hereby agree
for the benefit of Lessee that without the consent of Lessee they will not (and
the Owner Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
---------------------------
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name of the Owner Trustee, except as
otherwise required or permitted hereunder or under the Lease, under the
Federal Aviation Act or under the applicable law of another permitted
government of registry, or shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make
application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorney's fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required
to enable the Owner Trustee to timely file any reports required to be filed
by it as the lessor under the Lease or as the owner of the Aircraft with
any governmental authority (including tax authorities).
64
<PAGE>
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
-----
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
------
third, the Trust Indenture, with the Trust Agreement and the Trust
-----
Supplement attached, and fourth, the Lease, with the Lease Supplement
------
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
-----------------------------
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
--------------------------------
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or certified mail
or by prepaid courier), or by prepaid courier service, and shall be deemed to be
given for purposes of this Agreement on the day that such writing is delivered
or received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or
65
<PAGE>
(B) if to a subsequent Owner Participant, addressed to such subsequent Owner
Participant at such address as such subsequent Owner Participant shall have
furnished by notice to the parties hereto or (C) if to any subsequent
Certificate Holder, addressed to such Certificate Holder at its address set
forth in the Loan Certificate Register maintained pursuant to Section 2.03 of
the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
------------------------------
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall
66
<PAGE>
have received an opinion or opinions of counsel (reasonably satisfactory to the
Owner Participant) in scope, form and substance reasonably satisfactory to the
Owner Participant to the effect that (I) the trust, as thus removed, shall
remain a validly established trust, (II) any amendments to the Trust Agreement
necessitated by such removal shall have been duly authorized, executed and
delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Participants and the
-------------
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the
67
<PAGE>
delivery or return of the Aircraft, the transfer of any interest of the Owner
Participant in the Trust Estate or the Aircraft or any Engine or the transfer of
any interest by any Certificate Holder in any Loan Certificate or the Trust
Indenture Estate and the expiration or other termination of this Agreement or
any other Operative Document or any of the Pass Through Trust Agreements.
(c) This 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. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed
68
<PAGE>
to limit the exercise and enforcement in accordance with the terms of this
Agreement or such other agreements of rights and remedies against the Trust
Estate. The foregoing provisions of this Section 15(d) shall survive the
termination of this Agreement, the other Operative Documents and the Pass
Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
--------------------------------
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay
69
<PAGE>
all invoices of Transaction Expenses that have been so approved promptly upon
receipt thereof. Notwithstanding the foregoing, in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Expenses, except that the fees, expenses and disbursements of the
Owner Participant (including those relating to its counsel) shall be borne by
the Owner Participant if such failure to consummate the transactions results
from the failure of the Owner Participant to adhere to the terms and conditions
set forth in the letter dated March 2, 1995 addressed to Lessee and Capstar
Partners and agreed to by Lessee or to close after all conditions precedent to
the Owner Participant's funding of its Commitment set forth herein have been
satisfied. To the extent Transaction Expenses exceed [_____%] of Lessor's Cost,
the Lessee may, in lieu of electing an optimization pursuant to Section 18
hereof, promptly reimburse the Owner Trustee or Owner Participant, as
appropriate, for all or a portion of the Transaction Expenses described in
clause (i)(5) and/or clause (vi) (excluding any debt placement fees included in
said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
-----------------------------------
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in a
commercially reasonable manner to conclude an agreement with Lessee as to the
terms of such refunding or refinancing transaction (including the terms of any
debt to be issued in connection with such refunding or refinancing transaction
and the documentation to be executed in connection therewith), and if after such
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination
70
<PAGE>
Value percentages, Special Termination Value percentages and EBO
Percentage. Within ten Business Days of its receipt of the Refinancing
Certificate, Lessee may demand a verification pursuant to Exhibit E to the
Lease of the information set forth in the Refinancing Certificate. Upon
the acceptance by Lessee of the accuracy of the information set forth in
the Refinancing Certificate or the determination pursuant to such
verification procedures of the revised Basic Rent, Excess Amount, debt
amortization, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and EBO Percentage and
the Debt/Equity Ratio (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate principal amount
specified in the Refinancing Information, which amount shall be at least
equal to the aggregate principal amount of all Loan Certificates
outstanding on the Refinancing Date (such debt securities, the "New Debt")
and (ii) the application of the proceeds of the sale of the New Debt to the
redemption of all such Loan Certificates on the Refinancing Date and (B)
pursuant to which the parties to the refinancing transaction (including the
Owner Participant and Lessee but excluding any public holders of debt) make
such representations, warranties and covenants as the Owner Participant or
Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value percentages from and after the Refinancing Date shall be
as provided in the Refinancing Information;
71
<PAGE>
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant
72
<PAGE>
to be disclosed in any offering materials. Lessee shall have the right to
purchase such debt securities and apply such securities as a credit against its
obligations to pay Rent, provided that (x) in connection with such refunding or
refinancing Lessee shall have agreed to indemnify the Owner Participant with
respect to such right in a manner satisfactory to the Owner Participant, and (y)
Lessee may not, at any one time hold in the aggregate any such debt securities
having a face value in excess of that portion of the two next succeeding
installments of Basic Rent which is required to be paid to the holders of such
debt securities on account of principal and interest. Any trustee of public
debt shall be a bank or trust company having its principal place of business in
the Borough of Manhattan, City and State of New York, Chicago, Illinois,
Hartford, Connecticut or Boston, Massachusetts and having, or having a parent
willing to guarantee the obligations of such bank or trust company and 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 trustee
upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and 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 and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
73
<PAGE>
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to the fifth anniversary of the Delivery Date.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
------------
Date occurs other than on May 15, 1995 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost, the Lessee may,
pursuant to this Section 18 and in accordance with the requirements of Section
3(c) of the Lease, optimize the Basic Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
74
<PAGE>
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
-------------
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
75
<PAGE>
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.
UNITED AIR LINES, INC.,
Lessee
By:_______________________________
Vice President and Treasurer
_____________________________,
Owner Participant
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: ______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By:_______________________________
Title:____________________________
76
<PAGE>
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail
- ---------
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attn: Vice President and
Treasurer
Telecopy: (708) 952-7117
Owner Participant:
- -----------------
_______________________
_______________________
_______________________
Attn: ___________________
Telecopy: _______________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Overnight Delivery Service
- --------------------------
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and
Treasurer
Payment Address
- ---------------
The Chase Manhattan Bank, N.A.
New York, N.Y.
ABA #: 021000021
Account #: 910-2-499093
Account Name:
Reference: UAL/1995 777 A
<PAGE>
Indenture Trustee:
- -----------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight
delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
<PAGE>
SCHEDULE II
Commitments
-----------
<TABLE>
<CAPTION>
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
<S> <C> <C>
First Security Bank of Utah,
National Association, in
its capacity as Pass Through
Trustee under Pass
Through Trust Agreement 1995-A1
First Security Bank of Utah,
National Association, in its
capacity as Pass Through
Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
[__________________________] $
Total Commitments: 100.00% $
================= ======= =
</TABLE>
<PAGE>
Doc. No. 1.01
Aircraft N766UA
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1995 777 B)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
______________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1995 777 B Equipment Trust
One Boeing 777-222 Aircraft
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft............................... 3
SECTION 2. Lessee's Notice of Delivery Date............................... 4
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee........................................... 5
SECTION 4. Conditions..................................................... 6
(a) Conditions Precedent to the
Participations in the
Aircraft............................................... 6
(b) Conditions Precedent to the
Obligations of Lessee.................................. 15
SECTION 5. Confidentiality of Purchase Agreement.......................... 16
SECTION 6. Extent of Interest of Certificate
Holders..................................................... 17
SECTION 7. Lessee's Representations, Warranties
and Indemnities............................................. 17
(a) In General............................................. 17
(b) General Tax Indemnity.................................. 22
(c) General Indemnity...................................... 34
(d) Withholding............................................ 40
SECTION 8. Representations, Warranties and
Covenants................................................... 40
SECTION 9. [Intentionally Omitted]........................................ 63
SECTION 10. Other Documents; Amendment..................................... 63
SECTION 11. Certain Covenants of Lessee.................................... 64
SECTION 12. Owner for Income Tax Purposes.................................. 65
SECTION 13. Notices; Consent to Jurisdiction............................... 65
SECTION 14. Change of Situs of Owner Trust................................. 66
SECTION 15. Miscellaneous.................................................. 67
SECTION 16. Invoices and Payment of Expenses............................... 69
SECTION 17. Optional Redemption of Certificates............................ 70
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 18. Optimization.................................................. 74
SECTION 19. Nondisclosure................................................. 75
</TABLE>
SCHEDULE
<TABLE>
<S> <C>
SCHEDULE I -- Names and Addresses
SCHEDULE II -- Commitments
SCHEDULE III -- Legal Opinions
EXHIBIT A-1 -- Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 -- Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B -- Form of Assignment and Assumption Agreement
EXHIBIT C -- Form of Guaranty Agreement
iii
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
(1995 777 B)
THIS PARTICIPATION AGREEMENT (1995 777 B) dated as of May 1, 1995
among (i) United Air Lines, Inc., a Delaware corporation (the "Lessee"), (ii)
[____________], a corporation organized under the laws of Delaware (the "Owner
Participant"), (iii) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"),
(iv) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as otherwise provided
herein, but solely as trustee under the Pass Through Trust Agreement (the "Pass
Through Trustee"), dated as of February 1, 1992, as amended and restated as of
May 1, 1995 (the "Basic Agreement"), in each case between the Lessee and STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as
supplemented by Trust Supplements Nos. 1995-A1 and 1995-A2, each dated as of May
__, 1995 between the Lessee and the Pass Through Trustee creating the 1995-A1
Pass Through Trust and the 1995-A2 Pass Through Trust, respectively (the Basic
Agreement as so supplemented being the "1995-A1 Pass Through Trust Agreement"
and the "1995-A2 Pass Through Trust Agreement", respectively, each of the 1995-
A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust Agreement
being a "Pass Through Trust Agreement") and (v) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, in its individual capacity
and as Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer, the Manufacturer has agreed to sell to Lessee, among other things,
certain Boeing Model 777-222 aircraft, one of which has been recently purchased
from the Manufacturer by Lessee and is the subject of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
<PAGE>
[Participation Agreement (1995 777 B)]
(i) Lessee and the Owner Trustee are entering into the Owner Trustee's
Purchase Agreement and Assignment (1995 777 B) dated as of May 1, 1995 (the
"Owner Trustee's Purchase Agreement"), whereby Lessee agrees to sell the
Aircraft to the Owner Trustee and assigns to the Owner Trustee certain
rights and interests of Lessee under the Purchase Agreement with respect to
the Aircraft; and
(ii) the Manufacturer has executed the Consent and Agreement (1995
777 B) dated as of May 1, 1995 substantially in the form attached to the
Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Mortgage (1995 777 B) dated as of May 1, 1995 pursuant to which
the Owner Trustee agrees, among other things, to issue one or more Loan
Certificates in the form set forth in Exhibit A-1 or Exhibit A-2 to the Trust
Indenture to each Pass Through Trustee on behalf of the related grantor trusts
created by the applicable Pass Through Trust Agreement as evidence of the Owner
Trustee's indebtedness to each Pass Through Trustee, which Loan Certificates are
to be secured by the mortgage and security interest in the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1995 777 B) dated as of May 1, 1995
whereby, subject to the terms and conditions set forth therein, the Owner
Trustee agrees to lease to Lessee, and Lessee agrees to lease from the Owner
Trustee, the Aircraft on the Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the
2
<PAGE>
[Participation Agreement (1995 777 B)]
"obligor" thereunder, as such term is defined in and solely for purposes of the
Trust Indenture Act of 1939, as amended, with respect to the Pass Through
Certificates and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context otherwise requires, any reference herein to any of
the Operative Documents refers to such document as it may be amended from time
to time in accordance with its terms and the terms of each other agreement
restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement, (i) each of
the Pass Through Trustees agrees to finance in part, the Owner Trustee's payment
of Lessor's Cost for the Aircraft by making a secured loan to the Owner Trustee
(herein called a "Loan" and collectively, the "Loans") on a date to be
designated pursuant to Section 2 hereof, but in no event later than May 31,
1995, in the amount in Dollars equal to the amount set forth opposite its name
on Schedule II hereto and (ii) the Owner Participant hereby agrees, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated hereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated as set forth
above, but in no event later than May 31, 1995, in an amount in Dollars equal to
the amount set forth opposite its name on Schedule II hereto. To fund its
obligations set out in (i) above, each Pass Through Trustee shall, in accordance
with Section 2.01 of the applicable Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated a date not later than
the Delivery Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the request of the
Company (as defined in the Basic Agreement)
3
<PAGE>
[Participation Agreement (1995 777 B)]
delivered pursuant to such Section 2.01, and deliver such Pass Through
Certificates to the Underwriters (as defined in Section 4(a)(xvii) as specified
in such request against payment by the Underwriters of an amount equal to the
aggregate principal amount of its Loan. In the case of the Owner Participant,
the amount of its participation to be made as provided above in the payment of
Lessor's Cost and, in the case of each Pass Through Trustee, the amount of its
Loan, is hereinafter called such Participant's "Commitment" for the Aircraft.
In case any Participant shall default in its obligation to make the amount of
its Commitment available pursuant to Section 2 hereof in respect of the
Aircraft, the other Participants shall have no obligation to make any portion of
such amount available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participants shall remain subject to the terms
and conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. Lessee agrees to give
the Owner Participant, the Owner Trustee, the Pass Through Trustees and the
Indenture Trustee at least two Business Days' prior written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than May 31, 1995, which notice shall specify the amount of Lessor's Cost
and the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice. The
Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Indenture Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Loan Certificates in the full amount of the Pass Through
Trustees' Commitments.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, the Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. On the Delivery Date, subject to the terms and conditions of this
Agreement, and in consideration for the transfer of title to the Aircraft to the
Owner Trustee, the Owner Trustee and the Indenture Trustee (on behalf of the
Owner Trustee) shall pay over the funds made available to it equal to Lessor's
Cost to Lessee's account no. ____________ at First Security Bank of Utah,
National Association. In addition, subject to the terms and conditions of this
Agreement, the Owner Trustee shall, on the Delivery Date,
4
<PAGE>
[Participation Agreement (1995 777 B)]
issue to the Pass Through Trustees the Loan Certificates to evidence the Loans
The Owner Participant agrees, subject to the terms and conditions of
this Agreement, to make its Commitment available to the Owner Trustee at the
Owner Trustee's account no. ________ at First Security Bank of Utah, National
Association, and the Pass Through Trustees agree to make their Commitment
available to the Indenture Trustee at the Indenture Trustee's account no.
_________ at First Security Bank of Utah, National Association, at or before
10:00 a.m., New York City time, on the Delivery Date specified in Lessee's
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
Subject to the terms and conditions of this Agreement, the Owner Trustee and the
Indenture Trustee, upon their respective receipts in full of the Owner
Participant's and the Pass Through Trustees' Commitments for the Aircraft, as
provided in Section 2 hereof, together with instructions from such Participant
or its special counsel to release such funds to Lessee, shall transfer such
funds to the Lessee and the Owner Trustee shall purchase the Aircraft from the
Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to the
Owner Trustee and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard to
items (b) - (f) below):
(a) to pay to Lessee the Lessor's Cost in the manner set forth in
Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of Lessee
designated by Lessee) to accept delivery of the Aircraft on the Delivery Date
pursuant to the Owner Trustee's Bill of Sale;
(c) to accept from the Lessee the Owner Trustee's Bill of Sale and the
Owner Trustee's FAA Bill of Sale;
(d) to execute an Aircraft Registration Application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow from the Pass Through Trustees amounts equal to their
respective Loans to finance a portion of Lessor's
5
<PAGE>
[Participation Agreement (1995 777 B)]
Cost and to issue to the Pass Through Trustees Loan Certificates in the amounts
specified herein; and
(f) to take such other action as may be required to be taken by the
Owner Trustee on the Delivery Date by the terms of any Operative Document.
SECTION 4. Conditions. (a) Conditions Precedent to the Participations
in the Aircraft. It is agreed that the respective obligations of the
Participants to participate in the payments of Lessor's Cost are subject to the
satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Pass Through Trustees), (xxv), (xxvi) and (xxviii) shall not be a condition
precedent to the obligation of the Pass Through Trustees, and paragraphs (iv),
(x) (insofar as it relates to the Owner Participant), (xiv), (xix) and (xxvii)
shall not be a condition precedent to the obligation of the Owner Participant:
(i) The Participants shall have received due notice with respect
to such participation pursuant to Section 2 hereof (or shall have waived
such notice either in writing or as provided in Section 2).
(ii) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the Pass
Through Trustees, as the case may be, would make it a violation of law or
regulations for (x) the Lessee, the Indenture Trustee, any Participant or
the Owner Trustee to execute, deliver and perform the Operative Documents
to which any of them is a party or (y) the Pass Through Trustees or the
Owner Participant to make their respective Commitments available or, in the
case of any Pass Through Trustee, to acquire a Loan Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Pass Through
Trustees shall have made available the amount of their respective
Commitments for the Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Pass Through Trustees, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
6
<PAGE>
[Participation Agreement (1995 777 B)]
(v) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall
each be satisfactory in form and substance to the Participants and shall be
in full force and effect and executed counterparts shall have been
delivered to the Participants, and their respective counsel, provided that
only the applicable Pass Through Trustee shall receive an executed original
of its Loan Certificate, only the Indenture Trustee, acting on behalf of
the Certificate Holders, shall receive the original counterparts of the
Lease and the Lease Supplement, only the Owner Participant shall receive a
copy of the Purchase Agreement which shall be delivered to and retained by
the Owner Trustee (the Owner Trustee and the Owner Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same until the return of
the Aircraft to Lessor (but only to the extent the Purchase Agreement has
any continued effectiveness on such return date) or unless a Lease Default
or Event of Default shall have occurred and be continuing) and provided
further that only the Lessee and the Owner Participant shall receive copies
of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the Aircraft and dated the
Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the Aircraft and dated the
Delivery Date;
(6) the Owner Trustee's Bill of Sale and the Owner Trustee's
FAA Bill of Sale;
(7) the Owner Trustee's Purchase Agreement;
(8) an acceptance certificate covering the Aircraft in the
form agreed to by the Participants and Lessee (the "Acceptance
Certificate") duly completed and executed by the Owner Trustee or its
agent, which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
7
<PAGE>
[Participation Agreement (1995 777 B)]
(10) the Loan Certificates;
(11) the Consent and Agreement;
(12) the Purchase Agreement;
(13) the Owner Participant Parent Guaranty; and
(14) the Pass Through Trust Agreements.
(vi) A Uniform Commercial Code financing statement or statements
covering all the security interests created by or pursuant to the Granting
Clause of the Trust Indenture shall have been executed and delivered by the
Owner Trustee and the Indenture Trustee, and such financing statement or
statements shall have been duly filed in all places necessary or advisable,
and any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Pass Through Trustees shall have
been executed and delivered by Lessee, the Indenture Trustee or the Owner
Trustee and duly filed.
(vii) Each Participant and the Indenture Trustee shall have
received the following, in each case in form and substance satisfactory to
it, provided that only the Owner Participant shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Trustee and the Owner Participant and their respective
counsel may inspect the Purchase Agreement prior to the Delivery Date but
thereafter shall not have access to the same until the return of the
Aircraft to Lessor (but only to the extent the Purchase Agreement has any
continued effectiveness on such return date) or unless a Lease Default or
Event of Default shall have occurred and be continuing):
(1) a certified copy of the Certificate of Incorporation and
By-Laws of Lessee and a copy of resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of this Agreement, the
Lease, the Owner Trustee's Purchase Agreement, the Owner Trustee's
Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
8
<PAGE>
[Participation Agreement (1995 777 B)]
(2) such other documents and evidence with respect to
Lessee, the Manufacturer, the Owner Trustee, the Indenture Trustee and
the Participants, as the Pass Through Trustees or the Owner
Participant, or their respective counsel, may reasonably request in
order to establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee (i) as to the Person or Persons
authorized to execute and deliver this Agreement, the other Lessee
Documents, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and as to the
signature of such person or persons, and (ii) to the effect that the
application of the proceeds from the Pass Through Certificates as
provided for herein will not be inconsistent with any of the
provisions of the Pass Through Trust Agreements;
(4) a copy of the Purchase Agreement certified by the
Secretary or an Assistant Secretary of Lessee as being a true and
accurate copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations or any
right in such Agreement assigned by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Purchase Agreement;
(5) a copy of the general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent of all of the Operative Documents to which it is a
party, together with such other documents and evidence with respect to
the Indenture Trustee, the Owner Trustee, the Pass Through Trustees,
the Owner Participant and the Owner Participant Parent as either the
Pass Through
9
<PAGE>
[Participation Agreement (1995 777 B)]
Trustees (or their counsel) or the Owner Participant (or its counsel)
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be a
condition precedent as to any Participant as to documents to be
provided by that Participant; and
(6) a copy of the excerpts the "United Air Lines 777
Maintenance Program" referred to in Section 5 of the Lease.
(viii) All appropriate action required to have been taken by the
Federal Aviation Administration, or any governmental or political agency,
subdivision or instrumentality of the United States, on or prior to the
Delivery Date 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, and all such orders,
permits, waivers, authorizations, exemptions and approvals shall be in full
force and effect on the Delivery Date.
(ix) On the Delivery Date, the following statements shall be true,
and the Participants and the Indenture Trustee shall have received evidence
satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and marketable title (subject
to filing and recording of the Owner Trustee's FAA Bill of Sale with
the Federal Aviation Administration) to the Aircraft, free and clear
of Liens other than the rights of Lessee under the Lease and Lease
Supplement covering the Aircraft, the mortgage and security interest
created by the Trust Indenture, the rights of the Owner Participant
under the Trust Agreement and the Trust Supplement and Liens permitted
by clause (iii) (solely for Taxes not yet due) of Section 6 of the
Lease;
(2) application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) and the
Owner Trustee's FAA Bill of Sale have been duly filed with the FAA;
10
<PAGE>
[Participation Agreement (1995 777 B)]
(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement and the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
(4) the Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee of the Owner Trustee's rights under the
Lease Agreement pursuant to the Trust Indenture, are entitled to the
protection of Section 1110 of the Bankruptcy Code in connection with
the Owner Trustee's and the Indenture Trustee's right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Lessee is a debtor; and
(5) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Lease and
has a current, valid U.S. standard certificate of airworthiness issued
by the FAA.
(x) On the Delivery Date, (A) the representations and warranties
of Lessee, the Owner Participant and the Owner Trustee contained in
Sections 7 and 8 of this Agreement and in the Tax Indemnity Agreement and
the Owner Participant Parent contained in the Owner Participant Parent
Guaranty shall be true and accurate as though made on and as of such date
except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date), (B) no event
shall have occurred and be continuing, or would result from the purchase,
sale, lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) an Event
of Default as defined in the Lease or the Trust Indenture, and (C) no event
shall have occurred that might have the effect of materially and adversely
affecting the ability of Lessee to carry on its business as conducted on
December 31, 1994 or to perform its obligations under the Operative
Documents.
(xi) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, and the Owner Trustee from (a)
Francesca M. Maher, Vice President-Law, Deputy General Counsel and
Corporate Secretary for Lessee, in substantially the form of Schedule III-
1(a) hereto and (b) Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, in substantially the form of Schedule III-1(b) hereto.
11
<PAGE>
[Participation Agreement (1995 777 B)]
(xii) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee, the Indenture Trustee and Lessee from
counsel to the Manufacturer, in substantially the form of Schedule III-2
hereto.
(xiii) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Bingham, Dana & Gould, special counsel for the Owner Trustee, in
substantially the form of Schedule III-3 hereto.
(xiv) The Pass Through Trustees shall have received an opinion
addressed to the Indenture Trustee, the Pass Through Trustees, the Owner
Trustee and Lessee from (a) Dewey Ballantine, special counsel to the Owner
Participant and the Owner Participant Parent, in substantially the form of
Schedule III-4(a) hereto and (b) Michael Flynn, Vice President-General
Counsel and Secretary to the Owner Participant and the Owner Participant
Parent in substantially the form of Schedule III-4(b) hereto.
(xv) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, in
substantially the form of Schedule III-5 hereto.
(xvi) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee and Lessee from Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee and the Pass Through Trustees, in
substantially the form of Schedule III-6 hereto.
(xvii) The Owner Participant shall have received an opinion
addressed to it from Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, substantially to the same effect as the opinion delivered
pursuant to Section 5(b)(1) of the Purchase Agreement dated ____________
(the "Underwriting Agreement") among Lessee, Merrill Lynch & Co. and Lehman
Brothers (the "Underwriter").
(xviii) The Participants and the Indenture Trustee shall have
received a certificate signed by the President or any Vice President of
Lessee, dated the Delivery Date, addressed to the Participants and the
Indenture Trustee and certifying as to the fulfillment of all conditions in
this Section 4(a) insofar as they relate to Lessee and as to the matters
stated in paragraphs (viii), (x) (insofar as it relates to Lessee), (xxii)
and (xxiii) (to the knowledge of
12
<PAGE>
[Participation Agreement (1995 777 B)]
Lessee, except in regard to matters relating to the Participants, Indenture
Trustee or the Owner Trustee, in which event such representation shall be
to the knowledge of Lessee without any investigation whatsoever) of this
Section 4(a).
(xix) (a) The Owner Participant shall, by making its Commitment
available as provided in Section 1(b)(ii) of this Agreement, (b) the
Indenture Trustee shall by authenticating the Loan Certificates issued on
the Delivery Date, (c) the Owner Trustee shall, by accepting the Owner
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale and (d) the
Pass Through Trustees shall, by making their respective Commitments
available as provided in Section 1(b)(i) of this Agreement, be respectively
deemed to have reaffirmed as of the Delivery Date the representations and
warranties made by it in Section 8 of this Agreement.
(xx) The Owner Participant shall have received an opinion, in form
and substance reasonably satisfactory to the Owner Participant, from BK
Associates, independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) on the Delivery Date, the fair market value of the Aircraft is equal to
Lessor's Cost; (B) on the Delivery Date, the Aircraft is expected to have
an economic useful life of at least 125% of the aggregate of the Interim
Term and the Basic Term; (C) on the Delivery Date, the Aircraft is expected
to have a residual value at the end of the Basic Term of at least 20% of
Lessor's Cost (without considering the effects of inflation or deflation
and assuming the Aircraft is in compliance with Section 5 of the Lease);
(D) on the Delivery Date, the Aircraft is expected to have a fair market
value on the EBO Date that does not exceed an amount equal to the EBO
Price; (E) the fair market value of each Engine is at least equal to Engine
Cost; and (F) the Aircraft is not limited use property.
(xxi) The Participants and the Indenture Trustee shall have
received an independent insurance broker's report, and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of the
Lease relating to insurance with respect to the Aircraft.
(xxii) On the Delivery Date it shall be true that no Event of Loss
(or event which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine has occurred.
13
<PAGE>
[Participation Agreement (1995 777 B)]
(xxiii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency,
nor shall any order, judgment or decree have been issued or proposed to be
issued by any court or governmental agency at the time of the Delivery Date
to set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Pass Through Trustees contained in Section 8
hereof shall be true and accurate as of the Delivery Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and the Lessee and each Participant shall have
received a certificate signed by the Chairman of the Board, the President,
any Vice President or any Assistant Vice President of the Indenture Trustee
and the Pass Through Trustees certifying as to the foregoing matters with
respect to the Indenture Trustee and the Pass Through Trustees, as
applicable.
(xxv) The Owner Participant shall have received from Dewey
Ballantine, special counsel to the Owner Participant, a favorable opinion,
in form and substance satisfactory to the Owner Participant, with respect
to certain income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, no law (including tax laws), regulation or regulatory order or
holding applicable to the Owner Participant or the Owner Participant's
participation in the transactions contemplated hereby, shall have been
enacted, issued or proposed prior to the Delivery Date that would have a
material adverse impact on the Owner Participant.
(xxvii) The Pass Through Trustees shall have received a letter from
BK Associates to the effect that the fair market value of the Aircraft on
the Delivery Date is not less than 125% of the aggregate amount of the
Loans.
(xxviii) The Lessee shall have executed and delivered to Owner
Participant a letter relating to Lessee's average cost of capital together
with appropriate supporting documentation.
14
<PAGE>
[Participation Agreement (1995 777 B)]
Promptly upon the registration of the Aircraft and the recording of
the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement and
the Trust Supplement covering the Aircraft pursuant to the Federal Aviation Act,
Lessee will cause Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, to deliver to the Owner Participant, the Indenture Trustee, the Pass
Through Trustees, the Owner Trustee and Lessee an opinion as to the due and
valid registration of the Aircraft in the name of the Owner Trustee, the due
recording of the Owner Trustee's FAA Bill of Sale, the Trust Indenture, the
Lease Supplement, the Trust Supplement, the Lease and the Trust Agreement and
the lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, are all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the following
conditions precedent:
(i) The conditions specified in Section 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii) and 4(a)(xxiii) hereof shall have been satisfied,
unless such nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section 4(a)(v) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Lessee) in the manner specified in Section 4(a)(v),
shall each be satisfactory in form and substance to Lessee, shall be in
full force and effect on the Delivery Date, and an executed counterpart of
each thereof (other than the Loan Certificates) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the general authorizing
resolutions of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the Indenture Trustee, the Owner
Trustee, the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary or
an Assistant Secretary of the Indenture Trustee, the Owner Trustee, the
Pass Through Trustees, the Owner Participant and the Owner Participant
Parent, respectively, which authorize the execution, delivery and
performance by the Indenture Trustee, the Owner Trustee, the Pass Through
Trustees, the Owner Participant and the Owner Participant Parent of all the
Operative Documents to which
15
<PAGE>
[Participation Agreement (1995 777 B)]
it is a party, together with such other documents and evidence with respect
to the Indenture Trustee, the Owner Trustee, the Pass Through Trustees, the
Owner Participant and the Owner Participant Parent as Lessee or its counsel
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the conditions
herein set forth.
(iv) The representations and warranties of the Participants, the
Indenture Trustee and the Owner Trustee contained in Section 8 hereof and
the Owner Participant Parent in the Owner Participant Parent Guaranty shall
be true and accurate as of the Delivery Date as though made on and as of
such date except to the extent that such representations and warranties
relate solely to an earlier date (in which event such representations and
warranties shall have been true and accurate on and as of such earlier
date) and Lessee shall have received a certificate signed by the Chairman
of the Board, the President, any Vice President or any Assistant Vice
President or other authorized representative of the Indenture Trustee, the
Owner Participant, the Pass Through Trustees and the Owner Trustee,
respectively, certifying as to the foregoing matters with respect to the
Indenture Trustee, the Owner Participant and the Owner Trustee,
respectively.
(v) Lessee shall have received the opinions set forth in Sections
4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv), and 4(a)(xvi), in each case
addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory authorities which, in
the opinion of Lessee, would make it a violation of law or regulations for
Lessee to enter into any transaction contemplated by the Operative
Documents.
(vii) No law (including tax laws), regulation or regulatory order
or holding applicable to the Lessee or Lessee's participation in the
transactions contemplated hereby, shall have been enacted, issued, or
proposed prior to the Delivery Date that would have a material adverse
impact on Lessee.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
Participants, and the Indenture Trustee shall keep
16
<PAGE>
[Participation Agreement (1995 777 B)]
the Purchase Agreement confidential and shall not disclose the same to any
Person, except (A) to prospective and permitted transferees of Lessor's, a Pass
Through Trustee's, the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, (B) to the aforementioned
prospective and permitted transferees', Lessor's, Pass Through Trustees', the
Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such information
confidential, (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation, including Federal or state
banking examiners or tax auditors or (D) as may be necessary or desirable for
purposes of protecting the interest of any such Person or for enforcement of the
Lease by Owner Trustee, the Participants or the Indenture Trustee; provided,
however, that any and all disclosures of all or any part of the Purchase
Agreement which are permitted by (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
SECTION 7. Lessee's Representations, Warranties and Indemnities. (a) In
General. Lessee represents and warrants that as of the Delivery Date:
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its
17
<PAGE>
[Participation Agreement (1995 777 B)]
operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on Lessee or
its business; is a Citizen of the United States and a Certificated Air
Carrier; holds all material licenses, certificates, permits and franchises
from the appropriate agencies of the United States of America and/or all
other governmental authorities having jurisdiction, necessary to authorize
Lessee to engage in air transport and to carry on scheduled passenger
service, in each case as presently conducted; has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Elk Grove Township, Illinois; and has the corporate power and
authority to conduct its business as it is presently being conducted, to
hold under lease the Aircraft and to enter into and perform its obligations
under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2), (C) any normal periodic and other reporting requirements under
the applicable rules and regulations of the FAA to the extent required to
be given or obtained only
18
<PAGE>
[Participation Agreement (1995 777 B)]
after the Delivery Date, (D) the recordings with the FAA described in the
opinion referred to in Section 4(a)(xv) and (E) any normal periodic and
other reporting requirements under the applicable rules and regulations of
the FAA to the extent required to be given or obtained only after the
Delivery Date, it being understood that the registration of the issuance
and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreements under the Securities Act of
1933, as amended, and under the securities laws of any state in which the
Pass Through Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the qualification of
each Pass Through Trust Agreement under the Trust Indenture Act of 1939, as
amended, has been duly obtained;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial
19
<PAGE>
[Participation Agreement (1995 777 B)]
Code of any applicable jurisdiction), is necessary or advisable in order to
establish and perfect the Owner Trustee's title to and interest in the
Aircraft as against the Lessee and the Indenture Trustee's security
interest in the Aircraft as against the Owner Trustee, and in each case as
against any third parties in any applicable jurisdictions in the United
States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1994 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1994, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
20
<PAGE>
[Participation Agreement (1995 777 B)]
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner Participant, and not more than ____________ (__) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, or (B) offered any
interest in the Trust Estate or any Pass Through Certificate or any Loan
Certificate in a manner which would violate the Securities Act of 1933, as
amended, the regulations thereunder, administrative and judicial
interpretation thereof or the securities laws, rules or regulations of any
state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, any Pass Through Trustee, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee 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 any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
21
<PAGE>
[Participation Agreement (1995 777 B)]
(xvii) neither Lessee nor any subsidiary of 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.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original
22
<PAGE>
[Participation Agreement (1995 777 B)]
Amount of, or interest or Premium on, or other amounts payable with respect to,
the Loan Certificates or the payment of principal of, interest on or any other
amounts payable with respect to the Pass Through Certificates, (G) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents, or (H) any change in the Owner Trustee or the situs of the
Trust Estate made pursuant to Sections 8(c) or 14 hereof; and (y) any reasonable
out-of-pocket costs and expenses fairly attributed to any of the foregoing
incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
23
<PAGE>
[Participation Agreement (1995 777 B)]
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B) the earlier discharge in
full of Lessee's obligation to
24
<PAGE>
[Participation Agreement (1995 777 B)]
pay the Stipulated Loss Value or the Termination Value and all other
amounts due under the Lease or (C) placement in storage or parking of
the Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to this Section 7(b) or Section 7(c) hereof or
pursuant to the Tax Indemnity Agreement; provided, however, that this
clause
25
<PAGE>
[Participation Agreement (1995 777 B)]
shall not result in any duplication of any amounts of any gross-up payable
under Section 7(b)(iii) or Section 7(c) hereof or the Tax Indemnity
Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant to (I) above would exceed (x)
the amount of all prior payments (determined without regard to any amount
paid in respect of Taxes required to be paid by such Indemnitee in
26
<PAGE>
[Participation Agreement (1995 777 B)]
respect of the receipt or accrual of such amounts received by such
Indemnitee) from Lessee pursuant to this Section 7(b), less (y) the portion
of all prior payments computed pursuant to (I) above by such Indemnitee to
Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's obligation hereunder unless such failure
effectively precludes Lessee's ability to (A) require such Indemnitee to
contest the Tax or (B) contest the Tax itself (in a case
27
<PAGE>
[Participation Agreement (1995 777 B)]
where Lessee cannot require the Indemnitee to contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and
28
<PAGE>
[Participation Agreement (1995 777 B)]
to the extent that the contest results in a determination which clearly and
unambiguously demonstrates that Lessee is not otherwise liable under this
Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee against any
additional net after-tax cost to such Indemnitee with respect to such
advance or payment, (IV) with regard to an Income Tax on an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee,
29
<PAGE>
[Participation Agreement (1995 777 B)]
independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee) plus interest received, if any,
from the relevant taxing authority with respect to such Tax payment (net of
Taxes required to be paid by such Indemnitee in connection with the receipt
of such interest), it being intended that such Indemnitee shall realize a
net
30
<PAGE>
[Participation Agreement (1995 777 B)]
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary to file such returns, statements or reports, and
(ii) in the case of a return, statement or report required (or requested by
the Indemnitee) to be in the name of or filed by such Indemnitee, Lessee
shall prepare and furnish such return, statement or report for filing by
such Indemnitee in such manner as shall be reasonably satisfactory to such
Indemnitee and send the same to such Indemnitee for filing
31
<PAGE>
[Participation Agreement (1995 777 B)]
no later than 10 Business Days prior to the due date; provided, however,
that Lessee shall have no obligation under this clause (ii) to the extent
such Indemnitee after receipt of Lessee's written request shall have failed
to furnish Lessee with such information as is peculiarly within such
Indemnitee's control and is necessary to prepare such return, statement or
report. Lessee shall hold each Indemnitee harmless from and against any
liabilities, including, but not limited to penalties, additions to tax,
fines and interest, arising out of any insufficiency or inaccuracy in any
such return, statement, report or information if such insufficiency or
inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
(vii) Application of Payments During Existence of Default or Event
of Default. Any amount payable to Lessee pursuant to the terms of this
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall not
be continuing any Default or Event of Default, such amount shall be paid to
the Lessee to the extent not previously applied against Lessee's
obligations
32
<PAGE>
[Participation Agreement (1995 777 B)]
hereunder as and when due after the Owner Trustee shall have declared the
Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
time to time, at the Lessee's request and expense, 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 tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
Agreement, Lessee may require the Indemnitee to agree to the terms of this
Section 7(b) prior to making any payment to such Indemnitee under this
Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
the term "Owner Participant" shall mean and include [__________________]
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which [_____________] (and its permitted
successors and assigns) is a member.
33
<PAGE>
[Participation Agreement (1995 777 B)]
(xii) Income Tax. For purposes of this Section 7, the term Income
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or copyright infringement; or (D) the offer, sale, holding, transfer
or delivery of the Loan Certificates or the Pass Through Certificates, whether
before, on or after the Delivery Date (the indemnity in this clause (D) to
extend also to any person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act of 1933, as amended); or (E) the offer,
holding, transfer or sale of any interest in the Trust Estate or the Trust
Agreement or any similar interest (a) on or prior to the Delivery Date, or (b)
subsequent to the Delivery Date during the continuation of an Event of Default
under the Lease or in connection with the exercise by the Lessee of its
34
<PAGE>
[Participation Agreement (1995 777 B)]
purchase options under the Lease or in connection with a refinancing pursuant to
Section 17 hereof or in connection with the termination of the Lease or action
or direction of Lessee pursuant to Sections 7, 8, 9, 10, or 19 thereof;
provided, that the foregoing indemnity shall not extend to any Expense to the
extent resulting from or arising out of one or more of the following: (1) any
representation or warranty by such Indemnitee in the Operative Documents or in
any Pass Through Trust Agreement being incorrect, or (2) the failure by such
Indemnitee to perform or observe any agreement, covenant or condition in any of
the Operative Documents or in any Pass Through Trust Agreement including,
without limitation, the creation or existence of a Lessor Lien (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens), or (3) the willful misconduct or the gross
negligence of such Indemnitee (other than gross negligence imputed to such
Indemnitee solely by reason of its interest in the Aircraft), or (4) (A) in the
case of such Indemnitee a disposition (voluntary or involuntary) of all or any
part of its interest in the Airframe or any Engine, (B) in the case of a
Certificate Holder a disposition (voluntary or involuntary) by such Certificate
Holder of all or any part of its interest in any Loan Certificate or (C) in the
case of any Indemnitee a disposition by such Indemnitee of all or any part of
such Indemnitee's interest in the Operative Documents or the Pass Through Trust
Agreements other than in each of (A), (B) and (C) during the continuance of an
Event of Default under the Lease or pursuant to the exercise by the Lessee of
its purchase options under the Lease or in connection with a refinancing
pursuant to Section 17 hereof or in connection with the termination of the Lease
or action or direction of Lessee pursuant to Sections 7, 8, 9, 10 or 19 thereof,
or (5) other than to the extent provided in the succeeding paragraph, any Tax
(as defined in Section 7(b) hereof) whether or not Lessee is required to
indemnify for such Tax pursuant to Section 7(b) hereof (it being understood that
Section 7(b) hereof and the Tax Indemnity Agreement and provisions requiring
payments to be made on an after-tax basis or expressly providing for additional
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust
35
<PAGE>
[Participation Agreement (1995 777 B)]
Indenture any amounts received and distributable by it thereunder to such
Certificate Holder or a failure on the part of any Pass Through Trustee to
distribute in accordance with the applicable Pass Through Trust Agreement any
amounts received and distributable by such Pass Through Trustee under such Pass
Through Trust Agreement, or (8) other than during the continuation of a Default
or an Event of Default under the Lease the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any of the Operative Documents or any Pass Through Trust Agreement
unless such amendments, supplements, waivers or consents (a) are requested by
Lessee or (b) are required or permitted pursuant to the terms of the Operative
Documents (unless the same results from the actions of an Indemnitee) (provided
if Lessee is not responsible for the Expense associated with such amendment,
supplement, waiver or consent, the party requesting the execution of the same
shall be responsible for such expense), or (9) other than to the extent provided
in the succeeding paragraph any loss of tax benefits or increase in tax
liability under any tax law whether or not Lessee is required to indemnify
therefor pursuant to this Agreement or the Tax Indemnity Agreement (it being
understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing
36
<PAGE>
[Participation Agreement (1995 777 B)]
authority or governmental subdivision of a foreign country, or any territory or
possession of the United States or any international authority, shall be equal
to the excess, if any, of (A) the amount of such Expense over (B) the current
net reduction in Taxes actually required to be paid by such recipient resulting
from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use reasonable
efforts to obtain such severance), and (C) in any other case, to be consulted by
such Indemnitee with respect to judicial proceedings subject to the control of
such Indemnitee and to be allowed, at Lessee's sole expense, to participate
therein. Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to assume responsibility for and control of any such judicial or
administrative proceedings if (i) any Default under Section 14(a), (b), (f) or
(g) of the Lease or an Event of Default under the Lease shall have occurred and
be continuing, (ii) if such proceedings will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on, the Aircraft, the Trust Indenture Estate or the Trust Estate or any
part thereof unless Lessee shall have posted a bond or other security reasonably
satisfactory to the relevant Indemnitees in respect to such risk
37
<PAGE>
[Participation Agreement (1995 777 B)]
or (iii) if such proceedings could, in the good faith opinion of the Indemnitee
entail any risk of criminal liability or any material risk of civil liability
(unless, in the case of such civil liability, Lessee has agreed to indemnify
against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee
38
<PAGE>
[Participation Agreement (1995 777 B)]
subsequently shall be reimbursed in respect of such indemnified amount from any
other person, such Indemnitee shall, unless a Default under Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or (b)(viii)
of the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing, promptly pay
Lessee but not before Lessee shall have made all payments then due to such
Indemnitee pursuant to this Section 7(c) and any other payments then due under
any of the Operative Documents, an amount equal to the sum of (I) the amount of
such reimbursement, including interest received attributable thereto, net of
taxes required to be paid by such Indemnitee as a result of any reimbursement
including interest received attributable thereto and (II) any tax benefit
actually realized by such Indemnitee as a result of any payment by such
Indemnitee made pursuant to this sentence; provided, however, that in the case
of any Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above shall
not be in excess of the amount of such Expense payment net of any amount paid in
respect of Taxes required to be paid by such Indemnitee in respect of the
receipt or accrual of such payment or advance made by Lessee to such Indemnitee
plus interest received, if any, from the relevant taxing authority with respect
to any such Expense payment, it being intended that such Indemnitee shall
realize a net benefit pursuant to this Section 7(c) only if Lessee shall first
have been reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent appointed in accordance with Section
9.02(c) of the Trust Indenture) and each Pass Through Trustee (including, but
not limited to, the reasonable fees and expenses of its counsel) and, as
provided in Section 6.07 of the Trust Agreement, the Owner Trustee (including,
but not limited to, the reasonable fees and expenses of its counsel), in each
case without cost, on a net after-tax basis, to the Owner Participant, for
acting as such, other than such fees and expenses which constitute Transaction
Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement 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 any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
39
<PAGE>
[Participation Agreement (1995 777 B)]
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall instruct the Indenture Trustee to, and Indenture Trustee shall, withhold
as provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
40
<PAGE>
[Participation Agreement (1995 777 B)]
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure to immediately comply with
its obligations pursuant to the second sentence of this Section 8(b) unless such
failure is a result of such party's breach of its obligations to cooperate set
forth in the following sentence (including any damages suffered by any such
party (other than damages suffered by Lessee which Lessee could have mitigated
by taking reasonable steps (Lessee having no obligation to restrict the use of
the Aircraft to so mitigate)) at any time after the fifth Business Day following
the Owner Participant's having obtained Actual Knowledge of such ineligibility
or loss of citizenship). Each party hereto agrees, upon the request and at the
sole expense of the Owner Participant, to reasonably cooperate with the Owner
Participant in complying with its obligations under the provisions of the second
sentence of this Section 8(b) and such request shall not be subject to the
indemnity contained in Section 7(c) hereof. State Street Bank and Trust Company
in its individual capacity, agrees that if at any time a responsible officer of
State Street Bank and Trust Company, shall obtain Actual Knowledge that State
Street Bank and Trust Company has ceased to be a Citizen of the United States,
it will promptly resign as Owner Trustee (if and
41
<PAGE>
[Participation Agreement (1995 777 B)]
so long as such citizenship is necessary under the Federal Aviation Act as in
effect at such time or, if it is not necessary, if and so long as the Owner
Trustee's citizenship would have any adverse effect on a Certificate Holder,
Lessee or the Owner Participant), effective upon the appointment of a successor
Owner Trustee in accordance with Section 9.01 of the Trust Agreement. If the
Owner Participant or State Street Bank and Trust Company, in its individual
capacity, does not comply with the requirements of this Section 8(b), the Owner
Trustee, the Indenture Trustee, the Owner Participant and the Certificate
Holders hereby agree that a Default or an Event of Default shall not have
occurred and be continuing under the Lease due to noncompliance by Lessee with
the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or
42
<PAGE>
[Participation Agreement (1995 777 B)]
the United Kingdom, or (ii) upon 30 days' prior written notice in any other
country with which the United States maintains diplomatic relations at the time
of such request and the Owner Participant has not determined, acting reasonably,
that such other country would not provide substantially equivalent protection
for the rights of owner participants, lessors or lenders in similar transactions
as provided under United States laws, the Owner Participant will not, in the
case of either (i) or (ii), unreasonably withhold its consent to such change of
registration. In addition, such change of registration to a country listed on
Exhibit G shall be permitted only if such change will not result in the
imposition of, or increase the amount of, any Tax for which Lessee is not
required to indemnify or is not then willing to enter into a binding agreement
to indemnify, in a manner satisfactory in form and substance to the indemnified
party, each party referred to in clause (E) of paragraph (i) below. The Owner
Participant further agrees that the inability of Lessee to deliver to the Owner
Participant and, so long as the Lien of the Trust Indenture has not been
released, the Indenture Trustee, an opinion (reasonably satisfactory in form and
substance to the Owner Participant) of counsel reasonably acceptable to the
Owner Participant in such country listed on Exhibit G to the Lease to the effect
that the courts of such country would give effect to the Owner Trustee's title
to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit G, and if said opinion is delivered, the Owner Participant will
instruct the Owner Trustee, and the Indenture Trustee, subject only to
compliance with the provisions of Section 7.02 of the Indenture, shall
cooperate, to make such change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional
43
<PAGE>
[Participation Agreement (1995 777 B)]
indemnities for which Lessee is then willing to enter into a binding
agreement to indemnify) in favor of the Owner Participant, the Owner
Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms (including, without limitation, the governing-law, service-of-process
and jurisdictional-submission provisions thereof) of the Lease and the
Trust Indenture are legal, valid, binding and enforceable in such
jurisdiction, (B) that it is not necessary for the Owner Participant, the
Owner Trustee or the Indenture Trustee to register or qualify to do
business in such jurisdiction, (C) that there is no tort liability of the
owner of an aircraft not in possession thereof under the laws of such
jurisdiction other than tort liability which might have been imposed on
such owner under the laws of the United States or any state thereof (it
being understood that, in the event such latter opinion cannot be given in
a form satisfactory to the Owner Participant, such opinion shall be waived
if insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction
44
<PAGE>
[Participation Agreement (1995 777 B)]
payable in currency freely convertible into Dollars for the loss of use or
title of the Aircraft in the event of the requisition by such government of
such use or title, and (E) to such further effect with respect to such
other matters as the Owner Trustee, in its individual capacity, or the
Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's request to
change the registry of the Aircraft to, or to sublease the Aircraft in, a
country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval
45
<PAGE>
[Participation Agreement (1995 777 B)]
not already obtained of stockholders of the Owner Participant or any
approval or consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been duly
executed and delivered by the Owner Participant, and neither the execution
and delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor compliance
by the Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment, governmental
rule, regulation or order applicable to or binding on the Owner Participant
(it being understood that no representation or warranty is made with
respect to laws, rules or regulations relating to aviation or to the nature
of the equipment owned by the Owner Trustee, other than such laws, rules or
regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Liens provided for or otherwise permitted in the Operative
Documents) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or instrument to
which the Owner Participant is a party or by which it or its properties may
be bound or affected (it being understood that no representation or
warranty is made in this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation 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, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations
46
<PAGE>
[Participation Agreement (1995 777 B)]
relating to the citizenship requirements of the Owner Participant under
applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be necessary duly to
discharge such Lessor Lien attributable to it and (iii) to make restitution to
the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it. The Owner Participant
agrees to make restitution to the Trust Estate for any actual diminution of the
assets of the Trust Estate resulting from any Taxes or Expenses (as such terms
are defined in Section 7 hereof) imposed on the Trust Estate against which
Lessee is not required to indemnify the Trust Estate pursuant to Section 7
hereof, but excluding Taxes or Expenses referred to in Section 7(b)(ii)(5) and
7(b)(ii)(7) and excluding any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity;
provided that if the Owner Participant shall make restitution to the Trust
Estate on account of any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity, then
State Street Bank and Trust Company, in its individual capacity, shall reimburse
the Owner Participant for such amount together with interest thereon at the Past
Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate
47
<PAGE>
[Participation Agreement (1995 777 B)]
pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is in effect), each hereby waives to the fullest
extent permitted by law the benefit of the provisions of Section 1111(b) of
Title 11 of the United States Code with respect to recourse against the Owner
Trustee (in its individual capacity) and the Owner Participant on account of any
amount payable as principal of, Premium, if any, and interest on the Loan
Certificates. If (i) all or any part of the Trust Estate becomes the property
of, or the Owner Participant becomes, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any successor provision, (ii) pursuant to
such reorganization provisions the Owner Trustee (in its individual capacity) or
the Owner Participant is required, by reason of the Owner Trustee (in its
individual capacity) or the Owner Participant being held to have recourse
liability to a Certificate Holder, a Pass Through Trustee or the Indenture
Trustee, directly or indirectly (other than the recourse liability of the Owner
Participant under this Participation Agreement), to make payment on account of
any amount payable as principal, Premium, if any, or interest on the Loan
Certificates and (iii) such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee actually receives any Excess Payment (as hereinafter defined)
which reflects any payment by the Owner Trustee (in its individual capacity) or
the Owner Participant on account of clause (ii) above, then such Certificate
Holder, such Pass Through Trustee or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Trustee or the Owner Participant (whichever
shall have made such
48
<PAGE>
[Participation Agreement (1995 777 B)]
payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the Owner
Participant had not become subject to the recourse liability referred to in
clause (ii) above. Nothing contained in this Section 8(j) shall prevent any
Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
49
<PAGE>
[Participation Agreement (1995 777 B)]
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or
50
<PAGE>
[Participation Agreement (1995 777 B)]
compensation received by a Pass Through Trustee for services rendered in
connection with the transactions contemplated by the respective Pass
Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined
51
<PAGE>
[Participation Agreement (1995 777 B)]
capital, surplus and undivided profits of at least $75,000,000 or a corporation
whose net worth is at least $75,000,000, (B) any subsidiary of such a bank,
financial institution or corporation, provided that such bank, financial
institution or corporation furnishes to the Owner Trustee, the Indenture Trustee
and Lessee a guaranty substantially in the form of Exhibit C hereto with respect
to the Owner Participant's obligations, in the case of the Owner Trustee, under
the Trust Agreement and, in the case of the Indenture Trustee and Lessee, the
Owner Participant's obligations hereunder, or (C) any other entity, provided
such obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee no Transferee shall be an
airline, a commercial air carrier, an air freight forwarder, an entity engaged
in the business of parcel transport by air or other similar person or a
corporation or other entity controlling, controlled by or under common control
with such an airline, a commercial air carrier, an air freight forwarder, an
entity engaged in the business of parcel transport by air or other similar
person. Each such transfer to a Transferee shall be subject to the conditions
that (M) upon giving effect to such transfer, the Transferee is a Citizen of the
United States or the Transferee, at its sole cost and expense on an after-tax
basis (including any continuing costs of the voting trust), shall have entered
into a voting trust or similar arrangement which permits the registration of the
Aircraft under the Federal Aviation Act in the name of the Owner Trustee, (N)
the Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in
52
<PAGE>
[Participation Agreement (1995 777 B)]
the Trust Estate. Upon any such transfer by the Owner Participant as above
provided, (i) the Transferee shall be deemed the Owner Participant for all
purposes hereof and of the other Operative Documents and each reference herein
to the transferor Owner Participant shall thereafter be deemed for all purposes
to be to the Transferee and the transferor Owner Participant shall be relieved
of all obligations of the transferring Owner Participant under the Owner
Participant Documents arising after the date of such transfer except to the
extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in the Aircraft. If the Owner Participant intends to
transfer any of its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than 10 days prior thereto,
to the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee. The Owner Participant shall pay all of the
reasonable costs of the other parties hereto, on a net after-tax basis, of any
such transfer. For purposes of this paragraph, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined in
accordance with generally accepted accounting principles consistently applied.
Notwithstanding anything contained in this Section 8(l) to the contrary, each of
Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustees and,
by its acceptance of a Loan Certificate, each Certificate Holder agrees that the
Owner Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777B Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 B) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between [____________]
and the 777B Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
53
<PAGE>
[Participation Agreement (1995 777 B)]
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company (A) in its individual capacity
("SSBTC") represents and warrants that:
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization,
54
<PAGE>
[Participation Agreement (1995 777 B)]
execution and delivery of the Trust Agreement by the Owner Participant) has
full right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the other
Owner Trustee Documents;
(v) each of the Owner Trustee Documents has 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 Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
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;
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
55
<PAGE>
[Participation Agreement (1995 777 B)]
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC; and
(B) SSBT solely in its capacity as Owner Trustee further represents
and warrants that:
(i) SSBT is a trust company duly organized and validly existing
in good standing under the laws of the Commonwealth of Massachusetts and
has the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Trust Agreement, this
Agreement, the Trust Indenture, the Lease and the Loan Certificates has
been, or on the Delivery Date will have been, duly executed and delivered
by it, and each of this Agreement, the Trust Agreement, the Lease and the
Trust Indenture, on the Delivery Date, will constitute a legal, valid and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms thereof;
(iii) the Owner Trustee has never directly or indirectly
offered any Loan Certificate or any interest in or to the Trust Estate, the
Trust Agreement or any similar interest for sale to, or solicited any offer
to acquire any of the same from, any Person other than the Indenture
Trustee, each of the Pass Through Trustees and the Owner Participant; and
it has not authorized any Person to act on its behalf (other than for
purposes of this paragrpah, the Lessee and the Underwriters) to offer
directly or indirectly any Loan Certificate or any interest in and to the
Trust Estate, the Trust Agreement or any similar interest for sale to, or
to solicit any offer to acquire any of the same from, any Person; and
(iv) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the case may be,
56
<PAGE>
[Participation Agreement (1995 777 B)]
to perform its obligations under any of the Owner Trustee Documents or any
other documents executed by the Owner Trustee or SSBTC in connection with
the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner Trustee, the Indenture Trustee, each
Certificate Holder and the Owner Participant covenants and agrees that, at
Lessee's expense on a net after-tax basis (including, without limitation,
reasonable attorney's fees and expenses of each of such parties), (i) Lessee may
elect to terminate the Lease and to purchase the Aircraft pursuant to Section
19(b) of the Lease and that each of such parties will execute and deliver
appropriate documentation transferring all right, title and interest in the
Aircraft to Lessee (without recourse or warranty except as to Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) with respect to the Owner Participant)
(including without limitation, such bills of sale and other instruments and
documents as Lessee shall reasonably request to evidence (on the public record
or otherwise) such transfer and the vesting of all right, title and interest in
and to the Aircraft in Lessee), and (ii) Lessee, in connection with such
purchase and subject to the provisions of the second paragraph of this Section
8(r), may assume (and receive a credit in an amount equal to the principal
amount of the debt assumed against the purchase price payable by Lessee pursuant
to Section 19(b) of the Lease) the obligations of the Owner Trustee pursuant to
Section 7.03 of the Trust Indenture and the Loan Certificates (and the Lease, to
the extent that the Owner Trustee's obligations thereunder are incorporated into
the Trust Indenture or the Loan Certificates), and Lessee shall confirm that its
obligations under the Lease shall be direct obligations to the Indenture Trustee
as if set forth in the Trust Indenture, and that each of the parties shall
execute and deliver appropriate documentation in form and substance reasonably
satisfactory to such parties under which Lessee will assume such obligations on
the basis of full recourse to Lessee, maintaining the security interest in the
Aircraft created by the Trust Indenture, releasing the Owner Participant and the
Owner Trustee
57
<PAGE>
[Participation Agreement (1995 777 B)]
from all future obligations in respect of the Loan Certificates, the Trust
Indenture and all other Operative Documents and all such other actions
(including the furnishing of legal opinions reasonably requested by any party)
as are reasonably necessary to permit such assumption by Lessee.
If Lessee elects to assume the rights and obligations of the Owner Trustee
in accordance with Section 7.03 of the Trust Indenture in connection with the
purchase by the Lessee of the Aircraft pursuant to Section 19(b) of the Lease
and to pay the EBO Price in installments as permitted thereby, then:
(A) in addition to the provisions contemplated above, the Trust
Indenture shall be amended (a) to provide for an additional series of loan
certificates (the "EBO Certificates") to be issued to the Owner Participant
on the EBO Date to evidence the payment of the EBO Price in installments on
the dates specified in Exhibit H to the Lease (taking into account the
credit provided for above), (2) to provide that the Indenture Trustee will
make no distributions to the Owner Participant or the Owner Trustee or
otherwise in respect of the EBO Certificates prior to the payment in full
of all amounts then due and payable to the other Holders or, if an "Event
of Default" under the Trust Indenture (an "Indenture Event of Default") or
any payment Default under the Trust Indenture shall have occurred and be
continuing, prior (unless such Loan Certificates shall have been purchased
by the Owner Trustee) to the payment in full of the principal amount of,
and interest accrued on, the Loan Certificates other than the EBO
Certificates, (3) to include the failure to pay any installments of the EBO
Certificates within 10 calendar days of when due as an Event of Default,
(4) to include a right so long as the EBO Certificates shall be outstanding
for the Owner Participant to purchase the other Loan Certificates under
circumstances similar to, and on the same terms as provided in, Section
8.03(e)(ii) of the Trust Indenture (it being understood that upon any
assumption pursuant to Section 7.03 of the Trust Indenture, the provisions
of the Trust Indenture intended for the benefit of the Owner Participant
(other than provisions concerning, but only to the extent applicable to,
Excluded Payments), including, without limitation, Sections 8.03(e)(i) and
8.03(e)(iii) of the Trust Indenture providing the Owner Trustee or the
Owner Participant with certain rights, shall be of no further force and
effect), (5) to provide that the Owner Participant and the Owner Trustee
shall have no voting or consent rights under the Trust Indenture by reason
of being the holder of the EBO Certificates or otherwise until all other
Loan Certificates have either been paid in full or been purchased by the
Owner
58
<PAGE>
[Participation Agreement (1995 777 B)]
Participant (pursuant to the provisions contemplated by clause (A)(4) of
this Section 8(r) by the reference therein to Section 8.03(e)(ii) of the
Trust Indenture), except that without the consent of the Owner Participant
the Trust Indenture could not be amended, modified or supplemented to
reduce the amount or extend the time of payment of any amount owing or
payable under the EBO Certificates, and (6) to confirm that, although the
Owner Participant cannot participate in the exercise of remedies under the
Trust Indenture, it shall not be precluded form demanding, collecting,
suing for or otherwise receiving and enforcing payment of the EBO
Certificates by demand upon Lessee; and
(B) upon Lessee's payment in full of all amounts due on or prior to
the EBO Date in accordance with Section 19(b) of the Lease and compliance
with all of the conditions to such assumption in accordance with this
Section 8(r) and Section 7.03 of the Trust Indenture, (1) the Owner Trustee
shall assign the right to the remaining installments of the EBO Price to
the Owner Participant, (2) the EBO Certificates shall be issued to the
Owner Participant in aggregate amount of such remaining installments of the
EBO Price and (3) the Owner Trustee (AA) shall transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens) and on an
"as is" basis, all right, title and interest of the Owner Trustee in and to
the Aircraft and (BB) shall furnish to or at the direction of Lessee one or
more bills of sale in form and substance reasonably satisfactory to Lessee
evidencing such transfer.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
59
<PAGE>
[Participation Agreement (1995 777 B)]
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as Lessee herein and therein. No such
conveyance, transfer or lease of substantially all of the assets of Lessee as an
entirety shall have the effect of releasing Lessee or any successor corporation
or Person which shall theretofore have become such in the manner prescribed in
this Section 8(s) from its liability in respect of any Operative Document to
which it is a party or any Pass Through Trust Agreement. 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.
60
<PAGE>
[Participation Agreement (1995 777 B)]
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through Trustee to act within its own discretion), it
shall not, without the prior written consent of the Owner Trustee, direct the
Indenture Trustee to take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization, direction or
consent of, or notice from, the Certificate Holders holding a specified
percentage in principal amount of Outstanding (as defined in the Trust
Indenture) Loan Certificates unless such Pass Through Trustee receives a
Direction (as defined in the relevant Pass Through Trust Agreement) to so direct
the Indenture Trustee from Certificate Holders (as defined in the relevant Pass
Through Trust Agreement) holding the same percentage of Certificates (as defined
in the
61
<PAGE>
[Participation Agreement (1995 777 B)]
relevant Pass Through Trust Agreement) evidencing Fractional Undivided Interests
(as defined in the relevant Pass Through Trust Agreement) in the Trust (as
defined in the relevant Pass Through Trust Agreement) holding the Loan
Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that Article X
of each Pass Through Trust Agreement (to the extent relating to the
Certificates) shall not be amended without the prior written consent of the
Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and
62
<PAGE>
[Participation Agreement (1995 777 B)]
reinvest all money so held by it in such Permitted Investments as Lessee deems
appropriate. Lessee will apply such money to the payment of previously
unclaimed payments with respect to the Loan Certificates when and as claims for
payment are made by the Holders of such Loan Certificates. As compensation for
its services pursuant to this Section 8(z), Lessee shall be entitled to an
annual fee from the Owner Participant in an amount to be agreed to at the time
by Lessee and the Owner Participant but in no event shall such fee exceed at any
time the amount of earnings on the monies so held in trust distributable at such
time to the Owner Participant. Any net losses on such investment shall be for
the account of Lessee. Any net earnings on such investment shall be distributed
from time to time by Lessee to the Owner Participant after deducting therefrom
any portion of such fee then due and unpaid. Upon the date required by
applicable law dealing with unclaimed property, Lessee will distribute to the
Owner Participant any amount held by it pursuant to this Section 8(z) and not
previously applied to the payment of the Loan Certificates, after deducting
therefrom any portion of such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no adverse impact upon the rights or interests of the Owner
Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner Participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture
63
<PAGE>
[Participation Agreement (1995 777 B)]
Trustee not to amend, supplement or otherwise modify any provision of the Trust
Agreement in a manner adversely affecting such party without the prior written
consent of such party. Notwithstanding the foregoing, unless an Event of
Default shall have occurred and be continuing and so long as the Lease has not
been terminated, the Indenture Trustee and the Owner Participant hereby agree
for the benefit of Lessee that without the consent of Lessee they will not (and
the Owner Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name of the Owner Trustee, except as
otherwise required or permitted hereunder or under the Lease, under the
Federal Aviation Act or under the applicable law of another permitted
government of registry, or shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make
application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorney's fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required
to enable the Owner Trustee to timely file any reports required to be filed
by it as the lessor under the Lease or as the owner of the Aircraft with
any governmental authority (including tax authorities).
64
<PAGE>
[Participation Agreement (1995 777 B)]
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
third, the Trust Indenture, with the Trust Agreement and the Trust
Supplement attached, and fourth, the Lease, with the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or certified mail
or by prepaid courier), or by prepaid courier service, and shall be deemed to be
given for purposes of this Agreement on the day that such writing is delivered
or received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or
65
<PAGE>
[Participation Agreement (1995 777 B)]
(B) if to a subsequent Owner Participant, addressed to such subsequent Owner
Participant at such address as such subsequent Owner Participant shall have
furnished by notice to the parties hereto or (C) if to any subsequent
Certificate Holder, addressed to such Certificate Holder at its address set
forth in the Loan Certificate Register maintained pursuant to Section 2.03 of
the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall
66
<PAGE>
[Participation Agreement (1995 777 B)]
have received an opinion or opinions of counsel (reasonably satisfactory to the
Owner Participant) in scope, form and substance reasonably satisfactory to the
Owner Participant to the effect that (I) the trust, as thus removed, shall
remain a validly established trust, (II) any amendments to the Trust Agreement
necessitated by such removal shall have been duly authorized, executed and
delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Participants and the
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the
67
<PAGE>
[Participation Agreement (1995 777 B)]
delivery or return of the Aircraft, the transfer of any interest of the Owner
Participant in the Trust Estate or the Aircraft or any Engine or the transfer of
any interest by any Certificate Holder in any Loan Certificate or the Trust
Indenture Estate and the expiration or other termination of this Agreement or
any other Operative Document or any of the Pass Through Trust Agreements.
(c) This 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. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed
68
<PAGE>
[Participation Agreement (1995 777 B)]
to limit the exercise and enforcement in accordance with the terms of this
Agreement or such other agreements of rights and remedies against the Trust
Estate. The foregoing provisions of this Section 15(d) shall survive the
termination of this Agreement, the other Operative Documents and the Pass
Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay
69
<PAGE>
[Participation Agreement (1995 777 B)]
all invoices of Transaction Expenses that have been so approved promptly upon
receipt thereof. Notwithstanding the foregoing, in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Expenses, except that the fees, expenses and disbursements of the
Owner Participant (including those relating to its counsel) shall be borne by
the Owner Participant if such failure to consummate the transactions results
from the failure of the Owner Participant to adhere to the terms and conditions
set forth in the letter dated March 2, 1995 addressed to Lessee and Capstar
Partners and agreed to by Lessee or to close after all conditions precedent to
the Owner Participant's funding of its Commitment set forth herein have been
satisfied. To the extent Transaction Expenses exceed [_____%] of Lessor's Cost,
the Lessee may, in lieu of electing an optimization pursuant to Section 18
hereof, promptly reimburse the Owner Trustee or Owner Participant, as
appropriate, for all or a portion of the Transaction Expenses described in
clause (i)(5) and/or clause (vi) (excluding any debt placement fees included in
said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in a
commercially reasonable manner to conclude an agreement with Lessee as to the
terms of such refunding or refinancing transaction (including the terms of any
debt to be issued in connection with such refunding or refinancing transaction
and the documentation to be executed in connection therewith), and if after such
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination
70
<PAGE>
[Participation Agreement (1995 777 B)]
Value percentages, Special Termination Value percentages and EBO
Percentage. Within ten Business Days of its receipt of the Refinancing
Certificate, Lessee may demand a verification pursuant to Exhibit E to the
Lease of the information set forth in the Refinancing Certificate. Upon
the acceptance by Lessee of the accuracy of the information set forth in
the Refinancing Certificate or the determination pursuant to such
verification procedures of the revised Basic Rent, Excess Amount, debt
amortization, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and EBO Percentage and
the Debt/Equity Ratio (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate principal amount
specified in the Refinancing Information, which amount shall be at least
equal to the aggregate principal amount of all Loan Certificates
outstanding on the Refinancing Date (such debt securities, the "New Debt")
and (ii) the application of the proceeds of the sale of the New Debt to the
redemption of all such Loan Certificates on the Refinancing Date and (B)
pursuant to which the parties to the refinancing transaction (including the
Owner Participant and Lessee but excluding any public holders of debt) make
such representations, warranties and covenants as the Owner Participant or
Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value percentages from and after the Refinancing Date shall be
as provided in the Refinancing Information;
71
<PAGE>
[Participation Agreement (1995 777 B)]
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant
72
<PAGE>
[Participation Agreement (1995 777 B)]
to be disclosed in any offering materials. Lessee shall have the right to
purchase such debt securities and apply such securities as a credit against its
obligations to pay Rent, provided that (x) in connection with such refunding or
refinancing Lessee shall have agreed to indemnify the Owner Participant with
respect to such right in a manner satisfactory to the Owner Participant, and (y)
Lessee may not, at any one time hold in the aggregate any such debt securities
having a face value in excess of that portion of the two next succeeding
installments of Basic Rent which is required to be paid to the holders of such
debt securities on account of principal and interest. Any trustee of public
debt shall be a bank or trust company having its principal place of business in
the Borough of Manhattan, City and State of New York, Chicago, Illinois,
Hartford, Connecticut or Boston, Massachusetts and having, or having a parent
willing to guarantee the obligations of such bank or trust company and 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 trustee
upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and 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 and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
73
<PAGE>
[Participation Agreement (1995 777 B)]
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to the fifth anniversary of the Delivery Date.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
Date occurs other than on May 15, 1995 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost, the Lessee may,
pursuant to this Section 18 and in accordance with the requirements of Section
3(c) of the Lease, optimize the Basic Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
74
<PAGE>
[Participation Agreement (1995 777 B)]
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
75
<PAGE>
[Participation Agreement (1995 777 B)]
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.
UNITED AIR LINES, INC.,
Lessee
By:_______________________________
Vice President and Treasurer
______________________________,
Owner Participant
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: ______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By:_______________________________
Title:____________________________
76
<PAGE>
[Participation Agreement (1995 777 B)]
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail Overnight Delivery Service
- --------- --------------------------
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
Payment Address
---------------
Owner Participant:
- ----------------- The Chase Manhattan Bank, N.A.
New York, N.Y.
_______________________ ABA #: 021000021
_______________________
_______________________ Account #: 910-2-499093
_______________________ Account Name:
Reference: UAL/1995 777 B
Attn: ______________________
Telecopy: __________________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust
Department
Telecopy: (801) 246-5053
<PAGE>
[Participation Agreement (1995 777 B)]
Indenture Trustee:
- -----------------
First Security Bank of Utah, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight
delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
<PAGE>
[Participation Agreement (1995 777 B)]
SCHEDULE II
Commitments
-----------
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
First Security Bank of Utah,
National Association, in
its capacity as Pass Through
Trustee under Pass
Through Trust Agreement 1995-A1
First Security Bank of Utah,
National Association, in its
capacity as Pass Through
Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
[__________________________] $
Total Commitments: 100.00% $
================= ======= =
<PAGE>
Doc. No. 1.01
Aircraft N189UA
- --------------------------------------------------------------------------------
FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT
(1993 747 A)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
___________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1993 747 A Equipment Trust
One Boeing 747-422 Aircraft
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Certain Definitions; Participations in Lessor's
Cost of the Aircraft................................................... 3
SECTION 2. Lessee's Notice of Delivery Date................................ 4
SECTION 3. Instructions to the Owner Trustee and Indenture
Trustee................................................................ 4
SECTION 4. Conditions...................................................... 4
(a) Conditions Precedent to the Participations in the Aircraft........ 4
(b) Conditions Precedent to the Obligations of Lessee................. 4
SECTION 5. Confidentiality of Purchase Agreement........................... 5
SECTION 6. Extent of Interest of Certificate Holders....................... 5
SECTION 7. Lessee's Representations, Warranties and Indemnities............ 6
(a) In General........................................................ 6
(b) General Tax Indemnity............................................. 10
(c) General Indemnity................................................. 22
(d) Withholding....................................................... 28
SECTION 8. Representations, Warranties and Covenants........................ 29
SECTION 9. [Intentionally Omitted]......................................... 51
SECTION 10. Other Documents; Amendment..................................... 51
SECTION 11. Certain Covenants of Lessee.................................... 51
SECTION 12. Owner for Income Tax Purposes.................................. 52
SECTION 13. Notices; Consent to Jurisdiction............................... 52
SECTION 14. Change of Situs of Owner Trust................................. 53
SECTION 15. Miscellaneous.................................................. 55
SECTION 16. Invoices and Payment of Expenses............................... 57
SECTION 17. Optional Redemption of Certificates............................ 57
SECTION 18. Optimization................................................... 61
SECTION 19. Nondisclosure.................................................. 62
</TABLE>
ii
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III - Legal Opinions
EXHIBIT A-1 - Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 - Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B - Form of Assignment and Assumption Agreement
</TABLE>
iii
<PAGE>
FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT
(1993 747 A)
THIS FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT (1993 747 A)
dated as of May 1, 1995 (this "Agreement") among (i) United Air Lines, Inc., a
Delaware corporation (the "Lessee"), (ii) _________________, a corporation
organized under the laws of Delaware (the "Owner Participant"), (iii) STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (the "Owner Trustee") as successor to the
Original Owner Trustee (as defined below), (iv) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, except as otherwise provided herein, but solely as trustee under the
Pass Through Trust Agreement (the "Pass Through Trustee"), dated as of February
1, 1992, as amended and restated as of May 1, 1995 (the "Basic Agreement"), in
each case between the Lessee and STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, as supplemented by Trust Supplements Nos.
1995-A1 and 1995-A2, each dated as of May __, 1995 between the Lessee and the
Pass Through Trustee creating the 1995-A1 Pass Through Trust and the 1995-A2
Pass Through Trust, respectively (the Basic Agreement as so supplemented being
the "1995-A1 Pass Through Trust Agreement" and the "1995-A2 Pass Through Trust
Agreement", respectively, each of the 1995-A1 Pass Through Trust Agreement and
the 1995-A2 Pass Through Trust Agreement being a "Pass Through Trust Agreement")
and (v) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, in its individual capacity and as Indenture Trustee under the Trust
Indenture (the "Indenture Trustee") as successor to the Original Indenture
Trustee (as defined below), amends and restates that certain Participation
Agreement (1993 747 A) dated as of April 1, 1993 among Lessee, the Owner
Participant, Wilmington Trust Company, not in its individual capacity except as
expressly provided therein (the "Original Owner Trustee"), State Street Bank and
Trust Company of Connecticut, National Association, as Indenture Trustee (the
"Original Indenture Trustee") and The Chase Manhattan Bank, N.A., as an Original
Loan Participant, as amended by that certain First Amendment to Participation
Agreement (1993 747 A) dated as of December 1, 1993 among Lessee, the Owner
Participant, the Original Owner Trustee, the Original Indenture Trustee and The
Chase Manhattan Bank. N.A., Berliner Handels Und Frankfurter Bank and NBD Bank,
N.A., as Original Loan Participants (collectively, the "Original Loan
Participants"), as further amended by that certain Second Amendment to
Participation Agreement (1993 747 A) dated as of July 1, 1994 among Lessee, the
Owner Participant, the Original Owner Trustee, the Original
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture Trustee and The Mitsubishi Trust and Banking Corporation, New York
Branch (the "Successor Original Loan Participant") (such Participation
Agreement, as amended as set forth above, being referred to herein as the
"Original Participation Agreement").
WITNESSETH:
WHEREAS, except as otherwise defined in this Agreement, capitalized
terms used herein shall have the meanings attributed thereto in Section 1
hereof;
WHEREAS, as contemplated by Section 20 of the Original Participation
Agreement, the outstanding Loan Certificates held by the Successor Original Loan
Participant are, concurrently with the execution and delivery of this Amendment,
being refinanced by the issuance to each Pass Through Trustee of new Loan
Certificates in the aggregate principal amount of $_________ and the proceeds
of such issuance are, concurrently with the execution and delivery of this
Agreement, being applied to the payment of all the unpaid principal on such
outstanding Loan Certificates in an amount equal to $____________; and
WHEREAS, the parties hereto desire to amend and restate the Original
Participation Agreement in its entirety and the parties hereto desire and intend
that the terms, provisions and agreements herein set forth shall have the same
force and effect as though originally executed and delivered in the place of the
Original Participation Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the First Amended and Restated
Trust Agreement (1993 747 A) (the "Trust Agreement") pursuant to which Trust
Agreement the Owner Trustee agrees, among other things, to hold the Trust Estate
defined in Section 1.01 thereof (the "Trust Estate") for the use and benefit of
the Owner Participant; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Third Amended
and Restated Trust Indenture and Mortgage (1993 747 A) dated as of May 1, 1995
(the "Trust Indenture") pursuant to which the Owner Trustee agrees, among other
things, to issue one or more Loan Certificates in the form set forth in Exhibit
A-1 or Exhibit A-2 to the Trust Indenture to each Pass Through Trustee on behalf
of the related grantor trusts created by the applicable Pass Through Trust
Agreement as evidence of the Owner Trustee's indebtedness to each Pass Through
2
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee, which Loan Certificates are to be secured by the mortgage and security
interest in the Aircraft created pursuant to the Trust Indenture by the Owner
Trustee in favor of the Indenture Trustee, and the Owner Trustee shall execute
and deliver the Trust Supplement covering the Aircraft, supplementing the Trust
Agreement and the Trust Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into the Second Amended and Restated Lease Agreement (1993
747 A) dated as of May 1, 1995 (the "Lease Agreement") whereby, subject to the
terms and conditions set forth therein, the Owner Trustee agrees to lease to
Lessee, and Lessee agrees to lease from the Owner Trustee, the Aircraft on the
Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the "obligor" thereunder, as such term is defined in
and solely for purposes of the Trust Indenture Act of 1939, as amended, with
respect to the Pass Through Certificates and is undertaking to perform certain
administrative and ministerial duties thereunder and is also undertaking to pay
the fees and expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context
3
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
otherwise requires, any reference herein to any of the Operative Documents
refers to such document as it may be amended from time to time in accordance
with its terms and the terms of each other agreement restricting the amendment
thereof.
(b) Subject to the terms and conditions of the Original Participation
Agreement, (i) the Original Loan Participant agreed to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date designated
pursuant to Section 2 thereof, but in no event later than May 15, 1993, in the
amount in Dollars equal to the percentage of Lessor's Cost set forth opposite
its name on Schedule II thereto and (ii) the Owner Participant agreed, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated thereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date designated as set forth above,
but in no event later than May 15, 1993, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II thereto.
SECTION 2. Lessee's Notice of Delivery Date.
[Intentionally Omitted].
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
[Intentionally Omitted].
SECTION 4. Conditions. (a) Conditions Precedent to the
Participations in the Aircraft. It is agreed that the respective obligations of
the Original Loan Participant and the Owner Participant to participate in the
payments of Lessor's Cost were subject to the satisfaction prior to or on the
Delivery Date of the conditions precedent set forth in Section 4(a) of the
Original Participation Agreement and the respective obligations of the OP and
the Pass Through Trustees to enter into a refinancing are set forth in the
Redemption and Refinancing Agreement.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, were all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the conditions
precedent set forth in the Original Participation Agreement and the obligations
of Lessee to enter into a
4
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
refinancing transaction are set forth in the Redemption and Refinancing
Agreement.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
Participants, and the Indenture Trustee shall keep the Purchase Agreement
confidential and shall not disclose the same to any Person, except (A) to
prospective and permitted transferees of Lessor's, a Pass Through Trustee's, the
Owner Participant's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to the aforementioned prospective and permitted
transferees', Lessor's, Pass Through Trustees', the Owner Participant's or the
Indenture Trustee's counsel or special counsel, independent insurance brokers or
other agents who agree to hold such information confidential, (C) as may be
required by any statute, court or administrative order or decree or governmental
ruling or regulation, including Federal or state banking examiners or tax
auditors or (D) as may be necessary or desirable for purposes of protecting the
interest of any such Person or for enforcement of the Lease by Owner Trustee,
the Participants or the Indenture Trustee; provided, however, that any and all
disclosures of all or any part of the Purchase Agreement which are permitted by
(C) or (D) above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons to whom such disclosures are hereby
permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
5
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
SECTION 7. Lessee's Representations, Warranties and Indemnities.
(a) In General. Lessee represents and warrants that as of the
Delivery Date:
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its operations or the nature of its business requires, except where
the failure to be so qualified would not have a material adverse effect on
Lessee or its business; is a Citizen of the United States and a
Certificated Air Carrier; holds all material licenses, certificates,
permits and franchises from the appropriate agencies of the United States
of America and/or all other governmental authorities having jurisdiction,
necessary to authorize Lessee to engage in air transport and to carry on
scheduled passenger service, in each case as presently conducted; has its
chief executive office (as such term is defined in Article 9 of the Uniform
Commercial Code) in Elk Grove Township, Illinois; and has the corporate
power and authority to conduct its business as it is presently being
conducted, to hold under lease the Aircraft and to enter into and perform
its obligations under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
6
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2) and (C) any normal periodic and other reporting requirements
under the applicable rules and regulations of the FAA to the extent
required to be given or obtained only after the Delivery Date;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable jurisdiction),
is necessary or advisable in order to establish and perfect the Owner
Trustee's title to and interest in the Aircraft as against the Lessee and
the Indenture Trustee's security interest in
7
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Aircraft as against the Owner Trustee, and in each case as against any
third parties in any applicable jurisdictions in the United States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1992 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1992, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner
8
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Participant, and not more than twenty-five (25) other institutions believed
capable of evaluating and bearing the risks of investment in the
transactions contemplated hereby, or (B) offered any interest in the Trust
Estate or any Pass Through Certificate or any Loan Certificate in a manner
which would violate the Securities Act of 1933, as amended, the regulations
thereunder, administrative and judicial interpretation thereof or the
securities laws, rules or regulations of any state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee 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 any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
(xvii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an
9
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
investment company" within the meaning of the Investment Company Act of
1940, as amended.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original Amount of, or interest or
Premium on, or other amounts payable
10
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
with respect to, the Loan Certificates or the payment of principal of, interest
on or any other amounts payable with respect to the Pass Through Certificates,
(G) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents, or (H) any change in the Owner Trustee
or the situs of the Trust Estate made pursuant to Sections 8(c) or 14 hereof;
and (y) any reasonable out-of-pocket costs and expenses fairly attributed to any
of the foregoing incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
11
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B)
12
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
the earlier discharge in full of Lessee's obligation to pay the
Stipulated Loss Value or the Termination Value and all other amounts
due under the Lease or (C) placement in storage or parking of the
Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to
13
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
this Section 7(b) or Section 7(c) hereof or pursuant to the Tax Indemnity
Agreement; provided, however, that this clause shall not result in any
duplication of any amounts of any gross-up payable under Section 7(b)(iii)
or Section 7(c) hereof or the Tax Indemnity Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant
14
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
to (I) above would exceed (x) the amount of all prior payments (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such amounts
received by such Indemnitee) from Lessee pursuant to this Section 7(b),
less (y) the portion of all prior payments computed pursuant to (I) above
by such Indemnitee to Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's
15
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
obligation hereunder unless such failure effectively precludes Lessee's
ability to (A) require such Indemnitee to contest the Tax or (B) contest
the Tax itself (in a case where Lessee cannot require the Indemnitee to
contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee
16
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
a written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee
17
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
against any additional net after-tax cost to such Indemnitee with respect
to such advance or payment, (IV) with regard to an Income Tax on an
Indemnitee which is the Owner Participant or the Owner Trustee, or a
successor, assign or Affiliate of the Owner Participant or the Owner
Trustee, independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in
18
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
respect of the receipt or accrual of such payment or advance made by Lessee
to such Indemnitee) plus interest received, if any, from the relevant
taxing authority with respect to such Tax payment (net of Taxes required to
be paid by such Indemnitee in connection with the receipt of such
interest), it being intended that such Indemnitee shall realize a net
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary
19
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
to file such returns, statements or reports, and (ii) in the case of a
return, statement or report required (or requested by the Indemnitee) to be
in the name of or filed by such Indemnitee, Lessee shall prepare and
furnish such return, statement or report for filing by such Indemnitee in
such manner as shall be reasonably satisfactory to such Indemnitee and send
the same to such Indemnitee for filing no later than 10 Business Days prior
to the due date; provided, however, that Lessee shall have no obligation
under this clause (ii) to the extent such Indemnitee after receipt of
Lessee's written request shall have failed to furnish Lessee with such
information as is peculiarly within such Indemnitee's control and is
necessary to prepare such return, statement or report. Lessee shall hold
each Indemnitee harmless from and against any liabilities, including, but
not limited to penalties, additions to tax, fines and interest, arising out
of any insufficiency or inaccuracy in any such return, statement, report or
information if such insufficiency or inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
20
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(vii) Application of Payments During Existence of Default or Event
of Default. Any amount payable to Lessee pursuant to the terms of this
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall
not be continuing any Default or Event of Default, such amount shall be
paid to the Lessee to the extent not previously applied against Lessee's
obligations hereunder as and when due after the Owner Trustee shall have
declared the Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
time to time, at the Lessee's request and expense, 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 tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
Agreement, Lessee may require the Indemnitee to
21
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
agree to the terms of this Section 7(b) prior to making any payment to such
Indemnitee under this Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
the term "Owner Participant" shall mean and include ____________________
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which _________________ (and its
permitted successors and assigns) is a member.
(xii) Income Tax. For purposes of this Section 7, the term Income
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or
22
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
copyright infringement; or (D) the offer, sale, holding, transfer or delivery of
the Loan Certificates or the Pass Through Certificates, whether before, on or
after the Delivery Date (the indemnity in this clause (D) to extend also to any
person who controls an Indemnitee, its successors, assigns, employees,
directors, officers, servants and agents within the meaning of Section 15 of the
Securities Act of 1933, as amended); or (E) the offer, holding, transfer or sale
of any interest in the Trust Estate or the Trust Agreement or any similar
interest (a) on or prior to the Delivery Date, or (b) subsequent to the Delivery
Date during the continuation of an Event of Default under the Lease or in
connection with the exercise by the Lessee of its purchase options under the
Lease or in connection with a refinancing pursuant to Section 17 hereof or in
connection with the termination of the Lease or action or direction of Lessee
pursuant to Sections 7, 8, 9, 10, or 19 thereof; provided, that the foregoing
indemnity shall not extend to any Expense to the extent resulting from or
arising out of one or more of the following: (1) any representation or warranty
by such Indemnitee in the Operative Documents or in any Pass Through Trust
Agreement being incorrect, or (2) the failure by such Indemnitee to perform or
observe any agreement, covenant or condition in any of the Operative Documents
or in any Pass Through Trust Agreement including, without limitation, the
creation or existence of a Lessor Lien (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens), or
(3) the willful misconduct or the gross negligence of such Indemnitee (other
than gross negligence imputed to such Indemnitee solely by reason of its
interest in the Aircraft), or (4) (A) in the case of such Indemnitee a
disposition (voluntary or involuntary) of all or any part of its interest in the
Airframe or any Engine, (B) in the case of a Certificate Holder a disposition
(voluntary or involuntary) by such Certificate Holder of all or any part of its
interest in any Loan Certificate or (C) in the case of any Indemnitee a
disposition by such Indemnitee of all or any part of such Indemnitee's interest
in the Operative Documents or the Pass Through Trust Agreements other than in
each of (A), (B) and (C) during the continuance of an Event of Default under the
Lease or pursuant to the exercise by the Lessee of its purchase options under
the Lease or in connection with a refinancing pursuant to Section 17 hereof or
in connection with the termination of the Lease or action or direction of Lessee
pursuant to Sections 7, 8, 9, 10 or 19 thereof, or (5) other than to the extent
provided in the succeeding paragraph, any Tax (as defined in Section 7(b)
hereof) whether or not Lessee is required to indemnify for such Tax pursuant to
Section 7(b) hereof (it being understood that Section 7(b) hereof and the Tax
Indemnity Agreement and provisions requiring payments to be made on an after-tax
basis or expressly providing for additional
23
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust Indenture any amounts received and
distributable by it thereunder to such Certificate Holder or a failure on the
part of any Pass Through Trustee to distribute in accordance with the applicable
Pass Through Trust Agreement any amounts received and distributable by such Pass
Through Trustee under such Pass Through Trust Agreement, or (8) other than
during the continuation of a Default or an Event of Default under the Lease the
authorization or giving or withholding of any future amendments, supplements,
waivers or consents with respect to any of the Operative Documents or any Pass
Through Trust Agreement unless such amendments, supplements, waivers or consents
(a) are requested by Lessee or (b) are required or permitted pursuant to the
terms of the Operative Documents (unless the same results from the actions of an
Indemnitee) (provided if Lessee is not responsible for the Expense associated
with such amendment, supplement, waiver or consent, the party requesting the
execution of the same shall be responsible for such expense), or (9) other than
to the extent provided in the succeeding paragraph any loss of tax benefits or
increase in tax liability under any tax law whether or not Lessee is required to
indemnify therefor pursuant to this Agreement or the Tax Indemnity Agreement (it
being understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
24
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing authority or governmental subdivision of
a foreign country, or any territory or possession of the United States or any
international authority, shall be equal to the excess, if any, of (A) the amount
of such Expense over (B) the current net reduction in Taxes actually required to
be paid by such recipient resulting from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use
25
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
reasonable efforts to obtain such severance), and (C) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to the
control of such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. Notwithstanding any of the foregoing to the contrary,
Lessee shall not be entitled to assume responsibility for and control of any
such judicial or administrative proceedings if (i) any Default under Section
14(a), (b), (f) or (g) of the Lease or an Event of Default under the Lease shall
have occurred and be continuing, (ii) if such proceedings will involve a
material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Lien) on, the Aircraft, the Trust Indenture Estate or
the Trust Estate or any part thereof unless Lessee shall have posted a bond or
other security reasonably satisfactory to the relevant Indemnitees in respect to
such risk or (iii) if such proceedings could, in the good faith opinion of the
Indemnitee entail any risk of criminal liability or any material risk of civil
liability (unless, in the case of such civil liability, Lessee has agreed to
indemnify against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
26
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee subsequently shall be
reimbursed in respect of such indemnified amount from any other person, such
Indemnitee shall, unless a Default under Section 14(a), (b), (d) (solely with
respect to Lessee's obligations under Section 7(a) or (b)(viii) of the Lease or
Section 8 of the Lease), (f) or (g) of the Lease or an Event of Default under
the Lease shall have occurred and be continuing, promptly pay Lessee but not
before Lessee shall have made all payments then due to such Indemnitee pursuant
to this Section 7(c) and any other payments then due under any of the Operative
Documents, an amount equal to the sum of (I) the amount of such reimbursement,
including interest received attributable thereto, net of taxes required to be
paid by such Indemnitee as a result of any reimbursement including interest
received attributable thereto and (II) any tax benefit actually realized by such
Indemnitee as a result of any payment by such Indemnitee made pursuant to this
sentence; provided, however, that in the case of any Indemnitee which is the
Owner Participant or any successor, assign or Affiliate of the Owner Participant
such amount attributable to (I) above shall not be in excess of the amount of
such Expense payment net of any amount paid in respect of Taxes required to be
paid by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee plus interest received, if any, from
the relevant taxing authority with respect to any such Expense payment, it being
intended that such Indemnitee shall realize a net benefit pursuant to this
Section 7(c) only if Lessee shall first have been reimbursed for any payments by
it to such Indemnitee pursuant to this Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent
27
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
appointed in accordance with Section 9.02(c) of the Trust Indenture) and each
Pass Through Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel) and, as provided in Section 6.07 of the Trust
Agreement, the Owner Trustee (including, but not limited to, the reasonable fees
and expenses of its counsel), in each case without cost, on a net after-tax
basis, to the Owner Participant, for acting as such, other than such fees and
expenses which constitute Transaction Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement 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 any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall
28
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
instruct the Indenture Trustee to, and Indenture Trustee shall, withhold as
provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure
29
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
to immediately comply with its obligations pursuant to the second sentence of
this Section 8(b) unless such failure is a result of such party's breach of its
obligations to cooperate set forth in the following sentence (including any
damages suffered by any such party (other than damages suffered by Lessee which
Lessee could have mitigated by taking reasonable steps (Lessee having no
obligation to restrict the use of the Aircraft to so mitigate)) at any time
after the fifth Business Day following the Owner Participant's having obtained
Actual Knowledge of such ineligibility or loss of citizenship). Each party
hereto agrees, upon the request and at the sole expense of the Owner
Participant, to reasonably cooperate with the Owner Participant in complying
with its obligations under the provisions of the second sentence of this Section
8(b) and such request shall not be subject to the indemnity contained in Section
7(c) hereof. State Street Bank and Trust Company in its individual capacity,
agrees that if at any time a responsible officer of State Street Bank and Trust
Company, shall obtain Actual Knowledge that State Street Bank and Trust Company
has ceased to be a Citizen of the United States, it will promptly resign as
Owner Trustee (if and so long as such citizenship is necessary under the Federal
Aviation Act as in effect at such time or, if it is not necessary, if and so
long as the Owner Trustee's citizenship would have any adverse effect on a
Certificate Holder, Lessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement. If the Owner Participant or State Street Bank and Trust
Company, in its individual capacity, does not comply with the requirements of
this Section 8(b), the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Certificate Holders hereby agree that a Default or an Event
of Default shall not have occurred and be continuing under the Lease due to
noncompliance by Lessee with the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
30
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or the United Kingdom, or (ii) upon 30 days' prior written notice in any
other country with which the United States maintains diplomatic relations at the
time of such request and the Owner Participant has not determined, acting
reasonably, that such other country would not provide substantially equivalent
protection for the rights of owner participants, lessors or lenders in similar
transactions as provided under United States laws, the Owner Participant will
not, in the case of either (i) or (ii), unreasonably withhold its consent to
such change of registration. In addition, such change of registration to a
country listed on Exhibit G shall be permitted only if such change will not
result in the imposition of, or increase the amount of, any Tax for which Lessee
is not required to indemnify or is not then willing to enter into a binding
agreement to indemnify, in a manner satisfactory in form and substance to the
indemnified party, each party referred to in clause (E) of paragraph (i) below.
The Owner Participant further agrees that the inability of Lessee to deliver to
the Owner Participant and, so long as the Lien of the Trust Indenture has not
been released, the Indenture Trustee, an opinion (reasonably satisfactory in
form and substance to the Owner Participant) of counsel reasonably acceptable to
the Owner Participant in such country listed on Exhibit G to the Lease to the
effect that the courts of such country would give effect to the Owner Trustee's
title to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit
31
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
G, and if said opinion is delivered, the Owner Participant will instruct the
Owner Trustee, and the Indenture Trustee, subject only to compliance with the
provisions of Section 7.02 of the Indenture, shall cooperate, to make such
change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional indemnities for which Lessee is then willing to enter into a
binding agreement to indemnify) in favor of the Owner Participant, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms
32
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(including, without limitation, the governing-law, service-of-process and
jurisdictional-submission provisions thereof) of the Lease and the Trust
Indenture are legal, valid, binding and enforceable in such jurisdiction,
(B) that it is not necessary for the Owner Participant, the Owner Trustee
or the Indenture Trustee to register or qualify to do business in such
jurisdiction, (C) that there is no tort liability of the owner of an
aircraft not in possession thereof under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner under
the laws of the United States or any state thereof (it being understood
that, in the event such latter opinion cannot be given in a form
satisfactory to the Owner Participant, such opinion shall be waived if
insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction payable in
currency freely convertible into Dollars for the loss of use of the
Aircraft in the event of the requisition by such government of such use or
title, and (E) to such further effect with respect to such other matters as
the Owner Trustee, in its individual capacity, or the Owner Participant may
reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's
33
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
request to change the registry of the Aircraft to, or to sublease the
Aircraft in, a country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval not already obtained of stockholders of the Owner
Participant or any approval or consent not already obtained of any trustee
or holders of any indebtedness or obligations of the Owner Participant, and
have been duly executed and delivered by the Owner Participant, and neither
the execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the terms
and provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to aviation or to the nature of the equipment owned by
the Owner Trustee, other than such laws, rules or regulations relating to
the citizenship requirements of the Owner Participant under applicable
aviation law) or contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien (other than Liens
provided for or otherwise permitted in the Operative Documents) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, corporate
charter, by-law or other agreement or instrument to which the Owner
Participant is a party or by which it or its properties may be bound or
34
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
affected (it being understood that no representation or warranty is made in
this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation 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, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be
35
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
necessary duly to discharge such Lessor Lien attributable to it and (iii) to
make restitution to the Trust Estate for any actual diminution of the assets of
the Trust Estate resulting from such Lessor Liens attributable to it. The Owner
Participant agrees to make restitution to the Trust Estate for any actual
diminution of the assets of the Trust Estate resulting from any Taxes or
Expenses (as such terms are defined in Section 7 hereof) imposed on the Trust
Estate against which Lessee is not required to indemnify the Trust Estate
pursuant to Section 7 hereof, but excluding Taxes or Expenses referred to in
Section 7(b)(ii)(5) and 7(b)(ii)(7) and excluding any diminution of the Trust
Estate attributable to or caused by State Street Bank and Trust Company in its
individual capacity; provided that if the Owner Participant shall make
restitution to the Trust Estate on account of any diminution of the Trust Estate
attributable to or caused by State Street Bank and Trust Company in its
individual capacity, then State Street Bank and Trust Company, in its individual
capacity, shall reimburse the Owner Participant for such amount together with
interest thereon at the Past Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is
36
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
in effect), each hereby waives to the fullest extent permitted by law the
benefit of the provisions of Section 1111(b) of Title 11 of the United States
Code with respect to recourse against the Owner Trustee (in its individual
capacity) and the Owner Participant on account of any amount payable as
principal of, Premium, if any, and interest on the Loan Certificates. If (i)
all or any part of the Trust Estate becomes the property of, or the Owner
Participant becomes, a debtor subject to the reorganization provisions of the
Bankruptcy Code or any successor provision, (ii) pursuant to such reorganization
provisions the Owner Trustee (in its individual capacity) or the Owner
Participant is required, by reason of the Owner Trustee (in its individual
capacity) or the Owner Participant being held to have recourse liability to a
Certificate Holder, a Pass Through Trustee or the Indenture Trustee, directly or
indirectly (other than the recourse liability of the Owner Participant under
this Participation Agreement), to make payment on account of any amount payable
as principal, Premium, if any, or interest on the Loan Certificates and (iii)
such Certificate Holder, such Pass Through Trustee or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects any
payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Certificate Holder, such
Pass Through Trustee or the Indenture Trustee, as the case may be, shall
promptly refund to the Owner Trustee or the Owner Participant (whichever shall
have made such payment) such Excess Payment. For purposes of this Section 8(j),
"Excess Payment" means the amount by which such payment exceeds the amount which
would have been received by such Certificate Holder, such Pass Through Trustee
or the Indenture Trustee if the Owner Trustee (in its individual capacity) or
the Owner Participant had not become subject to the recourse liability referred
to in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
any Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
37
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the
38
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or compensation received by a Pass Through Trustee for services
rendered in connection with the transactions contemplated by the respective
Pass Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
39
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined capital, surplus and undivided profits of at least
$75,000,000 or a corporation whose net worth is at least $75,000,000, (B) any
subsidiary of such a bank, financial institution or corporation, provided that
such bank, financial institution or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of Exhibit
C hereto with respect to the Owner Participant's obligations, in the case of the
Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other entity, provided such obligations are guaranteed by the transferor Owner
Participant; provided, however, that unless otherwise consented to by Lessee no
Transferee shall be an airline, a commercial air carrier, an air freight
forwarder, an entity engaged in the business of parcel transport by air or other
similar person or a corporation or other entity controlling, controlled by or
under common control with such an airline, a commercial air carrier, an air
freight forwarder, an entity engaged in the business of parcel transport by air
or other similar person. Each such transfer to a Transferee shall be subject to
the conditions that (M) upon
40
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
giving effect to such transfer, the Transferee is a Citizen of the United States
or the Transferee, at its sole cost and expense on an after-tax basis (including
any continuing costs of the voting trust), shall have entered into a voting
trust or similar arrangement which permits the registration of the Aircraft
under the Federal Aviation Act in the name of the Owner Trustee, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in the Trust Estate. Upon any such transfer by the Owner Participant
as above provided, (i) the Transferee shall be deemed the Owner Participant for
all purposes hereof and of the other Operative Documents and each reference
herein to the transferor Owner Participant shall thereafter be deemed for all
purposes to be to the Transferee and the transferor Owner Participant shall be
relieved of all obligations of the transferring Owner Participant under the
Owner Participant Documents arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in
41
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Aircraft. If the Owner Participant intends to transfer any of its interests
hereunder, it shall give prior written notice thereof as soon as practicable,
but in no event less than 10 days prior thereto, to the Indenture Trustee, the
Owner Trustee and Lessee, specifying the name and address of the proposed
Transferee. The Owner Participant shall pay all of the reasonable costs of the
other parties hereto, on a net after-tax basis, of any such transfer. For
purposes of this paragraph, "net worth" shall mean the excess of total tangible
assets over total liabilities, each to be determined in accordance with
generally accepted accounting principles consistently applied. Notwithstanding
anything contained in this Section 8(l) to the contrary, each of Lessee, the
Owner Trustee, the Indenture Trustee, the Pass Through Trustees and, by its
acceptance of a Loan Certificate, each Certificate Holder agrees that the Owner
Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777A Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 A) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between _____________
_____________ and the 777A Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company in its individual capacity
("SSBTC") represents and warrants that:
42
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant) has full right, power and
authority to enter into and perform its obligations as Owner Trustee
pursuant to the Trust Agreement under each of the other Owner Trustee
Documents;
(v) each of the Owner Trustee Documents has 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 Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
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;
43
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC;
(xi) no consent, approval, order or authorization of, giving of
notice to, or registration or filing with (including the filing of any
financing statement under Article 9 of the Uniform Commercial Code as in
effect in the Commonwealth of Massachusetts), or taking of any other action
in respect of, any Massachusetts Commonwealth or local governmental
authority or agency or any United States
44
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
federal governmental authority or agency regulating the banking or trust
powers of SSBTC is required for the execution and delivery of, or the
carrying out by, SSBTC or the Owner Trustee, as the case may be, of any of
the transactions contemplated by the Owner Trustee Documents or of any of
the transactions contemplated by any other of the Operative Documents to
which SSBTC or the Owner Trustee is or is to be a party, other than any
such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken (and other than the filing
of continuation statements required to be filed at periodic intervals under
Article 9 of the Uniform Commercial Code as in effect in the State of
Illinois and the Commonwealth of Massachusetts);
(xii) except for the filing of a financing statement in the
office of the Secretary of State of the Commonwealth of Massachusetts
naming the Owner Trustee as debtor and the Indenture Trustee as secured
party and describing the Trust Indenture Estate accurately and completely,
which financing statement has been duly filed, and the timely filing in the
future of continuation statements with respect to such financing statement,
no other filing is required in the Commonwealth of Massachusetts in order
to perfect the mortgage and security interests created by the Trust
Indenture; and
(xiii) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the case may be, to
perform its obligations under any of the Owner Trustee Documents or any
other documents executed by the Owner Trustee or SSBTC in connection with
the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner
45
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee, the Indenture Trustee, each Certificate Holder and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorney's fees and expenses of
each of such parties), (i) Lessee may elect to terminate the Lease and to
purchase the Aircraft pursuant to Section 19(b) of the Lease and that each of
such parties will execute and deliver appropriate documentation transferring all
right, title and interest in the Aircraft to Lessee (without recourse or
warranty except as to Lessor Liens (including for this purpose Liens that would
be Lessor Liens but for the proviso to the definition of Lessor Liens) with
respect to the Owner Participant) (including without limitation, such bills of
sale and other instruments and documents as Lessee shall reasonably request to
evidence (on the public record or otherwise) such transfer and the vesting of
all right, title and interest in and to the Aircraft in Lessee), and (ii)
Lessee, in connection with such purchase and may assume (and receive a credit in
an amount equal to the principal amount of the debt assumed against the purchase
price payable by Lessee pursuant to Section 19(b) of the Lease) the obligations
of the Owner Trustee pursuant to Section 7.03 of the Trust Indenture and the
Loan Certificates (and the Lease, to the extent that the Owner Trustee's
obligations thereunder are incorporated into the Trust Indenture or the Loan
Certificates), and Lessee shall confirm that its obligations under the Lease
shall be direct obligations to the Indenture Trustee as if set forth in the
Trust Indenture, and that each of the parties shall execute and deliver
appropriate documentation in form and substance reasonably satisfactory to such
parties under which Lessee will assume such obligations on the basis of full
recourse to Lessee, maintaining the security interest in the Aircraft created by
the Trust Indenture, releasing the Owner Participant and the Owner Trustee from
all future obligations in respect of the Loan Certificates, the Trust Indenture
and all other Operative Documents and all such other actions (including the
furnishing of legal opinions reasonably requested by any party) as are
reasonably necessary to permit such assumption by Lessee.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
46
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as
47
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Lessee herein and therein. No such conveyance, transfer or lease of
substantially all of the assets of Lessee as an entirety shall have the effect
of releasing Lessee or any successor corporation or Person which shall
theretofore have become such in the manner prescribed in this Section 8(s) from
its liability in respect of any Operative Document to which it is a party or any
Pass Through Trust Agreement. 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.
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through
48
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee to act within its own discretion), it shall not, without the prior
written consent of the Owner Trustee, direct the Indenture Trustee to take or
refrain from taking any action under the Trust Indenture that requires the
approval, waiver, authorization, direction or consent of, or notice from, the
Certificate Holders holding a specified percentage in principal amount of
Outstanding (as defined in the Trust Indenture) Loan Certificates unless such
Pass Through Trustee receives a Direction (as defined in the relevant Pass
Through Trust Agreement) to so direct the Indenture Trustee from Certificate
Holders (as defined in the relevant Pass Through Trust Agreement) holding the
same percentage of Certificates (as defined in the relevant Pass Through Trust
Agreement) evidencing Fractional Undivided Interests (as defined in the relevant
Pass Through Trust Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Loan Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that
Article X of each Pass Through Trust Agreement (to the extent relating to
the Certificates) shall not be amended without the prior written consent of
the Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
49
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate. Lessee
will apply such money to the payment of previously unclaimed payments with
respect to the Loan Certificates when and as claims for payment are made by the
Holders of such Loan Certificates. As compensation for its services pursuant to
this Section 8(z), Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust distributable at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion of
such fee then due and unpaid. Upon the date required by applicable law dealing
with unclaimed property, Lessee will distribute to the Owner Participant any
amount held by it pursuant to this Section 8(z) and not previously applied to
the payment of the Loan Certificates, after deducting therefrom any portion of
such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no material adverse impact upon the rights or interests of the
Owner Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
50
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture Trustee not to amend, supplement or
otherwise modify any provision of the Trust Agreement in a manner adversely
affecting such party without the prior written consent of such party.
Notwithstanding the foregoing, unless an Event of Default shall have occurred
and be continuing and so long as the Lease has not been terminated, the
Indenture Trustee and the Owner Participant hereby agree for the benefit of
Lessee that without the consent of Lessee they will not (and the Owner
Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name
51
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
of the Owner Trustee, except as otherwise required or permitted hereunder
or under the Lease, under the Federal Aviation Act or under the applicable
law of another permitted government of registry, or shall furnish to the
Owner Trustee such information as may be required to enable the Owner
Trustee to make application for such registration (at the expense of
Lessee, including, without limitation, reasonable attorney's fees and
expenses), and shall promptly furnish to the Owner Trustee such information
as may be required to enable the Owner Trustee to timely file any reports
required to be filed by it as the lessor under the Lease or as the owner of
the Aircraft with any governmental authority (including tax authorities).
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
third, the Trust Indenture, with the Trust Agreement and the Trust
Supplement attached, and fourth, the Lease, with the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or
52
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
certified mail), or by prepaid courier service, and shall be deemed to be given
for purposes of this Agreement on the day that such writing is delivered or
received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or (B) if to a subsequent Owner
Participant, addressed to such subsequent Owner Participant at such address as
such subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Certificate Holder, addressed to such
Certificate Holder at its address set forth in the Loan Certificate Register
maintained pursuant to Section 2.03 of the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
53
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall have received an opinion or opinions of counsel (reasonably satisfactory
to the Owner Participant) in scope, form and substance reasonably satisfactory
to the Owner Participant to the effect that (I) the trust, as thus removed,
shall remain a validly established trust, (II) any amendments to the Trust
Agreement necessitated by such removal shall have been duly authorized, executed
and delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
54
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
SECTION 15. Miscellaneous. (a) Each of the Participants and the
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the delivery or return of the
Aircraft, the transfer of any interest of the Owner Participant in the Trust
Estate or the Aircraft or any Engine or the transfer of any interest by any
Certificate Holder in any Loan Certificate or the Trust Indenture Estate and the
expiration or other termination of this Agreement or any other Operative
Document or any of the Pass Through Trust Agreements.
(c) This 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. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
55
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed to limit the exercise
and enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement, the other Operative Documents and the Pass Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
56
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay all invoices of Transaction
Expenses that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, in the event that the transactions contemplated
hereby shall not be consummated, Lessee shall pay all Transaction Expenses,
except that the fees, expenses and disbursements of the Owner Participant
(including those relating to its counsel) shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
failure of the Owner Participant to adhere to the terms and conditions set forth
in the term sheet relating to the transactions contemplated hereby agreed to by
Lessee and the Owner Participant or the terms and conditions set forth in the
letter dated January 14, 1993, as amended as of April 14, 1993, from the Owner
Participant (and, in the case of the amendment dated as of April 14, 1993, from
NCC FSC IV, Inc.) to Capstar Partners and agreed to by Lessee or to close after
all conditions precedent to the Owner Participant's funding of its Commitment
set forth herein have been satisfied. To the extent Transaction Expenses exceed
[_____%] of Lessor's Cost, the Lessee may, in lieu of electing an optimization
pursuant to Section 18 hereof, promptly reimburse the Owner Trustee or Owner
Participant, as appropriate, for all or a portion of the Transaction Expenses
described in clause (i)(5) and/or clause (vi) (excluding any debt placement fees
included in said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant
57
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
agrees to negotiate promptly in a commercially reasonable manner to conclude an
agreement with Lessee as to the terms of such refunding or refinancing
transaction (including the terms of any debt to be issued in connection with
such refunding or refinancing transaction and the documentation to be executed
in connection therewith), and if after such negotiation Lessee and the Owner
Participant shall have concluded an agreement with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage. Within ten Business Days of its receipt of
the Refinancing Certificate, Lessee may demand a verification pursuant to
Exhibit E to the Lease of the information set forth in the Refinancing
Certificate. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Refinancing Certificate or the determination
pursuant to such verification procedures of the revised Basic Rent, Excess
Amount, debt amortization, Stipulated Loss Value percentages, Termination
Value percentages, Special Termination Value percentages and EBO Percentage
and the Debt/Equity Ratio (such information, the "Refinancing Information")
the appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate
58
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
principal amount specified in the Refinancing Information, which amount
shall be at least equal to the aggregate principal amount of all Loan
Certificates outstanding on the Refinancing Date (such debt securities, the
"New Debt") and (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Loan Certificates on the Refinancing
Date and (B) pursuant to which the parties to the refinancing transaction
(including the Owner Participant and Lessee but excluding any public
holders of debt) make such representations, warranties and covenants as the
Owner Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value from and after the Refinancing Date shall be as provided
in the Refinancing Information;
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
59
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant to be disclosed in any
offering materials. Lessee shall have the right to purchase such debt
securities and apply such securities as a credit against its obligations to pay
Rent, provided that (x) in connection with such refunding or refinancing Lessee
shall have agreed to indemnify the Owner Participant with respect to such right
in a manner satisfactory to the Owner Participant, and (y) Lessee may not, at
any one time hold in the aggregate any such debt securities having a face value
in excess of that portion of the two next succeeding installments of Basic Rent
which is required to be paid to the holders of such debt securities on account
of principal and interest. Any trustee of public debt shall be a bank or trust
company having its principal place of business in the Borough of Manhattan, City
and State of New York, Chicago, Illinois, Hartford, Connecticut or Boston,
Massachusetts and having, or having a parent willing to guarantee the
obligations of such bank or trust company and 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 trustee upon reasonable or
customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any
60
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
refunding or refinancing transaction as contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and 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 and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to May 15, 2000.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
Date occurs other than on April 20, 1993 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost (it being
understood that Transaction Expenses equal to 1.00% of Lessor's Cost will be
deemed to have been paid on the Delivery Date with the remainder of such
Transaction Expenses not paid on the Delivery Date will be deemed to have been
paid on May 15, 1995), the Lessee may, pursuant to this Section 18 and in
accordance with the requirements of Section 3(c) of the Lease, optimize the
Basic Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value
61
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
62
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
63
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amended
and Restated Participation Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By: _______________________________
Vice President and Treasurer
______________________,
Owner Participant
By: _______________________________
Title: ____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: _______________________________
Title: ____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: _______________________________
Title: ____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By: _______________________________
Title: ____________________________
64
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail Overnight Delivery Service
- --------- --------------------------
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Treasurer Attn: Vice President and Treasurer
Telecopy: (708) 952-7117
Payment Address
---------------
Owner Participant:
- ----------------- The Chase Manhattan Bank, N.A.
New York, N.Y.
____________________ ABA #: 021000021
____________________
____________________ Account #: 910-2-499093
____________________ Account Name:
Reference: UAL/1993 747 A
Attn: __________________
Telecopy: ______________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture Trustee:
- -----------------
First Security Bank of Utah, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
<PAGE>
[First Amended and Restated
Participation Agreement (1993 747 A)]
SCHEDULE II
Commitments
-----------
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
First Security Bank of Utah, National
Association, in its capacity as Pass
Through Trustee under Pass Through
Trust Agreement 1995-A1
First Security Bank of Utah, National
Association, in its capacity as Pass
Through Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
____________________ $
Total Commitments: 100.00% $
================= ======= =
<PAGE>
Doc. No. 1.02
Aircraft N777UA
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(1995 777 A)
Dated as of May 1, 1995
Between
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly
provided herein, but solely as
Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
----------------------------
United Air Lines, Inc.
1995 777 A Equipment Trust
One Boeing 777-222 Aircraft
----------------------------
- --------------------------------------------------------------------------------
As set forth in Section 20 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and to
this Lease. To the extent, if any, that this Lease 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 may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
thereof.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Definitions................................. 1
SECTION 2. Acceptance and Lease........................ 17
SECTION 3. Term and Rent............................... 17
(a) Interim Term and Basic Term......... 17
(b) Basic Rent.......................... 17
(c) Adjustments to Basic Rent,
Excess Amount, Stipulated Loss
Values, Termination Values,
Special Termination Value
Percentages and the EBO
Percentage.......................... 17
(d) Supplemental Rent................... 20
(e) Payments in General................. 20
(f) [Intentionally Reserved for
Potential Future Use]............... 21
(g) Prepayments of Certain Rent
Payments............................ 21
SECTION 4. Lessor's Representations and
Warranties............................... 22
SECTION 5. Return of the Aircraft...................... 23
(a) Condition Upon Return............... 23
(b) Return of Other Engines............. 27
(c) Fuel and Manuals.................... 28
(d) Storage Upon Return................. 28
(e) Purchase of Engine.................. 29
(f) Severable Parts..................... 29
(g) Special Redelivery Provision........ 29
SECTION 6. Liens....................................... 30
SECTION 7. Registration, Maintenance and
Operation; Possession and
Subleases; Insignia...................... 30
(a) (1) Registration and
Maintenance........................ 31
(2) Operation...................... 32
(3) Reregistration................. 33
(4) Operating Certificates......... 33
(b) Possession and Subleases............ 33
(c) Insignia............................ 39
SECTION 8. Replacement and Pooling of Parts;
Alterations, Modifications and Additions................ 40
(a) Replacement of Parts................ 40
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(b) Pooling of Parts.................... 41
(c) Alterations, Modifications and
Additions........................... 41
SECTION 9. Early Termination........................... 43
(a) [Intentionally reserved for
potential future use]............... 43
(b) Termination for
Obsolescence/Surplus................ 43
(c) Sale of the Aircraft................ 43
(d) Termination as to Engines........... 46
SECTION 10. Loss, Destruction, Requisition, etc........ 46
(a) Event of Loss with Respect to
the Aircraft........................ 46
(b) Event of Loss with Respect to
an Engine........................... 50
(c) Application of Payments from
Governmental Authorities for
Requisition of Title, etc........... 52
(d) Requisition for Use of the
Aircraft by the United States
Government or Government of
Registry of the Aircraft............ 53
(e) Requisition for Use of an
Engine by the United States
Government or the Government
of Registry of the Aircraft......... 54
(f) Application of Payments During
Existence of Events of
Default............................. 54
SECTION 11. Insurance.................................. 55
(a) Public Liability and Property
Damage Insurance.................... 55
(b) Insurance Against Loss or
Damage to the Aircraft.............. 55
(c) Reports, etc........................ 57
(d) Self-Insurance...................... 59
(e) Additional Insurance by Lessor
and Lessee.......................... 59
(f) Indemnification by Government
in Lieu of Insurance................ 60
(g) Application of Payments During
Existence of Default................ 60
(h) Terms of Insurance Policies......... 60
SECTION 12. Inspection................................. 61
SECTION 13. Assignment................................. 63
SECTION 14. Events of Default.......................... 63
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 15. Remedies................................... 65
SECTION 16. Lessee's Cooperation Concerning
Certain Matters.......................... 69
SECTION 17. Notices.................................... 71
SECTION 18. Net Lease; No Set-Off, Counterclaim,
Etc...................................... 72
SECTION 19. Renewal Options; Purchase Options;
Valuation................................ 74
(a) Renewal Options..................... 74
(1) Fixed Renewal Terms............. 74
(2) Fair Market Renewal Term........ 75
(3) Waiver.......................... 75
(4) Conditions Precedent,
Payment of Basic Rent........... 75
(5) Termination Value;
Stipulated Loss Value........... 76
(b) Purchase Options.................... 76
(c) Valuation........................... 77
SECTION 20. Security for Lessor's Obligation to
Certificate Holders...................... 78
SECTION 21. Lessor's Right to Perform for Lessee....... 79
SECTION 22. Investment of Security Funds;
Liability of Lessor Limited.............. 80
(a) Investment of Security Funds........ 80
(b) Liability of Lessor Limited......... 81
SECTION 23. Miscellaneous.............................. 81
SECTION 24. Successor Trustee.......................... 81
SECTION 25. Bankruptcy................................. 82
</TABLE>
iii
<PAGE>
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent and Excess Amount Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Termination Value Schedule
EXHIBIT E Rent Recalculation and Indemnification Verification
EXHIBIT F Schedule of Countries Authorized for Domicile of Permitted
Sublessees
EXHIBIT G Schedule of Countries Authorized for Aircraft Registration
EXHIBIT H Lessor's Cost, Engine Cost, Commencement Date, Lease Expiry Date,
Stipulated Loss Value Date, EBO Date, EBO Percentage, Special
Purchase Option Dates and Special Termination Value Percentages
iv
<PAGE>
LEASE AGREEMENT (1995 777 A)
This LEASE AGREEMENT (1995 777 A), dated as of May 1, 1995, between
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (as defined in Section 1 hereof) (in such
capacity, "Lessor"), and UNITED AIR LINES, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware ("Lessee").
WITNESSETH:
SECTION 1. Definitions. Unless the context otherwise requires, the
-----------
following terms shall have the following meanings for all purposes of this Lease
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms herein defined:
"Acceptable Alternate Engine" means a Pratt & Whitney Model PW4084
engine or an engine of the same or another manufacturer of equivalent or greater
value and utility, and suitable for installation and use on the Airframe;
provided that such engine shall be of the same make, model and manufacturer as
the other engine installed on the Airframe and shall be an engine of a type then
being utilized by Lessee on other Boeing 777-222 aircraft operated by Lessee and
shall have been maintained, serviced, repaired and overhauled in substantially
the same manner as Lessee maintains, services, repairs and overhauls similar
engines utilized by Lessee and without in any way discriminating against such
engine.
"Actual Knowledge" means, (i) as it applies to the Owner Trustee or
Indenture Trustee, as the case may be, actual knowledge of a responsible officer
in the Trust Office, and (ii) as it applies to the Owner Participant, actual
knowledge of a Vice President or more senior officer of the Owner Participant or
other officer of the Owner Participant in each case having responsibility for
the transactions contemplated by the Operative Documents; provided that each of
the Owner Trustee, the Indenture Trustee and the Owner Participant shall be
deemed to have "Actual Knowledge" of any matter as to which it has been given
notice by any of Lessee, the Owner Participant, any Certificate Holder, the
Owner Trustee or the Indenture Trustee, such notice having been given pursuant
to and in accordance with Section 13(a) of the Participation Agreement.
"Additional Insured" means Lessor, in its individual capacity and as
owner of the Aircraft, the Indenture Trustee, the
<PAGE>
Owner Participant, Lessee in its capacity as sublessor under any Sublease, and,
so long as the Pass Through Trustees are Certificate Holders, each Pass Through
Trustee and each of their respective Affiliates, successors and permitted
assigns; and the respective directors, officers and employees of each of the
foregoing.
"Affiliate" means a Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under a common
control with, another Person, (ii) which beneficially owns or holds 10% or more
(by number of votes) of any class of voting securities of such other Person or
(iii) 10% or more (by number of votes) of the voting securities (or in the case
of a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by such other Person or a Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Aircraft" means the Airframe together with the two Engines whether or
not such Engines are installed on the Airframe or any other airframe.
"Airframe" means: (i) The Boeing Company Model 777-222 aircraft
(excluding Engines or engines from time to time installed thereon) specified by
United States Registration Number and Manufacturer's serial number in the Lease
Supplement; (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but where
title to which remains vested in Lessor in accordance herewith; and (iii) any
replacement airframe which may from time to time be substituted pursuant to
Section 10(a)(ii) hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time.
"Base Rate" means the rate of interest announced from time to time by
The First National Bank of Chicago at its principal office in Chicago, Illinois
as its "corporate base rate" (or its equivalent successor rate if the corporate
base rate is no longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(b) hereof, as adjusted as provided in Section
3(c) and, for a Renewal Term, Basic Rent determined pursuant to Section 19.
2
<PAGE>
"Basic Term" means the term for which the Aircraft is leased hereunder
pursuant to Section 3(a) hereof beginning on the Commencement Date and ending on
the Lease Expiry Date or such earlier date as this Lease may be terminated in
accordance with the terms hereof.
"Business Day" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in the City of
Chicago, Illinois; New York City, New York; the city and state in which the
principal place of business of the Owner Trustee is located; and, so long as any
Loan Certificate is outstanding, the city and state in which the Indenture
Trustee has its principal place of business and the city and state in which the
Indenture Trustee receives and disburses funds.
"Certificate Holder" has the meaning assigned to the term "Holder" in
the Trust Indenture.
"Certificated Air Carrier" means a Citizen of the United States
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning given such term in
Section 40102(a)(15) of Title 49 of the United States Code.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program administered by the United States Government pursuant to Executive Order
No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended through the
Delivery Date.
"Commencement Date" means the date specified as such in Exhibit H
hereto.
"Commitments" means the respective commitments of the Pass Through
Trustees and the Owner Participant to finance the Owner Trustee's payment of
Lessor's Cost for the Aircraft and "Commitment" means any one of the
Commitments.
"Consent and Agreement" means the Consent and Agreement (1995 777 A),
dated as of the date hereof, executed by the
3
<PAGE>
Manufacturer, as the same may be amended, modified or supplemented from time to
time in accordance with the applicable provisions thereof.
"Debt Rate" means the weighted average interest rate borne by the Loan
Certificates then outstanding.
"Default" means any event which with the giving of notice or the lapse
of time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement for the
Aircraft, which date shall be the date the Aircraft is leased by Lessor to
Lessee and accepted by Lessee hereunder.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"EBO Date" means the date specified as such in Exhibit H hereto.
"EBO Percentage" means the percentage specified as such in Exhibit H
hereto.
"EBO Price" has the meaning set forth in Section 19(b)(2) hereof.
"Engine" means (i) each of the two Pratt & Whitney Model PW4084
engines listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the Manufacturer's delivery to
Lessee of such Airframe, and whether or not from time to time thereafter
installed on such Airframe or any other airframe; (ii) any Acceptable Alternate
Engine which may from time to time be substituted for any of such two engines
pursuant to the terms hereof; and (iii) in either case, any and all Parts which
are from time to time incorporated or installed in or attached to any such
engine and any and all parts removed therefrom so long as title thereto remains
vested in Lessor in accordance herewith. The term "Engines" means, as of any
date of determination, all Engines then leased hereunder.
"Engine Cost" means the amount specified as Engine Cost in Exhibit H
hereto.
"Event of Default" has the meaning specified in Section 14
hereof.
4
<PAGE>
"Event of Loss" with respect to the Aircraft, Airframe or any Engine
means any of the following events with respect to such property: (i) the loss
of such property or of the use thereof due to the destruction of or damage to
such property which renders repair uneconomic or which renders such property
permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or compromised
total loss; (iii) the theft or disappearance of such property, or the
confiscation, condemnation, or seizure of, or requisition of title to, or use
of, such property by any governmental or purported governmental authority (other
than a requisition for use by the United States Government or any government of
registry of the Aircraft or any agency or instrumentality thereof), which in the
case of any event referred to in this clause (iii) shall have resulted in the
loss of title or possession of such property by Lessee for a period in excess of
90 consecutive days or, if earlier, until the end of the Term; (iv) as a result
of any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, use of such property in the normal course of the business of air
transportation shall have been prohibited for a period in excess of 180
consecutive days, unless (A) such grounding is applicable to all Boeing 777-222
aircraft registered in such country, (B) Lessee, prior to the expiration of such
180 day period, shall have undertaken and shall be diligently carrying forward,
in a manner that does not discriminate against the Aircraft, all steps which are
necessary or desirable to permit the normal use of such property by Lessee, and
(C) Lessee, within one year from the time of grounding shall have conformed at
least one such aircraft in its fleet to the requirements of any such law, rule,
regulation, order or other action and commenced regular commercial use of the
same in such jurisdiction, provided that no such grounding shall extend beyond
the expiration of the Term; (v) the requisition for use by the United States
Government or any government of registry of the Aircraft or any instrumentality
or agency thereof, which shall have occurred during the Basic Term (or the
Interim Term or any Renewal Term) and shall have, in the case of any government
of registry of the Aircraft (other than the United States Government or any
agency or instrumentality thereof) or any agency or instrumentality thereof,
continued for more than two years (or if earlier, until the end of the Term),
and in the case of the United States Government or any agency or instrumentality
thereof shall have continued for a period that extends beyond the Term and
Lessor shall not have furnished the written notice specified in Section 10(d)
hereof; (vi) the operation of or location of the Aircraft, while under
requisition for use by any government, in any area excluded from coverage by any
insurance policy in effect
5
<PAGE>
with respect to the Aircraft required by the terms of Section 11, unless in the
case of a requisition by the government of the United States or any agency or
instrumentality thereof, Lessee shall have obtained an indemnity in lieu thereof
from such government; and (vii) any divestiture of title to an Engine treated as
an Event of Loss pursuant to Section 7(b) hereof. An Event of Loss with respect
to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.
"Excess Amount" for the Commencement Date means the amount determined
by multiplying Lessor's Cost by the percentage specified in Exhibit B hereto
opposite the Commencement Date (as such Exhibit B may be adjusted from time to
time as provided in Section 3(c) hereof).
"Excluded Payments" has the meaning set forth in the Trust Indenture.
"Expenses" means any and all liabilities, obligations, losses,
damages, penalties, claims (including, but not limited to, negligence, strict or
absolute liability, liability in tort and liabilities arising out of violation
of laws or regulatory requirements of any kind), actions, suits, costs, expenses
and disbursements (including reasonable legal fees and expenses and, to the
extent not required to be paid by the Owner Trustee pursuant to Section 16 of
the Participation Agreement, Transaction Expenses, and all costs and expenses
relating to amendments, supplements, waivers and consents to and under the
Operative Documents, any amounts that would be included in Premium, but
excluding internal costs and expenses such as salaries, and overhead of
whatsoever kind and nature).
"Fair Market Rental Value" means the fair market rental value
determined as provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value determined
as provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Act" means the sections of Title 49 of the
United States Code relating to aviation, as amended.
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any successor agency or agencies thereto.
"Indemnitees" means the Owner Participant, the Owner Trustee, in its
individual capacity and as trustee under the Trust Agreement, the Trust Estate,
the Trust Indenture Estate, the Indenture Trustee, in its individual capacity
and as trustee
6
<PAGE>
under the Trust Indenture, each Pass Through Trustee (so long as the Pass
Through Trustees are Certificate Holders), and each of their respective
Affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents.
"Indenture Trustee" has the meaning set forth in the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement, the
Trust Indenture, each Pass Through Trust Agreement, each Pass Through Trust
Supplement, each Loan Certificate and each Pass Through Certificate and any
other document executed by the Indenture Trustee or the Pass Through Trustee in
connection with the transactions contemplated by the Operative Documents.
"Interim Term" means the period commencing on the Delivery Date and
ending on and including the day immediately preceding the Commencement Date,
unless earlier terminated in accordance with the provisions hereof.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby", or other like words mean
this Lease Agreement as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions hereof and the terms
of the Trust Indenture, including, without limitation, supplementation hereof by
any Lease Supplement entered into in accordance with the applicable provisions
hereof and the terms of the Trust Indenture.
"Lease Expiry Date" means the date specified as such in Exhibit H.
"Lease Period" means each of the consecutive semi-annual periods
throughout the Basic Term and any Renewal Term ending on a Lease Period Date,
the first such period commencing on and including the Commencement Date.
"Lease Period Date" means April 19, 1996 and each succeeding semi-
annual anniversary thereof to and including the last such date in the Term.
"Lease Supplement" means a Lease Supplement (1995 777 A),
substantially in the form of Exhibit A hereto, to be entered into between Lessor
and Lessee on the Delivery Date for the purpose of leasing the Aircraft under
and pursuant to the terms of this Lease Agreement, and any subsequent Lease
Supplement entered into in accordance with the terms hereof and the terms of the
Trust Indenture.
7
<PAGE>
"Lessee Documents" means the Participation Agreement, the Lease, any
Lease Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's FAA Bill of Sale, the Owner Trustee's Bill of
Sale, the Tax Indemnity Agreement, each Pass Through Trust Agreement, each Pass
Through Trust Agreement Supplement and any other document executed by Lessee in
connection with the transactions contemplated by the Operative Documents.
"Lessor Liens" means any Lien on, or disposition of title to, the
Aircraft or the Trust Estate arising as a result of (i) claims against Lessor,
State Street Bank and Trust Company, in its individual capacity, or the Owner
Participant not related to the transactions contemplated by the Operative
Documents, (ii) any act or omission of the Owner Participant, Lessor, or State
Street Bank and Trust Company, in its individual capacity, which is not related
to the transactions contemplated by the Operative Documents or is in violation
of any of the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or State Street Bank and Trust Company, in its individual
capacity, with respect to Taxes or Expenses against which Lessee is not required
to indemnify the Owner Participant, Lessor or State Street Bank and Trust
Company, in its individual capacity or (iv) claims against Lessor or the Owner
Participant arising out of any transfer by Lessor or the Owner Participant of
all or any portion of the respective interests of Lessor or the Owner
Participant in the Aircraft, the Trust Estate or the Operative Documents (other
than a transfer of possession of the Aircraft by Lessor pursuant to this
Agreement, a transfer pursuant to the Trust Indenture (other than a transfer
pursuant to Article 8 of the Trust Indenture not attributable to a Lease Event
of Default) or a transfer pursuant to Section 7, 8, 9, 10 or 19 hereof, pursuant
to Section 17 of the Participation Agreement or pursuant to the exercise of the
remedies set forth in Section 15 hereof); provided, however, that any Lien which
is attributable solely to State Street Bank and Trust Company or the Owner
Participant and would otherwise constitute a Lessor Lien hereunder shall not
constitute a Lessor Lien hereunder so long as (1) the existence of such Lien
poses no material risk of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (2) the existence of such Lien does not
interfere in any way with the use or operation of the Aircraft by Lessee (or any
Sublessee), (3) the existence of such Lien does not affect the priority or
perfection of, or otherwise jeopardize, the Lien of the Trust Indenture, (4)
State Street Bank and Trust Company or the Owner Participant, as the case may
be, is diligently contesting such Lien by appropriate proceeding and (5) the
existence of such Lien does not result in actual interruption in the payment of
Rent assigned to the Indenture Trustee for the benefit of the Certificate
Holders.
8
<PAGE>
"Lessor's Cost" for the Aircraft means the amount specified as
Lessor's Cost in Exhibit H hereto; provided, however, Lessor's Cost shall be
reduced by Engine Cost for each Engine for which Lessee has paid Stipulated Loss
Value pursuant to the terms of Section 10(b) hereof and has otherwise paid all
other amounts due and payable under said Section 10(b).
"Lien" means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest.
"Loan Certificate" has the meaning assigned to the term "Certificate"
in the Trust Indenture.
"Loss Payment Date" has the meaning set forth in Section 10(a) hereof.
"Manufacturer" means The Boeing Company, a Delaware corporation, and
its subsidiaries, successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the Consent and
Agreement and any other document executed by the Manufacturer in connection with
the transactions contemplated by the Operative Documents.
"Net Economic Return" means the Owner Participant's net after-tax book
yield, aggregate after-tax cash flow and, with respect to any adjustments
required to maintain the Owner Participant's Net Economic Return, periodic FASB
13 earnings plus or minus 5% for any annual period, utilizing the multiple
investment sinking fund method of analysis, computed on the basis of the same
methodology and assumptions as were utilized by the Owner Participant in
determining Basic Rent, Stipulated Loss Value percentages, Special Termination
Value Percentages, EBO Percentage and Termination Value percentages as of the
Delivery Date, as such assumptions may be revised from time to time for events
which have been the basis for adjustments to Rent pursuant to Section 3(c)
hereof, provided that under no circumstances shall there be a reduction in Owner
Participant's 1995 FASB 13 earnings.
"Net Present Value of Rents" means the net present value, as of the
Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted at a rate
per Lease Period equal to (a) 11% per annum divided by (b) the number of Lease
Periods per year.
"Operative Documents" means the Lease (including any Lease
Supplement); the Participation Agreement; the Tax Indemnity Agreement; the Trust
Agreement; any Trust Supplement; the Purchase Agreement; the Owner Trustee's
Bill of Sale; the Owner
9
<PAGE>
Trustee's FAA Bill of Sale; the Owner Trustee's Purchase Agreement; an
acceptance certificate covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate"); the Trust Indenture; the
Loan Certificates outstanding at the time of reference; and the Consent and
Agreement.
"Original Amount", with respect to a Loan Certificate, means at any
time prior to the Commencement Date, the Original Issue Price (as defined in the
Trust Indenture) of such Loan Certificate, or, at any time on or after the
Commencement Date, the stated original principal amount of such Loan
Certificate, and with respect to all Loan Certificates means, at any time prior
to the Commencement Date, the aggregate Original Issue Prices for such Loan
Certificates or, at any time on or after the Commencement Date, the aggregate
stated original principal amounts of such Loan Certificates.
"Owner Participant" means the Person executing the Participation
Agreement as the Owner Participant and any Person to which such Person transfers
all or any portion of its right, title and interest in and to the Trust
Agreement, the Trust Estate and the Participation Agreement, to the extent
permitted thereby.
"Owner Participant Documents" means the Participation Agreement, the
Trust Agreement, the Tax Indemnity Agreement and any other document executed by
the Owner Participant in connection with the transactions contemplated by the
Operative Documents.
"Owner Participant Parent" means ____________________, a Delaware
corporation.
"Owner Participant Parent Guaranty" means the guaranty, dated the
Delivery Date, by the Owner Participant Parent in favor of Lessee, the Pass
Through Trustees, and certain other parties, of certain obligations of the Owner
Participant, as the same may be amended or modified in compliance with the
provisions thereof.
"Owner Trustee" means the Person executing the Participation Agreement
as Owner Trustee and any Person appointed as successor Owner Trustee in each
case not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the Trust
Agreement, this Lease, any Lease Supplement, the Owner Trustee's Purchase
Agreement, the Trust Indenture, any Trust Supplement, the Loan Certificates and
any other document
10
<PAGE>
executed by the Owner Trustee in connection with the transactions contemplated
by the Operative Documents.
"Owner Trustee's Bill of Sale" means a bill of sale for the Aircraft,
dated the Delivery Date, executed by Lessee in favor of Lessor in form and
substance satisfactory to Lessor.
"Owner Trustee's FAA Bill of Sale" means a bill of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Delivery Date executed by Lessee in favor of Lessor in form and substance
satisfactory to Lessor.
"Owner Trustee's Purchase Agreement" means the Owner Trustee's
Purchase Agreement and Assignment (1995 777 A), dated as of the date hereof,
between Lessee and the Owner Trustee, as the same may be amended, modified or
supplemented from time to time in accordance with the applicable provisions
thereof and the terms of the Trust Indenture.
"Participants" means and includes the Pass Through Trustees and the
Owner Participant.
"Participation Agreement" means that certain Participation Agreement
(1995 777 A), dated as of the date hereof, among Lessee, the Indenture Trustee,
the Owner Participant, the Pass Through Trustees and the Owner Trustee, as such
Participation Agreement may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to an Airframe or any Engine or which have been removed
therefrom, but where title to which remains vested in Lessor in accordance with
Section 8 hereof.
"Pass Through Certificates" has the meaning set forth in the Trust
Indenture.
"Pass Through Trust Agreements" means the Pass Through Trust Agreement
dated as of February 1, 1992, as amended and restated as of May 1, 1995, in each
case between the Lessee and State Street Bank and Trust Company of Connecticut,
National Association, as supplemented by each of the two Pass Through Trust
Supplements, in each case between the Lessee and the Pass Through Trustee, and
as the same may be further modified, amended or supplemented pursuant to the
applicable provisions thereof and the Participation Agreement.
11
<PAGE>
"Pass Through Trustee" shall mean First Security Bank of Utah,
National Association, a national banking association, in its capacity as Trustee
under each Pass Through Trust Agreement, and each other Person which may from
time to time be acting as successor trustee under any such Pass Through Trust
Agreement.
"Pass Through Trust Supplement" means each of the two separate Trust
Supplements Nos. 1995-A1 and 1995-A2, in each case dated as of May __, 1995
between Lessee and the Pass Through Trustee.
"Past Due Rate" means (i) with respect to the portion of any payment
of Rent that may be required by the Trust Indenture to be paid by the Indenture
Trustee to any Certificate Holder, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of any payment of Rent
(and the entire amount of any payment of Rent after the satisfaction and
discharge of the Trust Indenture), a fluctuating rate per annum equal to 2% over
the Debt Rate.
"Permitted Lien" means any Lien referred to in clauses (i) through
(vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled in a country
listed in Exhibit F hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Premium" has the meaning assigned to the term in Section 6.01(b) of
the Trust Indenture.
"Prepaid Rent" has the meaning set forth in Section 3(g) hereof.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
"Redemption Date" has the meaning set forth in the Trust Indenture.
"Reimbursement Amount" has the meaning set forth in Section 3(g)
hereof.
12
<PAGE>
"Renewal Term" means the Fair Market Renewal Term or a Fixed Renewal
Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Replacement Airframe" means any airframe substituted for an airframe
in accordance with Sections 10(a) of the Lease.
"Replacement Engine" means any engine substituted for an Engine in
accordance with Sections 9(d), 10(a) or 10(b) of the Lease.
"Restricted Country" has the meaning set forth on Exhibits F and G
hereto.
"Restricted Period" means the period ending on the last open day of
the calendar year in which there occurs the seventh anniversary of the Delivery
Date.
"Special Purchase Option Dates" means each of the dates specified as
such on Exhibit H hereto.
"Special Termination Value", with respect to any Special Purchase
Option Date, has the meaning set forth in Section 19(b)(1) hereof.
"Special Termination Value Percentage" means, with respect to any
Special Purchase Option Date, the percentage set forth opposite such Date on
Exhibit H hereto.
"Stipulated Loss Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term, means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount of Stipulated Loss Value is determined (as such
Exhibit C may be adjusted from time to time as provided in Section 3(c) hereof
and in Section 8 of the Tax Indemnity Agreement). "Stipulated Loss Value" with
respect to the Aircraft, as of any date during any Renewal Term, shall be the
amount determined as provided in Section 19 hereof. To the extent that an event
giving rise to an obligation to pay any Stipulated Loss Value occurs (with
respect to the Airframe or either Engine), and the actual date on which the loss
of tax benefits resulting from such event occurs shall be earlier or later than
the date assumed in calculating the United States Federal income tax
consequences reflected in the applicable Stipulated Loss Value, such Stipulated
Loss Value shall be appropriately adjusted upwards or downwards to reflect
13
<PAGE>
the actual date of such loss of tax benefits, but shall be otherwise based on
the original assumptions used in determining such Stipulated Loss Value.
"Stipulated Loss Value Date" has the meaning specified therefore in
Exhibit H hereto.
"Sublease" means any sublease permitted by the terms of Section
7(b)(viii) hereof.
"Sublessee" means any Person for so long, but only so long, as such
Person is in possession of the Airframe and or any Engine pursuant to the terms
of a Sublease which is then in effect pursuant to Section 7(b)(viii) hereof.
"Subsidiary" means, with respect to any Person that is a corporation,
any other corporation a majority of the voting securities of which are owned by
such person, whether directly or indirectly.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay to Lessor or
others hereunder or under any of the other Operative Documents, including
payments of Stipulated Loss Value and Termination Value and amounts calculated
by reference thereto, an amount equal to the Premium, if any, payable in
accordance with Section 3(d) hereof and indemnity payments. The parties
acknowledge that Supplemental Rent is a general category and, accordingly, agree
that any provision of any Operative Document which calls for the payment of
Supplemental Rent and also calls for the payment of specific items which are
includable in Supplemental Rent is not to be interpreted as requiring any double
payment.
"Tax Indemnity Agreement" means that certain Tax Indemnity Agreement
(1995 777 A), dated as of the date hereof, between the Owner Participant and
Lessee, as originally executed or as modified, amended or supplemented pursuant
to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes), licenses, levies,
imposts, duties, recording charges or fees, charges, assessments, or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon (each, individually, a "Tax").
14
<PAGE>
"Term" means the Interim Term, Basic Term and, if actually entered
into, any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(b) hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term means the amount determined
by multiplying Lessor's Cost for the Aircraft by the percentage specified in
Exhibit D hereto opposite the Termination Date with respect to which the amount
of Termination Value is determined (as such Exhibit D may be adjusted from time
to time as provided in Section 3(c) hereof and in Section 8 of the Tax Indemnity
Agreement). To the extent that an event giving rise to an obligation to pay any
Termination Value occurs, and the actual date on which the loss of tax benefits
resulting from such event occurs shall be earlier or later than the date assumed
in calculating the United States Federal income tax consequences reflected in
the applicable Termination Value, such Termination Value shall be appropriately
adjusted upwards or downwards to reflect the actual date of such loss of tax
benefits, but shall be otherwise based on the original assumptions used in
determining such Termination Value.
"Transaction Expenses" means (i) the reasonable and actual fees,
expenses and disbursements of (1) Ray, Quinney & Nebeker, special counsel for
the Indenture Trustee and the Pass Through Trustee, (2) Bingham, Dana & Gould,
counsel for the Owner Trustee, (3) Crowe & Dunlevy, P.C., special counsel in
Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel for the
underwriters (to the extent not payable by the underwriters), (5) Vedder, Price,
Kaufman & Kammholz, special counsel for Lessee, and (6) Dewey Ballantine,
special counsel for the Owner Participant, (ii) all fees, taxes and other
charges payable in connection with the recording or filing of instruments and
financing statements, (iii) the initial fee and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement, (iv) the initial
fee and reasonable and actual disbursements of the Indenture Trustee under the
Trust Indenture, (v) the fee of BK Associates (or of such other appraiser as
shall be selected by the Owner Participant) with respect to the appraisal of the
Aircraft required on or before the Delivery Date pursuant to Section 4(a) of the
Participation Agreement, (vi) the fees, commissions and expenses of Capstar
Partners, Inc., (vii) the reasonable out-of-pocket expenses of the Owner
Participant relating to the transactions contemplated by the Participation
Agreement including, without limitation, the expenses related to the
organization of the foreign sales corporation, as well as those transactions
relating to the investment by the Owner Participant in the second quarter of
1995 in one Boeing 777-222
15
<PAGE>
aircraft to be operated by the Lessee up to an aggregate of $25,000 (but
excluding from Transaction Expenses airfare charges incurred for travel on an
airline other than United Air Lines, unless such travel is necessitated by the
foreign sales corporation structure to the extent that United Air Lines does not
offer regularly scheduled flights directly from New York to such foreign
location where negotiations with respect to the transactions will be conducted
for purposes of the foreign sales corporation nature of the transactions) plus
airfare charges incurred for travel on United Air Lines, (viii) the placement or
underwriting fees, commissions and expenses, if any, in placing the debt
contemplated by the Participation Agreement and all costs and expenses
associated with the public offering pursuant thereto and the actual expenses of
each Pass Through Trustee under its respective Pass Through Trust Agreement and
(ix) printing and distribution costs.
"Trust Agreement" means that certain Trust Agreement (1995 777 A),
dated as of the date hereof, between the Owner Participant and State Street Bank
and Trust Company, in its individual capacity, as originally executed or as
modified, amended or supplemented in accordance with the applicable provisions
thereof and the terms of the Trust Indenture, including, without limitation, any
Trust Supplement entered into pursuant to the applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Mortgage
(1995 777 A), dated as of the date hereof, between Lessor and the Indenture
Trustee, as originally executed or as modified, amended or supplemented in
accordance with the provisions thereof and the terms of the Participation
Agreement, including, without limitation, any Trust Supplement entered into
pursuant to the applicable provisions thereof.
"Trust Indenture Estate" has the meaning assigned to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning set forth in the Trust Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and the
Trust Indenture, substantially in the form of Exhibit A to the Trust Agreement.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to Section 44102 of the Federal
Aviation Act, and as to which there
16
<PAGE>
is in force an air carrier operating certificate issued pursuant to Part 121 of
the regulations under such Act, or which may operate as an air carrier by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which such Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Federal Aviation Act (or if the Aircraft is not
registered in the United States, all certificates and licenses required by the
laws of the jurisdiction of registry) for the performance by such employees of
similar functions within the United States of America (or such jurisdiction of
registry) (it is understood that cabin attendants need not be employees of
Lessee) and (ii) shall be maintained by Lessee in accordance with its normal
maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees to accept from
--------------------
the Lessee the transfer of title to and simultaneously to lease to Lessee
hereunder, and Lessee hereby agrees to lease on the Delivery Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees that Lessor will
authorize one or more employees of Lessee, designated by Lessee in writing, as
the authorized representative or representatives of Lessor to accept delivery of
the Aircraft. Lessee hereby agrees that in the event delivery of the Aircraft
shall be accepted by an employee or employees of Lessee pursuant to such
authorization by Lessor, such acceptance of delivery by such employee or
employees on behalf of Lessor shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease.
SECTION 3. Term and Rent. (a) Interim Term and Basic Term. The
------------- ---------------------------
Interim Term shall commence on the Delivery Date and end on and include the day
immediately preceding the Commencement Date unless earlier terminated pursuant
to the provisions hereof. The Basic Term shall commence on the Commencement
Date and end on the Lease Expiry Date or such earlier date as this Lease may be
terminated in accordance with the provisions hereof.
(b) Basic Rent. Lessee shall pay Basic Rent in Dollars with respect
----------
to each Lease Period during the Basic Term on each Lease Period Date during the
Basic Term, in the respective amounts for each Lease Period Date determined in
accordance with Exhibit B hereto.
17
<PAGE>
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss Values,
-----------------------------------------------------------------
Termination Values, Special Termination Value Percentages and the EBO
- ---------------------------------------------------------------------
Percentage.
- -----------
(i) In the event that (A) Transaction Expenses paid by Lessor are
determined to be other than __% of Lessor's Cost, (B) there shall be an
optional redemption or a refinancing or a refunding of the Loan
Certificates in accordance with Section 17 of the Participation Agreement,
(C) the Delivery Date occurs other than on May 15, 1995, or (D) there is an
optimization in accordance with Section 18 of the Participation Agreement;
then in each case the Basic Rent and Excess Amount set forth in Exhibit B,
the Stipulated Loss Value percentages set forth in Exhibit C, the
Termination Value percentages set forth in Exhibit D, and the EBO
Percentage and the Special Termination Value Percentages set forth in
Exhibit H shall be adjusted (upwards or downwards as the case may be) using
the same methods and assumptions (as modified on account of the occurrence
of any of the events referred to in clauses (A)-(D)) used to calculate the
Basic Rent and Excess Amount, the Stipulated Loss Value percentages, the
Termination Value percentages and the EBO Percentage and the Special
Termination Value Percentages set forth in Exhibits B, C, D and H,
respectively, in each case in compliance with clauses (iv) and (v) of this
paragraph (c) and in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to Lessee
to the extent possible consistent with clause (1) hereof; provided,
--------
however, in no event will the EBO Price be adjusted below the greatest of
-------
(i) the Termination Value for the Aircraft as of the EBO Date, (ii) __% of
Lessor's Cost (i.e., the fair market value of the Aircraft as of the EBO
Date as the same was determined on the Delivery Date) and (iii) __%
multiplied by the present value as of the EBO Date of (x) the remaining
Basic Rent plus (y) __% of Lessor's Cost (i.e., the fair market value of
the Aircraft as of the end of the Term as the same was determined on the
Delivery Date) (the present value calculation described in this clause
(iii) shall utilize a semi-annual discount rate that on a compound basis is
equal to ___% per annum).
(ii) [Intentionally reserved for potential future use.]
(iii) Any recalculation of Basic Rent and Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, EBO
Percentage and Special Termination Value Percentages pursuant to this
Section 3(c) (or pursuant to the definition of Stipulated Loss Value or
Termination
18
<PAGE>
Value) shall be determined by the Owner Participant and shall be subject to
the verification procedures set forth in Exhibit E hereto. Such
recalculated Basic Rent and Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, EBO Percentage and Special
Termination Value Percentages shall be set forth in an amendment hereto.
(iv) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic Rent
payable hereunder, whether or not adjusted in accordance with this Section
3(c), together with the amount of Excess Amount and Supplemental Rent, if
any, in respect of the date on which such installment is payable, and each
payment of Termination Value, Stipulated Loss Value, EBO Price and Special
Termination Value whether or not adjusted in accordance with this Section
3(c) or Section 8 of the Tax Indemnity Agreement, and all other amounts
(excluding Excluded Payments payable simultaneously by Lessee pursuant to
this Lease), in each case, on the date on which such payment is due, shall
be in an amount at least sufficient to pay in full, and shall be available
to be applied by Lessor in payment on account of, any payments then
required to be made on account of the principal amount (and Premium, if
any) of and interest on the Loan Certificates then outstanding. It is
agreed that no installment of Basic Rent or payment of Excess Amount,
Termination Value, Stipulated Loss Value, Special Termination Value or EBO
Price, shall be increased or adjusted by reason of (A) any attachment or
diversion of Rent on account of (x) Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) or (y) any other Lien on or against the Trust
Estate, any part thereof or the Operative Documents arising as a result of
claims against the Indenture Trustee or a Certificate Holder, not related
to the transactions contemplated by the Operative Documents, (B) any
modification of the payment terms of the Loan Certificates made without the
prior written consent of Lessee, or (C) the acceleration of any Loan
Certificate due to the occurrence of an "Event of Default" (as defined in
the Trust Indenture) which does not constitute an Event of Default
hereunder.
(v) All adjustments to Basic Rent under this Section 3(c) shall
be consistent with the requirements of Sections 4.02(5), 4.07(1) and (2)
and Section 4.08(1) of Rev. Proc. 75-28 (provided that the requirements of
Section 4.08(1) shall apply on a prospective basis), as modified and in
effect on the Delivery Date, and shall not cause the Lease to be a
"disqualified leaseback or long-term
19
<PAGE>
agreement" within the meaning of Section 467 of the Code as then in effect
and any final, temporary or proposed regulations thereunder or any
administrative or judicial interpretation thereof in effect on the date of
such adjustment (a "Section 467 Agreement") (it being understood that any
such adjustment shall not be treated as causing the Lease to be a Section
467 Agreement to the extent the Lease would have been a Section 467
Agreement if no such adjustment to Basic Rent had occurred).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid)
-----------------
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value, Termination Value, EBO
Price and Special Termination Values as the same shall become due and owing and
all other amounts of Supplemental Rent within five Business Days after demand or
on such date, or within such other relevant period, as may be provided in any
Operative Document, and in the event of any failure on the part of Lessee to pay
any Supplemental Rent when due, Lessor shall have all rights, powers and
remedies provided for herein or in any other Operative Document or by law or
equity or otherwise in the case of nonpayment of Basic Rent. Lessee shall also
pay on behalf of Lessor as Supplemental Rent an amount equal to any amount
payable by Lessor as Premium as and when any such Premium shall be due and
payable; provided, however, that Lessee shall have no obligation to pay on
behalf of Lessor any Premium payable under Section 6.01 or 6.02 of the Trust
Indenture due to the occurrence of an "Event of Default" (as defined in the
Trust Indenture) which does not constitute an Event of Default hereunder.
Lessee also will pay to Lessor, or on behalf of Lessor to whomsoever shall be
entitled thereto, on demand, as Supplemental Rent, to the extent permitted by
applicable law, interest at the Past Due Rate with respect to any part of any
installment of Basic Rent not paid prior to 11:00 a.m., New York City time, on
the date when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid prior to 11:00 a.m., New York City time,
on the date when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent other than Excluded
-------------------
Payments payable to Lessor shall be made directly by Lessee by wire transfer of
immediately available funds prior to 11:00 a.m., New York time, on the date of
payment in Dollars, to Lessor at its office at 225 Franklin Street, Boston,
Massachusetts 02110, Attention: _________________________ (or such other office
of Lessor in the continental United States or such other account as Lessor shall
direct in a notice to Lessee at least 10 Business Days prior to the date such
payment of Rent is due); provided, that so long as the Trust Indenture shall not
20
<PAGE>
have been fully discharged, Lessor hereby directs and Lessee agrees, that all
Basic Rent shall be paid directly to the Indenture Trustee at the times and in
funds specified in this Section 3(e) at the offices of the Indenture Trustee at
Two International Place, Boston, MA 02110, Attention: Corporate Trust Department
(or such other office of Indenture Trustee in the continental United States or
such other account as Indenture Trustee shall direct in a notice to Lessee at
least 10 Business Days prior to the date such payment of Basic Rent is due).
Excluded Payments shall be paid in Dollars in immediately available funds to the
Person to whom payable at the address of such Person specified in Schedule I of
the Participation Agreement.
Notwithstanding anything to the contrary contained herein, if any date
on which a payment of Rent becomes due and payable is not a Business Day then
such payment shall be made on the next succeeding Business Day and no interest
shall accrue on the amount of such payment, if such payment is made on such next
succeeding Business Day.
(f) [Intentionally Reserved for Potential Future Use].
-----------------------------------------------
(g) Prepayments of Certain Rent Payments. Lessor agrees to pay, on
------------------------------------
behalf of the Owner Participant, to the Indenture Trustee for the account of the
Certificate Holders on the Commencement Date an amount equal to the Excess
Amount. To the extent, if any, that there shall not have been received by the
Indenture Trustee at the account of the Indenture Trustee referred to in Section
3(e) by 11:00 a.m., New York City time, on the Commencement Date from Lessor, an
amount equal to the Excess Amount payable for such date, Lessee shall advance to
Lessor, as Prepaid Rent, by paying to the Indenture Trustee on behalf of Lessor
on the Commencement Date an amount equal to the Excess Amount not so paid (such
amount being herein called "Prepaid Rent"); provided that Lessee will also pay
to the Indenture Trustee, on demand, as Supplemental Rent, to the extent
permitted by applicable law, interest at the Debt Rate on any Prepaid Rent not
paid when due for any period for which the same shall be overdue. Lessor agrees
to reimburse Lessee in the manner and subject to the conditions provided in the
following sentence for (x) the Prepaid Rent so paid by Lessee determined as of
the date such payment was made, plus (y) the Supplemental Rent so paid by Lessee
pursuant to this Section 3(g), plus (z) accrued interest on the unreimbursed
portion thereof at a rate per annum equal to the greater of the Base Rate plus
2% or the Debt Rate plus 2% from the date such amount is paid by Lessee to but
not including the date of each such reimbursement (such amounts to be reimbursed
being herein called the "Reimbursement Amount"). So long as no Default or Event
of Default has occurred and is
21
<PAGE>
continuing, Lessee may with written notice to the Owner Participant and
Indenture Trustee offset (without duplication) against each succeeding payment
(other than as limited by the proviso to this sentence) due from Lessee to
Lessor in respect of Basic Rent, Stipulated Loss Value, Termination Value or any
other amount due hereunder to Lessor, until Lessee has been fully reimbursed for
the Reimbursement Amount; provided, however, that in the case of any payment due
from Lessee which is distributable under the terms of the Trust Indenture,
Lessee's right of offset shall be limited to amounts distributable to Lessor or
the Owner Participant thereunder. No such offset or aggregate combined effect
of separate offsets shall reduce the amount of any installment of Basic Rent to
an amount insufficient, together with all other amounts payable simultaneously
by Lessee, to pay in full the payments then required to be made on account of
the principal amount (and Premium, if any) of and interest on the Loan
Certificates then outstanding.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
---------------------------------------
AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES AND AGREES
THAT AS BETWEEN LESSOR, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND LESSEE (A)
THE AIRFRAME AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME
AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR NOR OWNER
PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D)
NEITHER LESSOR, IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE, THE INDENTURE
TRUSTEE NOR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE
MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, VALUE, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR
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 STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except as set forth in Sections 8(f)(vi) and 8(p)(ii) of the
Participation Agreement as to Lessor Liens and except that State Street Bank and
Trust Company, in its individual capacity, (i) represents and warrants that on
the Delivery Date, Lessor shall have received whatever title to the Aircraft was
conveyed to it by Lessee, (ii) represents and warrants that on the Delivery Date
the Aircraft shall be free of Lessor Liens (including for this purpose Liens
that would be Lessor Liens but for the proviso to the definition of Lessor
Liens) attributable to it in its individual capacity, (iii) covenants that it
will not, through its own actions or inactions, in such capacity, interfere in
Lessee's or any
22
<PAGE>
Sublessee's quiet enjoyment, use, operation or possession of the Aircraft unless
this Lease shall have been declared in default pursuant to Section 15 hereof,
(iv) agrees that it will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it in its individual capacity on
or with respect to the Airframe or any Engine or any portion of the Trust Estate
and (v) represents and warrants that it is a Citizen of the United States and
agrees that if at any time it shall cease to be a Citizen of the United States,
it will promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Federal Aviation Act as in effect at such time or, if it is
not necessary, if and so long as the Owner Trustee's citizenship would have any
adverse effect on the Owner Participant, the Certificate Holders or Lessee),
effective upon the appointment of a successor Owner Trustee in accordance with
the provisions of the Trust Agreement. None of the provisions of this Section 4
or any other provision of this Agreement shall be deemed to amend, modify or
otherwise affect the representations, warranties or other obligations (express
or implied) of the Manufacturer, any subcontractor or supplier of the
Manufacturer with respect to the Airframe, Engines, or any Parts, or to release
the Manufacturer, or any such subcontractor or supplier from any such
representation, warranty or obligation. Unless a Section 14(a), 14(b), 14(f) or
14(g) Default or any Event of Default shall have occurred and be continuing,
Lessor agrees to make available to Lessee such rights as Lessor may have under
any warranty with respect to the Aircraft made by the Manufacturer or any of its
subcontractors or suppliers and any other claims against the Manufacturer or any
such subcontractor or supplier with respect to the Aircraft, all pursuant to and
in accordance with the terms of the Owner Trustee's Purchase Agreement.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
---------------------- ---------------------
Unless purchased by Lessee pursuant to Section 19(b) hereof, upon the
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(b) or 15 hereof, Lessee will at its expense return the
Aircraft to Lessor at Lessee's maintenance base located at San Francisco
International Airport (or any principal maintenance base established by Lessee
in the continental United States subsequent to the date hereof), provided that
upon the request of the Lessor given to Lessee at least ten (10) days prior to
the date of such return, Lessee shall return the Airframe to Lessor at a
location on Lessee's route system in the continental United States selected by
Lessor, provided that such location is served on a normal basis by Boeing Model
777-222 aircraft operated by Lessee, and Lessor shall reimburse Lessee on a net
after-tax basis for Lessee's out-of-pocket Expenses (including for this purpose
salary costs for Lessee's personnel) resulting from Lessee's
23
<PAGE>
return of the Aircraft to such alternate return location to the extent such out-
of-pocket Expenses exceed the out-of-pocket Expenses (including, for this
purpose, salary costs for Lessee's personnel) Lessee would have incurred in
returning the Aircraft to its principal maintenance base at San Francisco
International Airport, provided, further, however, that if Lessor shall have
made the request for storage pursuant to Section 5(d) hereof, Lessee shall at
its expense return the Aircraft at the site of storage. At the time of such
return, (A) Lessee will, at its own cost and expense, unless otherwise requested
by Lessor to retain the existing registration of the Aircraft, cause the
Aircraft, if it is not then so registered, to be registered under the laws of
the United States with the FAA in the name of Lessor or its designee, provided
that Lessee shall be relieved of its obligations under this sentence if such
registration is prohibited by reason of the failure of Lessor, the Owner
Participant or Lessor's designee to be eligible on such date to own an aircraft
registered with the Federal Aviation Administration, and (B) subject to Section
5(e) hereof, the Airframe will be fully equipped with the Engines (or Acceptable
Alternate Engines) installed thereon. Also, at the time of such return, Lessor
shall have good title to such Airframe and Engines or Acceptable Alternate
Engines, and such Airframe and Engines or Acceptable Alternate Engines (i) shall
be certified (or, if not then registered under the Federal Aviation Act by
reason of the proviso to clause (A) in the preceding sentence or because Lessor
has so requested that the Aircraft not be so registered, shall hold a valid
certificate of airworthiness issued by the country of registry and be eligible
for certification by the FAA) as an airworthy aircraft by the Federal Aviation
Administration, (ii) shall be free and clear of all Liens (other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and rights of third parties under
pooling, interchange, overhaul, repair or other similar agreements or
arrangements, (iii) shall be in a regular passenger configuration, and in as
good a condition as when delivered by Lessee to Lessor, ordinary wear and tear
excepted and otherwise in the condition required to be maintained under the
Lease and under Lessee's FAA-approved maintenance plan (notwithstanding any
Sublease theretofore in effect) and shall be in compliance with all mandatory
environmental, noise, air pollution and other standards prescribed by the
federal government of the United States and applicable to the Aircraft
including, without limitation, standards relating to corrosion and structural
integrity and all other applicable manufacturer's mandatory service bulletins
(except for standards, laws, regulations, directives and bulletins that permit
compliance at a later time and would not, in the normal course of Lessee's
maintenance plan, be complied with by the date of return without discriminating
on the basis of the status of the Aircraft as a
24
<PAGE>
leased aircraft), (iv) in the event that Lessee shall not then be using a
continuous maintenance program with respect to the Airframe immediately prior to
such return but instead shall have been using a block overhaul program with
respect to the Airframe, then (A) such block overhaul program shall have been
approved by the government of registry of the Aircraft and (B) the Airframe
shall have remaining until the next scheduled block overhaul at least 25% of the
allowable hours between block overhauls permitted under the block overhaul
program then used by Lessee, (v) in the event that Lessee during the period of
operation of the Aircraft immediately prior to such return shall not have been
using an on-condition maintenance program with respect to the Engines (or
Acceptable Alternate Engines), Lessee agrees that the average number of hours or
cycles of operation (whichever shall be applicable under the maintenance program
then in use with respect to such Engines (or Acceptable Alternate Engines)) on
such Engines (or Acceptable Alternate Engines) remaining until the next
scheduled engine heavy maintenance shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine heavy maintenance allowed under
the maintenance program then in use with respect to such Engines (or Acceptable
Alternate Engines), (vi) shall have all Lessee's and any Sublessee's exterior
marking removed or painted over with areas thereof refinished to match adjacent
areas, and (vii) shall be in a state of cleanliness suitable under Lessee's
normal service standards for operation in Lessee's revenue passenger service and
in all such cases the Aircraft shall not have been discriminated against whether
by reason of its leased status or otherwise in maintenance, use, operation or in
any other manner whatsoever.
In addition, the following conditions shall be complied with at the
time of the return of the Aircraft: (i) Lessee shall deliver to Lessor any "no
cost" modification kits designated for the Aircraft that Lessee has in its
possession and that have not been incorporated at the time of the return of the
Aircraft, (ii) Lessor may purchase from Lessee at Lessee's cost any service
bulletin kits purchased or manufactured by Lessee for the Aircraft (provided
that Lessee shall not be obligated to sell to Lessor any service bulletin kit
manufactured by Lessee to the extent Lessee, in its reasonable judgment,
considers the same proprietary) and (iii) without limiting the obligations of
the Lessee set forth in the preceding paragraph, in the event the FAA shall
issue any directive which requires termination thereof prior to the return date,
then such directive shall be terminated prior to the return date, and if Lessee
shall have not been required to terminate such directive in the normal course of
its operations without discriminating against the Aircraft by reason of its
leased status or otherwise prior to the return of the Aircraft but such
directive must be terminated on or before six
25
<PAGE>
months following such return, then Lessee shall, at the sole cost and expense of
Lessor, comply with such directive but only if (x) at least 540 days prior to
the return of the Aircraft Lessee receives from Lessor a written request to
comply with such directive at Lessor's sole cost and expense (determined on the
basis of what a third party would charge for comparable services) and (y) after
receipt by Lessee of such request, the Aircraft is subject to a maintenance
check of the type at which such modification is made, in accordance with
Lessee's general maintenance program, and Lessee has, or can obtain using
commercial reasonable efforts taking into account the 540 day prior notice
received by Lessee, the personnel, parts, facilities and other resources
available to accomplish the modification and the modification can be made
without materially disrupting the operations of Lessee's maintenance facility or
Lessee's operations.
For purposes of this Section 5(a), any maintenance program used by
Lessee for airframes (including the Airframe) substantially similar to the
maintenance program described in the excerpts from ["United Air Lines 777
Maintenance Program"] furnished to Lessor and the Owner Participant prior to the
Delivery Date (a copy of which was attached to the certificate of the Assistant
Secretary of the Lessee delivered pursuant to Section 4(a)(vii)(6) of the
Participation Agreement) shall be considered a continuous maintenance program
(and not a block maintenance program) and any engine maintenance program used by
Lessee for engines (including the Engines) substantially similar to the
maintenance program described in "United Air Lines 777 Maintenance Program"
shall be considered an on-condition maintenance program.
In the event that the provisions of the preceding paragraph are
inapplicable and upon a return of the Aircraft pursuant to this Section 5,
Lessee and Lessor cannot agree as to whether Lessee, during the period of
operation of the Aircraft immediately prior to such return, shall have been
using a continuous maintenance program or a block overhaul program with respect
to the Airframe (including, without limitation, a dispute as to whether Lessee's
program is substantially similar to the program described in the excerpts to the
["United Air Lines 777 Maintenance Program"] furnished to Lessor as set forth in
the preceding paragraph), then Lessee and Lessor shall mutually appoint an
independent third party, satisfactory to both Lessee and Lessor, who shall make
such a determination, which determination shall be conclusive and final. Lessee
will provide, on a confidential basis, such independent third party with the
maintenance program and records applicable to the Aircraft necessary to make
such determination. The fee of such third party shall be paid equally by Lessor
and Lessee.
26
<PAGE>
If clause (iv) of the first paragraph of this Section 5(a) shall be
applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor, concurrently with
the return thereof, a Dollar amount computed by multiplying (i) the fair market
cost of obtaining an airframe block overhaul of the type referred to in such
clause (iv) at a location in the United States that has been approved by the FAA
for such work by (ii) a fraction of which (x) the numerator shall be the excess
of 25% of the hours of operation allowable between such block overhauls over the
actual number of hours of operation remaining on the Airframe to the next such
block overhaul and (y) the denominator shall be the number of hours of operation
allowable between such block overhauls in accordance with such block overhaul
program.
If clause (v) of the first paragraph of this Section 5(a) shall be
applicable but the Engines (or Acceptable Alternate Engines) do not meet the
conditions specified in said clause (v), Lessee shall pay or cause to be paid to
Lessor, concurrently with the return thereof, a Dollar amount computed by
multiplying (i) the fair market cost of obtaining the scheduled engine heavy
maintenance under the maintenance program then used by Lessee for engines of the
same model as the Engines (or Acceptable Alternate Engines) at a location in the
United States that has been approved by the FAA for such work by (ii) a fraction
which (x) the numerator shall be the excess of 25% of the hours or cycles
(whichever is applicable) of operation of one Engine between engine heavy
maintenance allowable under the maintenance program then in use with respect to
such Engines (or Acceptable Alternate Engines) over the actual average number of
hours or cycles of operation of such Engines (or Acceptable Alternate Engines)
remaining until the next such scheduled engine heavy maintenance and (y) the
denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last six months of the Term (unless Lessee shall have
irrevocably elected to purchase the Aircraft or renew this Lease in accordance
with the terms of this Lease), with reasonable notice, Lessee will cooperate,
and cause any Sublessee to cooperate, at Lessor's sole cost, in all reasonable
respects with the efforts of Lessor to sell or lease the Aircraft, including,
without limitation, permitting prospective purchasers or lessees to inspect the
Aircraft, any maintenance records relating to the Aircraft then required to be
retained by the FAA or by the comparable government agency of the country in
which the Aircraft is registered, all in accordance with Section 12 hereof,
provided that any such cooperation shall not interfere with the normal operation
or maintenance of the Aircraft by, or the business of, Lessee or any Sublessee.
27
<PAGE>
(b) Return of Other Engines. In the event that an Acceptable
-----------------------
Alternate Engine shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) bill of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to Lessor
(together with an opinion of counsel (which may be Lessee's General Counsel) to
the effect that such full warranty bill of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that each such
Acceptable Alternate Engine is free and clear of all Liens other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and will, to the extent applicable,
comply with the provisions of Section 9(d) as if Lessee had irrevocably elected,
in accordance with Section 9(d) hereof, to terminate the Lease with respect to
the Engine in replacement for which such Acceptable Alternate Engine is being
delivered and Lessor will provide a bill of sale, at Lessee's expense,
evidencing the transfer, without recourse or warranty (except as to the absence
of Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)) by Lessor to Lessee or its
designee of all of Lessor's right, title and interest in and to any Engine not
installed on the Airframe at the time of the return of the Airframe.
(c) Fuel and Manuals. Upon the return of the Airframe upon any
----------------
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessee shall invoice Lessor, and Lessor shall pay to Lessee the amount of
Lessee's cost for any fuel or oil contained in the fuel or oil tanks on the
Airframe, and (ii) Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data and inspection, modification and overhaul records in the
English language (or an English translation of the same), (A) required to be
maintained with respect to the Airframe, the Engines or any part thereof in
accordance with Section 7(a) hereof, (B) created since the Airframe's or
Engine's or Acceptable Alternate Engine's (whichever is applicable) last heavy
maintenance visit and (C) required to lawfully operate the Aircraft in the
United States under a United States Certificate of Airworthiness without
performing additional maintenance.
(d) Storage Upon Return. If, at any time at least 30 days prior to
-------------------
the end of the Basic Term or any Renewal Term or pursuant to Section 9(c) or
Section 15, Lessee receives from Lessor a written request for storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with storage facilities for the Aircraft (at
28
<PAGE>
Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
reasonable out-of-pocket expenses other than storage fees) for a period not
exceeding forty-five (45) days (and upon prior written notice from Lessor to
Lessee given at least 10 days prior to the end of such 45 day period, at
Lessor's risk and at Lessor's cost for insurance, maintenance and Lessee's
reasonable out-of-pocket expenses including storage fees, for an additional
period not exceeding 45 days) commencing on the date of such termination, at a
location in the forty-eight contiguous states of the United States selected by
Lessee and used as a location for the storage of aircraft. Lessee shall, at
Lessor's written request, maintain insurance (if available) for the Aircraft
during such period and shall be reimbursed by Lessor for the premiums thereon.
(e) Purchase of Engine. In the event that Lessee shall have paid the
------------------
Stipulated Loss Value for any Engine pursuant to Section 10(b) hereof and all
other amounts due and owing under said Section 10(b), then, notwithstanding
anything contained in this Section 5, Lessee shall, subject to the proviso
below, be under no obligation to return any engine installed on the Airframe in
replacement for such Engine to Lessor upon the termination of this Lease;
provided, however, that in such event Lessor shall have the right upon
termination of this Lease (unless Lessee shall have exercised any of its options
to purchase the Aircraft pursuant to Section 19), at its sole option, to
purchase from Lessee an engine or engines suitable for use on the Airframe and
compatible with the other Engine (if any) or the other engine purchased under
this Section 5(e) for such engine's then Fair Market Sales Value and any such
engine shall be installed at no cost to Lessor on the Airframe on the return
thereof.
(f) Severable Parts. At any time after Lessee has advised Lessor that
---------------
it has determined not to renew this Lease or purchase the Aircraft, or the
Aircraft is otherwise to be returned to Lessor, Lessee shall, at Lessor's
request, advise Lessor of the nature and condition of all severable Parts owned
by Lessee which have been used by Lessee during the prior six months and which
Lessee has or intends to remove from the Aircraft as permitted by Section 8
hereof. Lessor may, at its option, upon 30 days written notice to Lessee,
purchase any or all of such Parts from Lessee upon the expiration of the Term at
their then fair market value.
(g) Special Redelivery Provision. Not less than 30 days prior to (A)
----------------------------
the date of redelivery of the Aircraft by Lessee to Lessor in accordance with
this Section 5, (B) the date of redelivery to Lessor or a purchaser pursuant to
Section 9(c) or Section 15 hereof, or (C) a purchase of the Aircraft by Lessee
29
<PAGE>
pursuant to Section 19(b), Lessor may provide Lessee with a proposal regarding
the arranging of delivery of the Aircraft so as to enable Lessor to realize
"foreign trade income" (as defined in Section 923(b) of the Code or any
successor provision thereto) from the sale or re-lease of the Aircraft, and
Lessee shall (i) arrange delivery at Lessor's cost (unless the delivery site is
as provided in Section 5(a) hereof) either inside or outside the United States,
as specified in Lessor's proposal, and (ii) otherwise comply with such proposal
to the extent Lessee can do so without incurring any cost, expense or liability
not indemnified against by Lessor in a manner in form and substance reasonably
satisfactory to Lessee.
SECTION 6. Liens. Lessee will not directly or indirectly create,
-----
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided (including any Sublease permitted pursuant to Section 7(b)), the Lien
of the Trust Indenture, and any other rights existing pursuant to the Operative
Documents, (ii) Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), (iii) Liens
for Taxes of Lessee (or any Sublessee) either not yet due or being contested in
good faith by appropriate proceeding so long as such proceedings do not involve
any material risk of the sale, forfeiture or loss of the Airframe or any Engine
or any interest thereon, (iv) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of Lessee's or any
Sublessee's business securing obligations that are not overdue for a period of
more than 30 days or are being contested in good faith by appropriate
proceedings so long as during such 30 day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
the Airframe or any Engine or any interest therein, (v) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless there exists a
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein or unless the judgment secured shall not, within 45 days
after the entry thereof, have been discharged, vacated, reversed or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within 45 days after the expiration of such stay, and (vi) any other
Lien with respect to which Lessee (or any Sublessee) shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to
Lessor. Lessee will promptly, at its own expense, take (or cause to be taken)
such actions as may be necessary duly to discharge any such Lien not excepted
above if the same shall arise at any time.
30
<PAGE>
SECTION 7. Registration, Maintenance and Operation; Possession and
--------------------------------------- --------------
Subleases; Insignia. (a) (1) Registration and Maintenance. Lessee, at its
- ------------------- ----------------------------
own cost and expense, shall (or shall cause any Sublessee to): (i) upon
delivery of the Aircraft, cause the Aircraft to be duly registered in the name
of Lessor, and, subject to subparagraph (3) of this Section 7(a), to remain duly
registered in the name of Lessor under the Federal Aviation Act (except to the
extent that such registration cannot be effected because of Lessor's or the
Owner Participant's failure to comply with the citizenship requirements for
registration of aircraft under such Act), provided that Lessor and the Owner
Participant shall execute and deliver all such documents as Lessee (or any
Sublessee) may reasonably request for the purpose of effecting and continuing
such registration, and Lessee shall cause the Trust Indenture to be duly
recorded and maintained of record as a first mortgage on the Aircraft; (ii)
maintain, service, repair, and overhaul (or cause to be maintained, serviced,
repaired, and overhauled) the Aircraft (and any engine which is not an Engine
but which is installed on the Aircraft) (x) so as (p) at all times to keep the
Aircraft in as good an operating condition as when delivered by Manufacturer to
Lessee, ordinary wear and tear excepted, and (q) to keep the Aircraft in such
condition as may be necessary to enable the airworthiness certification for the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations) under
(I) the Federal Aviation Act, except when all of Lessee's Boeing Model 777-222
aircraft (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of such grounding) registered in the United States
have been grounded by the FAA unless such grounding was caused by the failure of
Lessee to maintain, service, repair or overhaul the Aircraft in accordance with
this Lease, or (II) the applicable laws of any other jurisdiction in which the
Aircraft may then be registered from time to time, except when all of Lessee's
Boeing Model 777-222 aircraft (powered by engines of the same type as those with
which the Airframe shall be equipped at the time of such grounding) registered
in such jurisdiction have been grounded by the aeronautical authority of such
jurisdiction unless such grounding was caused by the failure of Lessee to
maintain, service, repair or overhaul the Aircraft in accordance with this Lease
and (y) in substantially the same manner as Lessee (or any Sublessee) maintains,
services, repairs or overhauls similar aircraft operated by Lessee (or such
Sublessee) in similar circumstances and without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise,
including, without limitation, in regard to the termination of airworthiness
directives; or such other manner as shall have been approved in writing by the
Owner Participant; (iii) maintain or cause to be maintained in the English
language
31
<PAGE>
(or with appropriate English translation) all records, logs and other materials
required to be maintained in respect of the Aircraft by the FAA or the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered (which records, logs and other materials, as
between Lessor and Lessee and all parties claiming through Lessee, shall be the
property of Lessor but shall be maintained by Lessee during the Term of this
Lease and shall become the property of Lessee upon Lessee's purchase of the
Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event
of Loss and Lessee's compliance with Section 10); and (iv) promptly furnish or
cause to be furnished to Lessor or the Owner Participant such information as may
be reasonably required to enable Lessor or the Owner Participant to file any
reports required to be filed by Lessor or the Owner Participant with any
governmental authority because of Lessor's ownership of the Aircraft.
(2) Operation. Lessee will not (or permit any Sublessee to) maintain,
---------
use, service, repair, overhaul or operate the Aircraft in violation of any law
or any rule, regulation, treaty, order or certificate of any government or
governmental authority (domestic or foreign) having jurisdiction, or in
violation of any airworthiness certificate, license or registration relating to
the Aircraft issued by any such authority, except that, after Lessee shall have
provided Lessor and, so long as the Lien of the Trust Indenture shall not have
been released, the Indenture Trustee with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer stating all relevant
facts pertaining thereto, Lessee or any Sublessee may contest in good faith the
validity or application of any such law, rule, regulation, order, certificate,
license, registration or violation in any reasonable manner which does not
jeopardize the right, title and interest of the Lessor or the Owner Participant
in and to the Airframe and/or the Engines or otherwise materially adversely
affect Lessor, the Indenture Trustee or the Owner Participant but only so long
as such proceedings do not involve any risk of criminal liability or any
unindemnified material risk of civil liability to Lessor or the Owner
Participant for which the Lessee is not then willing to indemnify Lessor or the
Owner Participant in a manner reasonably satisfactory to such Person. If the
indemnities or insurance specified in Section 11(f), or some combination thereof
in amounts equal to amounts required by Section 11(f), have not been obtained,
Lessee will not operate the Aircraft, or permit any Sublessee to operate the
Aircraft, in or to any area excluded from coverage by any insurance required to
be maintained by the terms of Section 11, provided, however, that the failure of
Lessee to comply with the provisions of this sentence shall not give rise to an
Event of Default hereunder where such failure is
32
<PAGE>
attributable to a hijacking, medical emergency, equipment malfunction, weather
conditions, navigational error or other isolated extraordinary event beyond the
control of Lessee and Lessee is taking all reasonable steps to remedy such
failure as soon as is reasonably practicable.
(3) Reregistration. At any time after the Restricted Period, Lessor
--------------
shall, at the request and sole expense of Lessee, cooperate with Lessee and take
all actions required to change the country of registration of the Aircraft in
compliance with and subject to the terms and conditions of Section 8(e) of the
Participation Agreement.
(4) Operating Certificates. Lessor hereby authorizes Lessee, at
----------------------
Lessee's sole cost, expense and risk, to act as its agent for the purpose (but
only for the purpose) of obtaining any required replacement operating
certificates from the FAA; provided, however, that in the event that Lessee
shall have received from Lessor written notice that an Event of Default shall
have occurred and be continuing, this authority shall not apply for a period
from the date of receipt of such notice to such time as such Event of Default
shall have been cured by Lessee or waived by Lessor. This authority includes
(without expanding in any way the nature of the limited authority granted
pursuant to the first sentence of this Section 7(a)(4)), but is not limited to,
obtaining registration certificates, airworthiness certificates, certificates of
sanitary construction and ferry permits. In particular, this authority includes
the ability to make use of Exemption No. 5318 issued by the FAA. This authority
will allow duly authorized personnel of Lessee to sign any application forms
required in the process of obtaining such operating certificates, and this
authority will also allow such personnel, where necessary and appropriate, to
sign certificates as the attorney-in-fact for Lessor. Lessee hereby agrees that
it will promptly notify Lessor of any action that it has taken in accordance
with this Section 7(a)(4) as agent for the Lessor. Nothing in this Section
7(a)(4) shall permit the Lessee to change the country of registry of the
Aircraft except as provided in Section 7(a)(3) above.
(b) Possession and Subleases. Lessee will not, without the prior
------------------------
written consent of Lessor, sublease or otherwise in any manner deliver, transfer
or relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe; provided that,
so long as no Section 14(a), (b), (f) or (g) Default or, in the case of
paragraph (viii) of this Section 7(b), no Section 14(d) (solely with respect to
Lessee's obligations under Section 7(a) or (b)(viii) hereof or Section 8 hereof)
Default, or any Event of Default shall have occurred and be
33
<PAGE>
continuing at the time of such sublease, delivery, transfer or relinquishment of
possession or installation, and so long as the action to be taken shall not
deprive the Indenture Trustee of the Lien of the Trust Indenture on the Airframe
or any Engine and Lessee and any Sublessee shall continue to comply with the
provisions of Sections 7(a) and 11, Lessee may, without the prior written
consent of Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by Lessee (or any Sublessee) in the ordinary
course of its business and, in the case of the Airframe, (x) with a U.S.
Air Carrier not in bankruptcy or a Permitted Sublessee or (y) any other air
carrier approved by Lessor; provided, that (A) no such agreement or
arrangement contemplates or requires the transfer of title to the Airframe,
and (B) if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, Lessee shall be deemed to have irrevocably
elected, in accordance with Section 9(d) hereof, to terminate the Lease
with respect to such Engine on the Business Day next following the 44th day
following such divestiture and Lessee shall (or shall cause any Sublessee
to) comply with Section 9(d) hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof or to any other Person for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any Part of any
thereof or for alterations or modifications in or additions to such
Airframe or Engine to the extent required or permitted by the terms of
Section 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee (or any
Sublessee) which airframe is free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of third
parties under interchange agreements which would be permitted under clause
(i) above, provided that Lessor's title to such Engine shall not be
divested as a result thereof and (C) mortgage Liens or other security
interests, provided, that (as regards this clause (C)), such mortgage Liens
or other security interests effectively provide that such Engine shall not
become subject to the
34
<PAGE>
lien of such mortgage or security interest, notwithstanding the
installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such lease,
conditional sale or other security agreement effectively provides that such
Engine shall not become subject to the lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on
such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee (or
any Sublessee) subject to a conditional sale or other security agreement
under circumstances where neither subparagraph (iii) nor subparagraph (iv)
of this paragraph (b) is applicable, provided that in the event of such
installation, Lessee shall be deemed to have irrevocably elected, in
accordance with Section 9(d) hereof, to terminate the Lease with respect to
such Engine on the Business Day next following the 44th day following such
installation and Lessee shall (or shall cause any Sublessee to) comply with
Section 9(d) hereof in respect thereof, Lessor not intending hereby to
waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 9(d);
(vi) transfer (or permit any Sublessee to transfer) possession of
the Airframe or any Engine to the United States of America or any
instrumentality or agency thereof pursuant to the Civil Reserve Air Fleet
Program for a period, including all permissible renewal periods (so long as
such renewal options have been irrevocably exercised by Lessee), that does
not extend beyond the end of the Term so long as Lessee (or any Sublessee)
shall promptly notify Lessor (x) upon transferring possession of the
Airframe or any Engine to the United States of America or any agency or
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program and
(y) of the name and the address of the Contracting Office Representative
for the Military Airlift Command of the United States Air Force to whom
notice must be given pursuant to Section 15 hereof;
35
<PAGE>
(vii) transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor provided that
the term of such contract, including all permissible renewal periods (so
long as such renewal options have been irrevocably exercised by Lessee),
shall not continue beyond the end of the Term; or
(viii) So long as the Sublessee is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the Sublease is entered into, Lessee may, at any time, enter
into a sublease with (1) a U.S. Air Carrier, (2) after the Restricted
Period any Permitted Sublessee, provided that in the event such Permitted
Sublessee is domiciled in a country listed on Exhibit F hereto and
designated therein as a "Restricted Country" such Sublessee shall be deemed
a Permitted Sublessee only if its country of domicile at the time of such
subleasing imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central aviation
authority of any of Canada, France, Germany, Japan or the United Kingdom,
or (3) after the Restricted Period any other Person approved in writing by
the Owner Participant, which approval shall not be unreasonably withheld if
in regard to this subclause (3) (x) the proposed sublessee's country of
domicile imposes maintenance standards not materially less stringent than
those of the FAA or the central aviation authority of any of Canada,
France, Japan, Germany, or the United Kingdom and (y) Lessor, Owner
Participant and the Indenture Trustee receive an opinion of counsel
reasonably acceptable to Lessor, in its individual capacity, and Owner
Participant that the terms of the sublease and other Operative Documents
will be valid in the country where Sublessee is domiciled; that no
Participant is required to register to do business in the Sublessee's
country of domicile; that there is no tort liability for owners not in
possession that is more extensive than under United States law or any state
law (it being understood that if such opinion cannot be given in a form
reasonably satisfactory to the Owner Participant such opinion will be
waived if insurance reasonably satisfactory to the Owner Participant and
the Lessor, in its individual capacity, is provided at Lessee's expense to
cover such risk); that fair compensation in a currency freely convertible
into Dollars is mandated if there is a requisition of use or title of the
Aircraft by the country in which the Sublessee is domiciled (it being
understood that if such opinion cannot be given in a form reasonably
satisfactory to the Owner Participant such opinion will be
36
<PAGE>
waived if insurance reasonably satisfactory to the Owner Participant, is
provided at Lessee's expense to cover such risk); that there exist no
possessory rights in favor of the Sublessee which upon Lessee's bankruptcy
or other Default hereunder (assuming the Sublessee is not then bankrupt)
would prevent the return of the Aircraft in accordance with the terms
hereof or inhibit the Lessor's rights therein; and as to such other matters
as Lessor, in its individual capacity, and the Owner Participant may
reasonably request, provided, however, (A) that no sublease, including all
permissible renewal periods, shall extend beyond the Basic Term or any
Renewal Term then in effect, unless Lessee shall have irrevocably committed
to purchase the Aircraft or renew the Lease in accordance with the terms
thereof at the end of the Basic Term or Renewal Term, as the case may be,
to a date beyond the latest permissible expiration date of such sublease,
(B) that, on the date of such sublease, the United States and the country
in which sublessee is domiciled and principally located maintain diplomatic
relations, (C) that on or prior to entering into such sublease, Lessee
shall provide to the Lessor, the Owner Participant and, so long as the Lien
of the Trust Indenture shall not have been released, the Indenture Trustee
assurances reasonably satisfactory to Lessor, in its individual capacity,
and Owner Participant to the effect that the provisions of Section 11
hereof have been complied with after giving effect to such sublease and (D)
that, in the case of a sublease to a sublessee described in (3) above, if
the country of domicile of the proposed sublessee at the time of such
subleasing has not unqualifiedly ratified the Geneva Convention for
International Recognition of Rights in Aircraft, the Lessee shall provide
Lessor to the Lessor and, so long as the Lien of the Trust Indenture shall
not have been released, the Indenture Trustee an opinion of counsel, which
counsel and opinion shall be reasonably satisfactory to the Owner
Participant, to the effect that the country in which such sublessee has its
principal office and domicile would give effect to (i) the title of Lessor
in and to the Aircraft, (ii) the registry of the Aircraft in the name of
Lessor (or Lessee or Sublessee, as "lessee" or "sublessee" as appropriate)
and (iii) the priority and validity of the Lien of the Trust Indenture.
The rights of any Sublessee or other transferee (other than a
transferee where the transfer is of an Engine which is deemed a termination
under Section 9(d)) shall be subject and subordinate to, all the terms of the
Lease (and any Sublease shall expressly state that it is so subject and
subordinate), including, without limitation, the covenants contained in Section
7(a) hereof, the inspection rights contained in
37
<PAGE>
Section 12 hereof and Lessor's (and, so long as the Trust Indenture is in
effect, the Indenture Trustee's (as Lessor's assignee)) rights to repossess the
Aircraft and to void any Sublease upon such repossession, and Lessee shall
remain primarily liable for the performance of all of the terms of the Lease,
and the terms of any such Sublease shall not permit any Sublessee to take any
action not permitted to be taken by Lessee in the Lease with respect to the
Aircraft. No pooling agreement, Sublease or other relinquishment of possession
of the Airframe or any Engine shall in any way discharge or diminish any of
Lessee's obligations to Lessor under this Lease or constitute a waiver of
Lessor's rights or remedies hereunder. Lessor agrees, for the benefit of Lessee
(and any Sublessee) and for the benefit of any mortgagee or other holder of a
security interest in any engine owned by Lessee (or any Sublessee), any lessor
of any engine other than an Engine leased to Lessee (or any Sublessee) and any
conditional vendor of any engine other than an Engine purchased by Lessee (or
any Sublessee) subject to a conditional sale agreement or any other security
agreement, that no interest shall be created under the Lease in any engine so
owned, leased or purchased and that neither Lessor nor its successors or assigns
will acquire or claim, as against Lessee (or any Sublessee) or any such
mortgagee, lessor or conditional vendor or other holder of a security interest
or any successor or assignee of any thereof, any right, title or interest in
such engine as the result of such engine being installed on the Airframe;
provided, however, that such agreement of Lessor shall not be for the benefit of
any lessor or secured party of an airframe leased to Lessee (or any Sublessee)
or purchased by Lessee (or any Sublessee) subject to a conditional sale or other
security agreement or for the benefit of any mortgagee or any other holder of a
security interest in an airframe owned by Lessee (or any Sublessee), on which
airframe Lessee (or any Sublessee) then proposes to install an Engine, unless
such lessor, conditional vendor, other secured party or mortgagee has expressly
agreed (which agreement may be contained in such lease, conditional sale or
other security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor, any right title or interest in an
Engine as a result of such Engine being installed on such airframe. Lessee
shall provide the Owner Participant and the Indenture Trustee (A) written notice
(which notice shall be given (i) no later than thirty (30) days prior to
entering into any Sublease with a term of more than one (1) year or (ii) at any
time prior to (to the extent that the giving of prior notice is reasonably
possible) or promptly after entering into any Sublease with a term of one (1)
year or less) of any Sublease and (B) a copy of any Sublease which has a term of
more than one (1) year.
38
<PAGE>
Lessee shall assign any Sublease to Lessor as security for its
obligations hereunder pursuant to an assignment instrument reasonably
satisfactory to Lessor; provided, however, that any such assignment instrument
shall provide that the assignment of the Sublease shall only be effective,
without any further action, immediately upon the occurrence of a Section 14(a),
14(b), 14(f) or 14(g) Default or any Event of Default (and such effectiveness
shall terminate upon the curing or waiver of the aforesaid Defaults or Events of
Default). In addition, any Sublease entered into by Lessee shall provide that
all payments due under such Sublease shall be paid by the Sublessee to Lessor
during the continuance of a Section 14(a), 14(b), 14(f) or 14(g) Default or an
Event of Default.
In the event that during the term of a Sublease the Aircraft shall
have been maintained under a block-overhaul program, Lessee shall at its option
either (i) cause the Aircraft to be returned to the Lessee by the Sublessee no
later than three months prior to the end of the Term and Lessee shall upon such
return incorporate the Aircraft into Lessee's continuous maintenance program for
aircraft of the same make and model and in active commercial service or (ii)
upon return of the Aircraft to Lessor pursuant to Section 5(a), Lessee shall
comply with those return conditions set forth in such Section 5(a) applicable in
the event Lessee had adopted a block-overhaul program.
Any Wet Lease or similar arrangement under which Lessee maintains
operational control of the Aircraft shall not constitute a delivery, transfer or
relinquishment of possession for purposes of this section. Lessor acknowledges
that any consolidation or merger of Lessee or conveyance, transfer or lease of
all or substantially all of Lessee's assets permitted by the Operative Documents
shall not be prohibited by this Section.
No Sublease permitted pursuant to this Section shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Delivery Date, or as soon thereafter
--------
as practicable, Lessee agrees to affix and maintain (or cause to be affixed and
maintained) in the cockpit of the Airframe adjacent to the registration
certificate therein and on each Engine a nameplate bearing the inscription:
Leased From
State Street Bank and Trust Company, not in its individual capacity
but solely as Owner Trustee, Owner and Lessor
39
<PAGE>
and, for so long as the Airframe and each Engine shall be subject to the Lien of
the Trust Indenture, bearing the following additional inscription:
Mortgaged To
First Security Bank of Utah, National Association, as Indenture
Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents).
Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Airframe or on any Engine
as a designation that might be interpreted as a claim of ownership; provided,
that nothing herein contained shall prohibit Lessee (or any Sublessee) from
placing its customary colors and insignia on the Airframe or any Engine.
SECTION 8. Replacement and Pooling of Parts;
---------------------------------
Alterations, Modifications and Additions.
- ----------------------------------------
(a) Replacement of Parts. Lessee, at its own cost and expense, will
--------------------
promptly replace or cause to be replaced all Parts which 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, except
as otherwise provided in Section 8(c). All replacement Parts shall be owned by
Lessee free and clear of all Liens (except Permitted Liens, pooling arrangements
permitted by Section 8(b) hereof and replacement Parts temporarily installed on
an emergency basis) and shall be in as good operating condition as, and shall
have a value and utility substantially equal to, the Parts replaced assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof. All Parts at any time removed from the Airframe or any
Engine shall remain the property of Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the Airframe or any Engine,
without further act (subject only to Permitted Liens and any pooling arrangement
permitted by Section 8(b) hereof and except replacement Parts temporarily
installed on an emergency basis), (i) title shall vest in and such replacement
Part shall become the property of Lessor and shall become subject to this Lease
and be deemed a Part for all purposes hereof to the same
40
<PAGE>
extent as the Parts originally incorporated or installed in or attached to the
Airframe or such Engine and (ii) the replaced Part shall no longer be the
property of Lessor and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
----------------
Engine as provided in Section 8(a) hereof may be subjected by Lessee (or any
Sublessee) to a pooling arrangement of the type which is permitted by Section
7(b)(i) hereof; provided, that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) 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 an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Lessee (or any Sublessee), at its expense, as promptly thereafter
as practicable, and in any event within 90 days, either (i) causes such
replacement Part to become the property of Lessor free and clear of all Liens
other than Permitted Liens or (ii) replaces such replacement Part with a further
replacement Part owned by Lessee (or any Sublessee) which shall become the
property of Lessor, free and clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Lessee, at its own
----------------------------------------
expense, will make (or cause to be made) such alterations and modifications in
and additions to the Airframe and Engines as may be required from time to time
to be made during the Term so as to comply with any law, rule, regulation or
order of any regulatory agency or body of any jurisdiction in which the Aircraft
may then be registered; provided, however, that, after Lessee shall have
provided Lessor and, so long as the Lien of the Trust Indenture shall not have
been released, the Indenture Trustee, with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer stating all relevant
facts pertaining thereto, Lessee or any Sublessee may, in good faith, and by
appropriate proceedings contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not jeopardize the
right, title and interest of the Lessor or the Owner Participant in and to the
Airframe and/or the Engines, or otherwise materially adversely affect Lessor,
the Owner Participant or the Indenture Trustee but only so long as such
proceedings do not involve any risk of criminal liability or any unindemnified
material risk of civil liability to Lessor or the Owner Participant for which
the Lessee is not then willing to indemnify Lessor or the Owner Participant in a
manner reasonably satisfactory to such Person. In addition, Lessee (or any
Sublessee), at its own expense, may from time to time make such
41
<PAGE>
alterations and modifications in and additions to the Airframe or any Engine as
Lessee (or any Sublessee) may deem desirable in the proper conduct of its
business, including removal of Parts which Lessee (or any Sublessee) deems to be
obsolete or no longer suitable or appropriate for use on the Airframe or such
Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition impairs the condition or airworthiness of the
Airframe or such Engine, or decreases the value or the utility (or, in regard to
the Airframe, remaining useful life) of the Airframe or such Engine below the
value or utility (or, in regard to the Airframe, remaining useful life) thereof
immediately prior to such alteration, modification, removal or addition assuming
the Airframe or such Engine was then in the condition required to be maintained
by the terms of this Lease. In addition, the value (but not the utility,
condition, airworthiness or, in the case of the Airframe, remaining economic
useful life) of the Airframe or any Engine may be reduced by the value, if any,
of Obsolete Parts which shall have been removed so long as the aggregate
original cost of all Obsolete Parts which shall have been removed and not
replaced shall not exceed $900,000. All Parts incorporated or installed in or
attached or added to the Airframe or an Engine as the result of such alteration,
modification or addition (except those parts which Lessee has leased from others
and which may be removed by Lessee pursuant to the next sentence) (the
"Additional Parts") shall, without further act, become the property of, and
title to such Parts shall vest in, Lessor. Notwithstanding the foregoing
sentence, Lessee (or any Sublessee), subject to Lessor's rights under Section
5(f) hereof, may, at its own expense, at any time during the Term, so long as no
Default under Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g) or
an Event of Default shall have occurred and be continuing, remove or suffer to
be removed any Additional Part, provided that such Additional Part (i) is in
addition to, and not in replacement of or substitution for, any Part originally
incorporated or installed in or attached to such Airframe or any Engine at the
time of delivery thereof hereunder or any Part in replacement of or substitution
for any such Part, (ii) is not required to be incorporated or installed in or
attached or added to the Airframe or any Engine pursuant to the terms of Section
7 hereof or the first sentence of this paragraph (c) and (iii) can be removed
from the Airframe or such Engine without impairing the condition or
airworthiness or diminishing the value or utility (or, in regard to the
Airframe, remaining useful life) of the Airframe or such Engine which the
Airframe or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Airframe or Engine from which it was removed. Any
42
<PAGE>
Additional Part not removed as above provided prior to the return of the
Airframe or Engine to Lessor hereunder shall remain the property of Lessor.
SECTION 9. Early Termination.
-----------------
(a) [Intentionally reserved for potential future use].
-------------------------------------------------
(b) Termination for Obsolescence/Surplus. So long as no Section
------------------------------------
14(a), (b), (d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) or Section 8 hereof), (f) or (g) Default or any Event of Default
shall have occurred and be continuing, Lessee shall have the right to terminate
this Lease on the third Business Day prior to any Lease Period Date occurring on
or after the Restricted Period if Lessee shall have made a good faith
determination, which shall be evidenced by a certificate of any financial
officer of Lessee, who is the Treasurer or more senior officer, that the
Aircraft is surplus to Lessee's requirements or economically obsolete to Lessee.
Lessee shall give to Lessor and Indenture Trustee at least one hundred
and eighty (180) days revocable (except as provided below) advance written
notice of Lessee's intention to so terminate this Lease (any such notice, a
"Termination Notice") specifying (i) the date on which Lessee intends to
terminate this Lease in accordance with this Section 9(b) (such specified date,
a "Termination Date") and (ii) that Lessee has determined that the Aircraft is
surplus to its requirements or economically obsolete to Lessee. Lessee shall
exercise this option by arranging for the sale of the Aircraft pursuant to
Section 9(c), provided, however, that Lessee may not withdraw its notice if
Lessor has elected to retain the Aircraft pursuant to Section 9(c) or if the
highest bid obtained by Lessee pursuant to Section 9(c) is greater than the then
applicable Termination Value; provided, further, that if no sale of the Aircraft
shall have occurred on or prior to the Termination Date and if Lessor shall not
have elected to retain the Aircraft, Lessee's Termination Notice shall be deemed
withdrawn. The Termination Notice shall become irrevocable twenty-five (25)
days prior to the Termination Date.
(c) Sale of the Aircraft. In the event that Lessee shall have
--------------------
proposed to terminate this Lease under Section 9(b), then during the period
commencing with the date of the Termination Notice until the proposed
Termination Date Lessee, as non-exclusive agent for Lessor and at no expense to
Lessor, shall use reasonable efforts to obtain bids in Dollars for the purchase
of the Aircraft and, in the event it receives any bid, Lessee shall, within five
Business Days after receipt thereof and at least ten Business Days prior to the
proposed Termination Date,
43
<PAGE>
advise Lessor in writing of the amount and terms of such bid, and the name and
address of the party or parties (who shall not be Lessee or any Affiliate of
Lessee or any person with whom Lessee or any such Affiliate has an arrangement
or understanding regarding the future use of the Aircraft by Lessee or any such
Affiliate but who may be the Owner Participant, any Affiliate thereof or any
person contacted by the Owner Participant) submitting such bid. After Lessee
shall have advised Lessor of all bids received, the Owner Participant, any
Affiliate thereof or any Person contacted by the Owner Participant may submit a
further bid or bids to Lessee not later than five Business Days prior to the
Termination Date proposed by Lessee (unless Lessee shall have revoked the
Termination Notice specifying such proposed Termination Date). Subject to the
next succeeding sentence, on or before the Termination Date, subject to the
release of all mortgage and security interests with respect to the Aircraft
under the Trust Indenture: (1) Lessee shall deliver the Aircraft, or cause the
Aircraft to be delivered to the highest bidder as determined below, in the same
manner and in the same condition and otherwise in accordance with all the terms
of this Lease as if delivery were made to Lessor pursuant to Section 5, and
Lessee shall duly transfer to Lessor title to any engine installed on the
Airframe and not owned by Lessor, all in accordance with the terms of Section 5
(but subject to the provisions of Section 5(e) hereof), (2) Lessor shall comply
with the terms of the Trust Indenture and shall, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
subject to prior or concurrent payment by Lessee of all amounts due under clause
(3) of this sentence, sell the Aircraft for cash in Dollars to the entity, if
any, which shall have submitted the highest bona fide bid (evaluated on a net
---- ----
cash basis) therefor, the total selling price realized at such sale to be
retained by Lessor, and (3) Lessee shall simultaneously pay or cause to be paid
to Lessor in the manner provided in Section 3(e), (A) if the proceeds of the
sale of the Aircraft so sold, net of reasonable out-of-pocket costs and expenses
incurred by Lessor and the Owner Participant in connection therewith, including,
without limitation, applicable sales or transfer taxes and legal fees, are less
than the Termination Value for the Aircraft computed as of the Redemption Date,
the difference in Dollars, (B) all unpaid Basic Rent due on or prior to the
applicable Redemption Date (other than Basic Rent payable in advance on the
Redemption Date, if any) and all unpaid Supplemental Rent with respect to the
Aircraft due on or prior to such Redemption Date, and (C) Premium, if any, due
on the Loan Certificates and upon receiving all such payments referred to in
clauses (2) and (3) above Lessor simultaneously will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
44
<PAGE>
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to any Engines constituting part of the Aircraft which were not sold with the
Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has not
already revoked the Termination Notice, elect to retain title to the Aircraft.
If Lessor so elects, Lessor shall give to Lessee written notice of such election
at least ten Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to Lessor for
payment to the Indenture Trustee on the Termination Date the amount required to
pay in full the unpaid Original Amount of the Loan Certificates outstanding on
the applicable Redemption Date together with all other amounts due on such
Redemption Date thereunder less amounts to be paid by Lessee as a result of the
payment thereof as set forth in the second following sentence. Upon receipt of
notice of such an election by Lessor and the accompanying undertaking by the
Owner Participant, Lessee shall cease its efforts to obtain bids as provided
above and shall reject all bids theretofore or thereafter received. On the
Termination Date, Lessor shall (subject to the payment by Lessee of all Rent due
on or prior to the Redemption Date as set forth below) pay in full the unpaid
Original Amount of the Loan Certificates outstanding on the Redemption Date,
plus interest accrued to, or to accrue thereon to but excluding the applicable
Redemption Date, together with all other amounts due thereunder less any amounts
to be paid by Lessee as a result of the payment thereof and, provided that the
Loan Certificates are paid as aforesaid, Lessee shall deliver the Airframe and
Engines or engines to Lessor in accordance with Section 5 and shall pay all
Basic Rent due on or prior to the Redemption Date (other than Basic Rent payable
in advance on the Redemption Date, if any) and all unpaid Supplemental Rent due
on or prior to such Redemption Date, and Premium, if any, on the Loan
Certificates. If no sale shall have occurred on the Termination Date for any
reason (including, without limitation, by reason of Lessee's revocation of its
Termination Notice) or Lessor has not, after making its election referred to
above, made the payment contemplated by the preceding sentence and thereby
caused this Lease to terminate, this Lease shall continue in full force and
effect as to the Aircraft, Lessee shall be entitled to keep any deposits or
other advances received from the proposed purchaser(s) of the Aircraft (without
in any way limiting any other rights or remedies against such proposed
purchaser(s) available to Lessor or Lessee), Lessee shall pay the reasonable
out-of-pocket costs and expenses, including legal fees, incurred by the Owner
Participant, Indenture Trustee and Lessor (unless such failure to terminate this
Lease is a consequence of the failure of Lessor or the Owner Participant without
due cause to make, or cause to be made, the payment referred to in the
immediately preceding sentence), if
45
<PAGE>
any, in connection with preparation for such sale and Lessee may give one or
more additional Termination Notices, provided no more than three such notices
may be given during the Term and only one such notice may be given during any
365 day period (not counting, in either case, any Termination Notice for a
Termination Date on which this Lease does not terminate as a consequence of the
failure of Lessor or the Owner Participant without due cause to make or cause to
be made the payment referred to in the immediately preceding sentence). In the
event of any such sale or such retention of the Aircraft by Lessor and upon
compliance by Lessee with the provisions of this paragraph, the obligation of
Lessee to pay Basic Rent or any other amounts hereunder shall cease to accrue.
Upon payment of all amounts that may then be due hereunder, this Lease shall
terminate. Lessor may, but shall be under no duty to, solicit bids, inquire
into the efforts of Lessee to obtain bids or otherwise take any action in
connection with any such sale other than to transfer (in accordance with the
foregoing provisions) to the purchaser named in the highest bid certified by
Lessee to Lessor all of Lessor's right, title and interest in the Aircraft,
against receipt of the payments provided herein.
(d) Termination as to Engines. Upon compliance with the terms of the
-------------------------
Tax Indemnity Agreement, Lessee shall have the right at its option at any time
during the Term, on at least 30 days' prior written notice, to terminate this
Lease with respect to any Engine. In such event, and prior to the date of such
termination, Lessee shall replace such Engine hereunder by complying with the
terms of Section 10(b) to the same extent as if an Event of Loss had occurred
with respect to such Engine (provided that Lessee shall have no right to pay
Stipulated Loss Value with respect to such Engine), and Lessor shall transfer
title to the replaced Engine as provided in Section 5(b). No termination of
this Lease with respect to any Engine as contemplated by this Section 9(d) shall
result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of Loss
------------------------------------ -------------
with Respect to the Aircraft. Upon the occurrence of an Event of Loss with
- ----------------------------
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall (1) forthwith (and in any event, within fifteen
days after such occurrence) give Lessor written notice of such Event of Loss and
(2) within 60 days after such occurrence, give Lessor written notice of its
election to perform one of the following options (it being understood that the
failure to give such notice shall be deemed to be an election of the option set
forth in clause (i) below):
46
<PAGE>
(i) Not later than the earlier of (x) the Business Day next
succeeding the 100th day following the occurrence of such Event of Loss or
(y) the third Business Day following receipt by the loss payee of the
insurance proceeds in respect to such Event of Loss (but not earlier than
the first Business Day next succeeding the 65th day following the
occurrence of such Event of Loss) (the applicable day being the "Loss
Payment Date"), Lessee shall, to the extent not paid to Lessor or Indenture
Trustee, as the case may be, as insurance proceeds, pay or cause to be paid
to Lessor as specified in Section 3(e) hereof, (A) the Stipulated Loss
Value of the Aircraft computed as of the Stipulated Loss Value Date
occurring on or immediately following the date of such Event of Loss, plus
(B) if such Stipulated Loss Value Date is a Lease Period Date, Basic Rent
due on such Lease Period Date (excluding Basic Rent payable in advance on
such Lease Period Date), plus (C) unpaid Supplemental Rent with respect to
the Aircraft due on or prior to the date of payment, plus (D) interest on
such Stipulated Loss Value at the Debt Rate from and including such
Stipulated Loss Value Date to, but not including, the date of any advance
payment in respect of Stipulated Loss Value as provided below, and
thereafter on the unpaid balance of such Stipulated Loss Value from and
including the date of such advance payment to, but excluding, the date such
Stipulated Loss Value is paid in full; provided, however, that if a Lease
Period Date shall occur after the Stipulated Loss Value Date with respect
to which Stipulated Loss Value is determined but prior to the date of such
payment of the sum of the amounts specified in clauses (A), (B), (C) and
(D) above or if Basic Rent is payable in advance on the Stipulated Loss
Value Date, Lessee shall pay on such Lease Period Date an amount equal to
the Basic Rent that would have been due on such Lease Period Date if such
Event of Loss had not occurred, which amount shall be credited as an
advance against the amounts payable pursuant to clauses (A), (B), (C) and
(D) above, or
(ii) Not later than the Business Day next succeeding the 100th day
following the occurrence of such Event of Loss, Lessee shall, provided that
no Section 14(a), (b), (f) or (g) Default or any Event of Default shall
have occurred and be continuing, substitute an aircraft or an airframe or
an airframe and one or more engines, as the case may be in accordance with
the terms hereof, provided that if Lessee shall have elected to make a
substitution under this clause (ii) and shall fail for any reason to make
such substitution in accordance with the terms hereof, Lessee shall make
the payments required by clause (i) above as and when due thereunder.
47
<PAGE>
At such time as Lessor shall have received the sum of the amounts
specified in clauses (A), (B), (C) and (D) of subparagraph (i) above, together
with all other amounts that then may be due hereunder (including, without
limitation, all Basic Rent due on or before the date of such payment (other than
Basic Rent payable in advance, if any, on such date)), under the Participation
Agreement and under the Tax Indemnity Agreement, (1) the obligation of Lessee to
pay the installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
all Lessor's right, title and interest in and to the Airframe and the Engines
"as-is, where-is" and furnish to or at the direction of Lessee, at Lessee's
expense, a bill of sale in form and substance reasonably satisfactory to Lessee
(or any Sublessee), evidencing such transfer, and (4) Lessee will be subrogated
to all claims of Lessor if any against third parties (other than Lessor's or the
Owner Participant's insurers under policies independently maintained at its own
cost and expense in accordance with Section 11(e) hereof), but only to the
extent the same relate to physical damage to or loss of the Airframe and any
Engines which were subject to such Event of Loss.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall (A) convey or cause to be conveyed to Lessor an aircraft (or an airframe
or an airframe and an engine which, together with the Engines or Engine
constituting a part of the Aircraft but not installed thereon at the time of
such Event of Loss, constitute the Aircraft) free and clear of all Liens (other
than Permitted Liens) and having at least the fair market value, utility and
remaining useful life and being in as good an operating condition as, the
Aircraft subject to such Event of Loss assuming that the Aircraft had been
maintained in accordance with this Lease; provided that any aircraft or airframe
so substituted hereunder shall be of the same make and model or improved model
as those initially leased hereunder and any engine substituted hereunder shall
be an Acceptable Alternate Engine and (B) prior to or at the time of any such
substitution, Lessee (or any Sublessee), at its own expense, will (1) furnish
Lessor with a full warranty bill of sale and a FAA bill of sale, in form and
substance reasonably satisfactory to the Owner Participant, evidencing such
transfer of title, (2) cause a Lease Supplement and a Trust Supplement to be
duly executed by Lessee and filed for recording pursuant to the Federal Aviation
Act, or the applicable laws, rules and regulations of any other
48
<PAGE>
jurisdiction in which the Airframe may then be registered, and cause a financing
statement or statements or other requisite documents of a similar nature
(including precautionary filings) to be filed in such place or places as
necessary in order to perfect the security interests therein created by or
pursuant to the Trust Indenture (and, with regard to precautionary filings, this
Lease), (3) furnish the Owner Participant with such evidence of Lessor's title
to such replacement aircraft and of compliance with the insurance provisions of
Section 11 with respect to such substituted property as Lessor, in its
individual capacity, and the Owner Participant may reasonably request, (4)
provide Owner Participant an opinion of outside tax counsel, which opinion and
counsel shall be satisfactory to Owner Participant, to the effect that such
substitution will not result in any adverse tax consequences (including under
Section 861 of the Code as then in effect) to Lessor and/or the Owner
Participant (it being understood that if such opinion cannot be given Lessee may
indemnify Owner Participant for such adverse tax consequences in lieu of such
opinion in a manner satisfactory in form and substance to the Owner
Participant), (5) provide Lessor, Owner Participant and the Indenture Trustee an
opinion of counsel, which counsel and opinion shall be reasonably acceptable to
Lessor, in its individual capacity, and the Owner Participant, to the effect
that Lessor and the Indenture Trustee (as assignee of all right, title and
interest of Lessor under the Lease) shall be entitled to the benefits and
protections of Section 1110 of the Bankruptcy Code with respect to the aircraft
substituted hereunder, (6) provide an opinion of counsel to Lessor and the
Indenture Trustee, which opinion and counsel shall be reasonably acceptable to
the Lessor, in its individual capacity, and the Owner Participant, to the effect
that title to such replacement aircraft has been duly conveyed to Lessor free
and clear of all Liens except Permitted Liens and that such replacement aircraft
is duly subjected to the Lien of the Trust Indenture and (7) provide Lessor,
Owner Participant and Indenture Trustee all the documentation required (or,
following the termination of the Trust Indenture, all the documentation that
prior to such termination would have been required) to be provided by it
pursuant to Section 5.01(b) of the Trust Indenture, and Lessor simultaneously
will comply with the terms of the Trust Indenture and transfer to or at the
direction of Lessee, without recourse or warranty (except as to the absence of
Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)), all of Lessor's right,
title and interest, if any, in and to the Aircraft or the Airframe and one or
more Engines, as the case may be, "as-is, where-is" with respect to which such
Event of Loss occurred and furnish to or at the direction of Lessee, at Lessee's
expense, a bill of sale in form and substance reasonably satisfactory to Lessee,
evidencing such transfer. Lessee will be subrogated to
49
<PAGE>
all claims of Lessor, if any, against third parties (other than Lessor's or the
Owner Participant's insurers under policies independently maintained at their
own cost and expense in accordance with Section 11(e) hereof) but only to the
extent the same relate to physical damage to or loss of the Airframe and any
Engine which were subject to such Event of Loss. For all purposes hereof, the
property so substituted shall after such transfer be deemed part of the property
leased hereunder and shall be deemed an "Aircraft," "Airframe" and "Engine," as
the case may be, as defined herein. No Event of Loss with respect to the
Airframe or the Airframe and the Engines or engines then installed thereon for
which substitution has been elected pursuant to Section 10(a)(ii) hereof shall
result in any reduction in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of
---------------------------------------
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss with respect to the Airframe, Lessee shall
forthwith (and in any event, within fifteen days after such occurrence) give
Lessor written notice thereof and shall, within forty-five (45) days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of Loss occurred,
title to an Acceptable Alternate Engine free and clear of all Liens (other than
Permitted Liens, which engine may upon its transfer to Lessor become subject to
any and all Permitted Liens) and having a value and utility at least equal to,
and being in as good an operating condition as and having been maintained in the
same manner as, the Engine subject to such Event of Loss (assuming that such
Engine had been maintained in accordance with this Lease); provided, however,
upon written notice to Lessee given within 20 days after Lessor has received
notice of such Event of Loss, the Lessor may require Lessee to pay with respect
to the Engine subject to such Event of Loss within 45 days after the occurrence
of such Event of Loss (provided that in no event shall such payment be required
to be made prior to the Commencement Date) an amount equal to (A) Engine Cost
multiplied by the percentage specified in Exhibit C hereto opposite the
Stipulated Loss Value Date occurring on or immediately following the date of
such Event of Loss, plus (B) interest on the amount determined pursuant to
clause (A) above at the Debt Rate from and including such Stipulated Loss Value
Date to, but excluding, the date such amount is paid in full; and provided,
further, if Lessee pays such Stipulated Loss Value and interest, then, subject
to Section 5(e), Lessee shall only be obligated to return the Aircraft to Lessor
with any Engine attached thereto with respect to which Lessee has not paid
Stipulated Loss Value pursuant to this Section 10(b) at any time that Lessee is
required to return the Aircraft to Lessor pursuant to the terms hereof; provided
50
<PAGE>
further, however, that, in lieu of paying such Stipulated Loss Value and
interest, Lessee may replace the Engine in accordance with this Section 10(b) if
Lessee provides to the Owner Participant either: (x) an opinion of outside tax
counsel, which opinion and counsel shall be satisfactory to the Owner
Participant, to the effect that such substitution will not result in any adverse
tax consequences to the Owner Participant, or (y) an indemnity, satisfactory in
form and substance to the Owner Participant, for any adverse tax consequences
resulting from such substitution. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will (i) furnish Lessor with a warranty
(as to title) bill of sale, in form and substance reasonably satisfactory to
Lessor, with respect to such replacement engine, (ii) cause a Lease Supplement
and Trust Supplement to be duly executed by Lessee and to be filed for recording
pursuant to the Federal Aviation Act, or the applicable laws, rules and
regulations of any other jurisdiction in which the Airframe may then be
registered, and cause a financing statement or statements or other requisite
documents of a similar nature (including precautionary filings) to be filed in
such place or places as necessary in order to perfect the security interests
therein created by or pursuant to the Trust Indenture (and, with regard to
precautionary filings, this Lease), (iii) furnish Lessor with such evidence of
Lessor's title to such Acceptable Alternate Engine and of compliance with the
insurance provisions of Section 11 hereof with respect to such replacement
engine as Lessor, in its individual capacity, or the Owner Participant may
reasonably request, (iv) provide Lessor and the Indenture Trustee an opinion of
Lessee's counsel which counsel and opinion shall be reasonably satisfactory to
Lessor, in its individual capacity, or the Owner Participant to the effect that
title to such Acceptable Alternate Engine has been duly conveyed to Lessor free
and clear of all Liens except Permitted Liens and that such Acceptable Alternate
Engine is duly subjected to the Lien of the Trust Indenture, and (v) provide
Lessor, Owner Participant and Indenture Trustee all the documentation required
(or, following the termination of the Trust Indenture, all the documentation
that prior to such termination would have been required) to be provided by it
pursuant to Section 5.01(b) of the Trust Indenture, and Lessor will comply with
the terms of the Trust Indenture and transfer to or at the direction of Lessee
without recourse or warranty (except as to absence of Lessor Liens (including
for this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)) all of Lessor's right, title and interest, if any,
in and to (1) the Engine with respect to which such Event of Loss occurred and
furnish to or at the direction of Lessee, and at Lessee's expense, a bill of
sale in form and substance reasonably satisfactory to Lessee, evidencing such
transfer and (2) all claims, if any, against third parties (other than Lessor's
or the
51
<PAGE>
Owner Participant's insurers under policies independently maintained at their
own cost and expense in accordance with Section 11(e) hereof), for damage to or
loss of the Engine subject to such Event of Loss, and such Engine shall
thereupon cease to be an Engine leased hereunder. For all purposes hereof, each
such replacement engine shall, after such conveyance, be deemed part of the
property leased hereunder, and shall be deemed an "Engine." Except to the
extent Lessor's Cost is reduced pursuant to the definition thereof, no Event of
Loss with respect to an Engine under the circumstances contemplated by the terms
of this paragraph (b) shall result in any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
---------------------------------------------------------
Requisition of Title, etc. Any payments (other than insurance proceeds the
- --------------------------
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with respect
to an Event of Loss, other than a requisition for use by the United States
Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss, will
be applied as follows:
(i) if payments are received with respect to the Airframe (or the
Airframe and any Engine or engines then installed thereon), (A) unless the
same are replaced pursuant to the last paragraph of Section 10(a), after
reimbursement of Lessor (as provided in Section 7.01 of the Trust
Agreement) and the Owner Participant for reasonable costs and expenses, so
much of such payments remaining as shall not exceed the Stipulated Loss
Value and the other amounts payable under Section 10(a) hereof required to
be paid by Lessee pursuant to Section 10(a), shall be applied in reduction
of Lessee's obligation to pay Stipulated Loss Value and the other amounts
payable under Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of Stipulated Loss Value and such other amounts, and following the
foregoing application, the balance, if any, of such payments shall be
distributed between Lessee and Lessor as their respective interests may
appear; or (B) if such property is replaced pursuant to the last paragraph
of Section 10(a), such payments shall be paid over to or retained by,
Lessee; provided, that Lessee shall have fully performed or, concurrently
therewith, will fully perform the terms of the last paragraph of Section
10(a) with respect to the Event of Loss for which such payments are made;
and
(ii) if such payments are received with respect to an Engine under
circumstances contemplated by Section 10(b) hereof, (A) unless the same is
replaced pursuant to the
52
<PAGE>
terms of Section 10(b), after reimbursement of Lessor (as provided for in
Section 7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses, so much of such payments remaining as shall
not exceed the amounts payable under Section 10(b) hereof by Lessee, shall
be applied in reduction of Lessee's obligation to pay the same, if not
already paid by Lessee, or if already paid by Lessee, shall be applied to
reimburse Lessee for its payment of such amounts and following the
foregoing application, the balance, if any, shall be paid to Lessee; or (B)
if such property is replaced pursuant to Section 10(b), such payments shall
be paid over to, or retained by, Lessee, provided that Lessee shall have
fully performed, or concurrently therewith will perform, the terms of
Section 10(b) with respect to the Event of Loss for which such payments are
made.
(d) Requisition for Use of the Aircraft by the United States
--------------------------------------------------------
Government or Government of Registry of the Aircraft. In the event of the
- ----------------------------------------------------
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any thereof,
Lessee shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this Lease Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred (unless
deemed prior to the end of the Term an Event of Loss in which case the foregoing
provisions of this Section 10 shall be applicable). If Lessee shall fail to
return the Aircraft (i) on or before the end of the Term, in the case of a
requisition by the United States government or any agency or instrumentality
thereof or (ii) within the earlier of the end of the Term or two years after
such requisition in the case of a requisition for use by the government of
registry of the Aircraft or any agency or instrumentality thereof (other than
the United States government or any agency or instrumentality thereof), such
failure shall constitute an Event of Loss which shall be deemed to have occurred
in the case of clause (i) on the last day of the Term, and in the case of clause
(ii), on the earlier of the last day of the Term or the expiration of such two-
year period, provided, however, that Lessor may notify Lessee in writing on or
before the twentieth day prior to the last day of the Term that, in the event
Lessee shall fail by reason of such requisition to return the Airframe and such
Engines or engines on or before the end of the Term, such failure shall not be
deemed an Event of Loss. Upon the giving of such notice and such failure to
return by the end of the Term, Lessee shall be relieved of all of its
obligations pursuant to the provisions of Section 5 (but not under any other
Section), except that if any engine not owned by Lessor shall then be installed
on the
53
<PAGE>
Airframe, Lessee will, at no cost to Lessor, furnish, or cause to be furnished,
to Lessor a full warranty (as to title) bill of sale with respect to each such
engine, in form and substance reasonably satisfactory to Lessor, in its
individual capacity, and the Owner Participant (together with an opinion of
counsel (which may be Lessee's General Counsel) to the effect that such full
warranty bill of sale has been duly authorized and delivered and is enforceable
in accordance with its terms and that such engines are free and clear of Liens
other than Lessor Liens (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens), against receipt
from Lessor, at Lessee's expense, of a bill of sale evidencing the transfer,
without recourse or warranty (except as to the absence of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)), by Lessor to Lessee or its designee of all
of Lessor's right, title and interest in and to any Engine constituting part of
the Aircraft but not then installed on the Airframe. All payments received by
Lessor or Lessee from such government for the use of such Airframe and Engines
or engines during the Term shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Sublessee); and all payments received by Lessor or
Lessee from such government for the use of such Airframe and Engines or engines
after the end of the Term shall be paid over to, or retained by, Lessor unless
Lessee shall have exercised its purchase option hereunder, or there is a deemed
Event of Loss hereunder, in which case such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
----------------------------------------------------------------
or the Government of Registry of the Aircraft. In the event of the requisition
- ---------------------------------------------
for use of an Engine during the Term by the United States Government or any
other government of registry of the Aircraft or any agency or instrumentality of
any thereof (other than in the circumstances contemplated by subsection (d))
which shall have continued for more than 180 days or, if earlier, until the end
of the Term, Lessee shall replace (or cause any Sublessee to replace) such
Engine hereunder and Lessor and Lessee (or Sublessee as the case may be) shall
comply with the terms of Section 10(b) to the same extent as if an Event of Loss
had occurred with respect to such Engine. Upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government with
respect to such requisition shall be paid over to, or retained by Lessee.
(f) Application of Payments During Existence of Events of Default.
-------------------------------------------------------------
Any amount referred to in this Section 10 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or any
Sublessee) if at the time of such payment or retention a Default or an Event of
54
<PAGE>
Default shall have occurred and be continuing, but shall be held by or paid over
to Lessor as security for the obligations of Lessee (or such Sublessee) under
this Lease and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
--------- ------------------------------------
Insurance. (1) Except as provided in clause (2) of this Section 11(a), and
- ---------
subject to self-insurance to the extent permitted by Section 11(d) hereof,
Lessee will carry or cause to be carried with respect to the Aircraft at its or
any Sublessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury, and property damage
liability) insurance (exclusive of manufacturer's product liability insurance)
and (ii) cargo liability insurance, (A) in an amount not less than the greater
of (x) the amounts of comprehensive airline liability insurance from time to
time applicable to aircraft owned or leased, and operated by Lessee of the same
type as the Aircraft and (y) $450,000,000 per occurrence, (B) of the type and
covering the same risks as from time to time are applicable to aircraft owned or
leased, and operated by Lessee of the same type as the Aircraft, and (C) which
is maintained in effect with insurers of recognized reputation and
responsibility; provided, however, that Lessee need not maintain cargo liability
insurance, or may maintain such insurance in an amount less than $450,000,000
per occurrence, as long as the amount of cargo liability insurance, if any,
maintained with respect to the Aircraft is the same as the cargo liability
insurance, if any, maintained for other Boeing Model 777-222 aircraft owned or
leased, and operated by Lessee.
(2) During any period that the Airframe or an Engine, as the case may
be, is on the ground and not in operation, Lessee may carry or cause to be
carried as to such non-operating property, in lieu of the insurance required by
clause (1) above, and subject to the self-insurance to the extent permitted by
Section 11(d) hereof, insurance by insurers of recognized reputation and
responsibility otherwise conforming with the provisions of clause (1) except
that (A) the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable to
property owned or leased by Lessee of the same type as such non-operating
property and which is on the ground and not in operation; and (B) the scope of
the risks covered and the type of insurance shall be the same as from time to
time shall be applicable to property owned or leased by Lessee of the same type
55
<PAGE>
as such non-operating property and which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1) Except as
------------------------------------------------
provided in clause (2) of this Section 11(b), and subject to the provisions of
Section 11(d) hereof permitting self-insurance, Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized reputation and responsibility, all-risk aircraft hull insurance
covering the Aircraft and fire and extended coverage and all-risk aircraft hull
insurance covering Engines and Parts while temporarily removed from the Aircraft
and not replaced by similar components (including, without limitation, aircraft
war risk and governmental confiscation and expropriation (other than by the
government of registry of the Aircraft) and hijacking insurance, if and to the
extent the same is maintained by Lessee (or any Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the same
routes); provided, that such insurance shall at all times while the Aircraft is
subject to this Lease be for an amount (taking into account self-insurance to
the extent permitted by Section 11(d) hereof) not less than the Stipulated Loss
Value for the Aircraft; and provided further, that subject to compliance with
Section 11(d) hereof, such all-risk property damage insurance covering Engines
and Parts while temporarily removed from the Airframe or an airframe of (in the
case of Parts) an Engine need be obtained only to the extent available at
reasonable cost (as reasonably determined by Lessee). In the case of a loss
with respect to an engine (other than an Engine) installed on the Airframe in
circumstances which do not constitute an Event of Loss with respect to the
Airframe, Lessor shall promptly remit any payment made to it of any insurance
proceeds in respect of such loss to Lessee or any other third party that is
entitled to receive such proceeds.
Except during a period when a Section 14(a), (b), (f) or (g) Default
or an Event of Default has occurred and is continuing, all losses will be
adjusted by Lessee with the insurers giving due regard to Lessor's interest. As
between Lessor and Lessee, it is agreed that all proceeds of insurance
maintained in compliance with the preceding paragraph and received as the result
of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the Airframe
(or the Airframe and the Engines installed thereon), (i) unless such
property is replaced pursuant to the last paragraph of Section 10(a)
hereof, so much of such payments remaining, after reimbursement of Lessor
(as provided in Section 7.01 of the Trust Agreement) and the
56
<PAGE>
Owner Participant for reasonable costs and expenses, as shall not exceed
the Stipulated Loss Value and the other amounts payable under Section 10(a)
hereof required to be paid by Lessee pursuant to Section 10(a) hereof shall
be applied in reduction of Lessee's obligation to pay such Stipulated Loss
Value and the other amounts payable under Section 10(a) hereof, if not
already paid by Lessee, or, if already paid by Lessee, shall be applied to
reimburse Lessee for its payment of such Stipulated Loss Value and the
other amounts payable under Section 10(a) hereof, and the balance, if any,
of such payments remaining thereafter will be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee); or (ii) if such property
is replaced pursuant to the last paragraph of Section 10(a) hereof, such
payments shall be paid over to, or retained by, Lessee (or if directed by
Lessee, any Sublessee), provided that Lessee shall have fully performed or,
concurrently therewith, will fully perform the terms of the last paragraph
of Section 10(a) hereof with respect to the Event of Loss for which such
payments are made; and
(y) if such payments are received with respect to an Engine under
the circumstances contemplated by Section 10(b) hereof, so much of such
payments remaining after reimbursement of Lessor and the Owner Participant
for reasonable costs and expenses shall be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed or, concurrently therewith, will fully perform
the terms of Section 10(b) hereof with respect to the Event of Loss for
which such payments are made.
(2) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (1) above, and subject to the self-insurance to the extent
permitted by Section 11(d) hereof, insurance otherwise conforming with the
provisions of said clause (1) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
leased by Lessee of the same type as the Aircraft similarly on the ground and
not in operation, provided that, subject to the self-insurance to the extent
permitted by Section 11(d) hereof, Lessee shall maintain insurance against risk
of loss or damage to the Aircraft in an amount at least equal to the Stipulated
Loss Value of the Aircraft during such period that the Aircraft is on the ground
and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished, to
------------
Lessor, the Indenture Trustee, the Owner
57
<PAGE>
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, each Pass Through Trustee, on or before the Delivery Date, and each
annual anniversary of the Delivery Date during the Term, a report, signed by
Rollins Hudig Hall of Illinois, Inc. or any other independent firm of insurance
brokers reasonably acceptable to Lessor which brokers may be in the regular
employ of Lessee (the "Insurance Brokers"), describing in reasonable detail the
hull and liability insurance (and property insurance for detached engines and
parts) then carried and maintained with respect to the Aircraft and stating the
opinion of such firm that (a) such insurance complies with the terms hereof and
(b) that such insurance together with any self-insurance permitted hereby
provides coverage that are in substantially similar forms, are of such types and
have limits within the range of limits as are customarily carried by U.S.
carriers; provided, however, that the opinion set forth in clause (b) shall not
be required if the Insurance Broker then generally does not provide such an
opinion or will provide such an opinion for material additional cost; and
provided further that all information contained in the foregoing report shall
not be made available by Lessor, the Indenture Trustee, the Pass Through
Trustees or the Owner Participant to anyone except (A) to prospective and
permitted transferees of Lessor's, the Owner Participant's, any Pass Through
Trustee's or the Indenture Trustee's interest or their respective counsel,
independent certified public accountants, independent insurance brokers or other
agents, who agree to hold such information confidential, (B) to Lessor's, Owner
Participant's, any Pass Through Trustee's or the Indenture Trustee's counsel or
independent certified public accountants, independent insurance brokers or other
agents who agree to hold such information confidential, (C) as may be required
by any statute, court or administrative order or decree or governmental ruling
or regulation, or (D) as may be necessary for purposes of protecting the
interest of any such Person or for enforcement of this Lease by Lessor or the
Indenture Trustee; provided, however, that any and all disclosures permitted by
clauses (C) or (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of the Persons to whom such disclosures are
hereby permitted. Lessee will cause such Insurance Broker to agree to advise
Lessor, the Indenture Trustee, the Owner Participant and, so long as the Pass
Through Trustees are the Certificate Holders, each Pass Through Trustee in
writing of any act or omission on the part of Lessee of which it has knowledge
and which might invalidate or render unenforceable, in whole or in part, any
insurance on the Aircraft and to advise such Persons in writing at least 30 days
(7 days in the case of war risk and allied perils coverage) prior to the
cancellation or material adverse change of any insurance maintained pursuant to
this Section 11, provided that if the notice period specified above is not
reasonably obtainable, the
58
<PAGE>
Insurance Broker shall provide for as long a period of prior notice as shall
then be reasonably obtainable. In addition, Lessee will also cause such
Insurance Broker to deliver to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, each Pass Through Trustee, on or prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of insurance,
a new certificate of insurance, substantially in the same form as delivered by
Lessee to such parties on the Delivery Date except for the changes in the report
or the coverage consistent with the terms hereof. In the event that Lessee or
any Sublessee shall fail to maintain or cause to be maintained insurance as
herein provided, Lessor, the Indenture Trustee or, so long as the Pass Through
Trustees are the Certificate Holders, each Pass Through Trustee may at its sole
option, but shall be under no duty to, provide such insurance and, in such
event, Lessee shall, upon demand, reimburse Lessor, the Indenture Trustee or
such Pass Through Trustee, as Supplemental Rent, for the cost thereof to Lessor,
such Pass Through Trustee or the Indenture Trustee, as the case may be;
provided, however, that no exercise by Lessor, a Pass Through Trustee or the
Indenture Trustee, as the case may be, of said option shall affect the
provisions of this Lease, including the provisions that failure by Lessee to
maintain the prescribed insurance shall constitute an Event of Default.
(d) Self-Insurance. Lessee may self-insure the risks required to be
--------------
insured against pursuant to this Section 11 under a program applicable to all
aircraft (whether owned or leased) in Lessee's fleet, but in no case shall the
aggregate amount of such self-insurance in regard to Sections 11(a) and 11(b)
hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Lessee's fleet (including, without limitation, the
Aircraft) the lesser of (A) 50% of the highest replacement value of any single
aircraft in Lessee's fleet or (B) 1-1/2% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft (including, without
limitation, the Aircraft) on which Lessee carries insurance. In addition to the
foregoing right to self-insure, Lessee (and any Sublessee) may self-insure to
the extent of any applicable mandatory minimum per aircraft (or, if applicable,
per annum or other period) hull or liability insurance deductible imposed by the
aircraft hull or liability insurer.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
-----------------------------------------
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11. The Owner Participant or Lessor may carry for its own account at
its sole cost and expense insurance with respect to its interest in the
59
<PAGE>
Aircraft, provided that such insurance does not prevent Lessee (or any
Sublessee) from carrying the insurance required or permitted by this Section 11
or adversely affect such insurance or materially increase the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
--------------------------------------------------
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof, the obligations of which
are supported by the full faith and credit of the federal government of the
United States, against such risk in an amount which, when added to the amount of
insurance against such risk maintained by Lessee (or any Sublessee) shall be at
least equal to the amount of insurance against such risk otherwise required by
this Section 11 (taking into account self-insurance permitted by Section 11(d)
hereof).
(g) Application of Payments During Existence of Default. Any amount
---------------------------------------------------
referred to in this Section 11 which is payable to or retainable by Lessee (or
any Sublessee) shall not be paid to or retained by Lessee (or any Sublessee) if
at the time of such payment or retention a Default or an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to Lessor as
security for the obligations of Lessee under this Lease and, if such a Default
or an Event of Default shall have occurred and be continuing, applied against
Lessee's obligations hereunder as and when due. At such time as there shall not
be continuing any such Default or Event of Default, such amount shall be paid to
Lessee to the extent not previously applied in accordance with the preceding
sentence.
(h) Terms of Insurance Policies. Any policies carried in accordance
---------------------------
with Sections 11(a) and 11(b) hereof covering the Aircraft, and any policies
taken out in substitution or replacement for any such policies, (A) shall name
the Additional Insureds as additional insureds, or, if appropriate, loss payees,
as their respective interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurance), (B) may provide for
self-insurance to the extent permitted in Section 11(d) hereof, (C) shall
provide that if the insurers cancel such insurance for any reason whatever, or
if the same is allowed to lapse for non-payment of premium or if any material
change is made in the insurance which adversely affects the interest of any
Additional Insured, such lapse, cancellation or change shall not be effective as
to any Additional Insured for thirty days (ten days in the case of lapse for
nonpayment of premium and seven days in the case of war risk and allied perils
coverage) after receipt by such Additional Insured of written
60
<PAGE>
notice by such insurers of such lapse, cancellation or change; provided,
however, that if any notice period specified above is not reasonably obtainable,
such policies shall provide for as long a period of prior notice as shall then
be reasonably obtainable, (D) shall provide that in respect of the respective
interests of each Additional Insured in such policies the insurance shall not be
invalidated by any action or inaction of Lessee (or any Sublessee) or any other
Person and shall insure the respective interests of the Additional Insureds, as
they appear, regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by Lessee (or any Sublessee) or by any
other Person, (E) shall be primary without any right of contribution from any
other insurance which is carried by any Additional Insured, (F) shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured, (G) shall waive any right of the insurers to set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Additional Insured, and (H) shall provide that
(i) in the event of a loss involving the Aircraft, Airframe, or an Engine for
which proceeds are in excess of $5,000,000 ($2,500,000 if the Aircraft is under
sublease), the proceeds in respect of such loss up to the amount of Stipulated
Loss Value for the Aircraft shall be payable to Lessor (or, so long as the Trust
Indenture shall be in effect, the Indenture Trustee), it being understood and
agreed that in the case of any payment to Lessor (or the Indenture Trustee)
otherwise than in respect of an Event of Loss, Lessor (or the Indenture Trustee)
shall, upon receipt of evidence reasonably satisfactory to it that the damages
giving rise to such payment shall have been repaired or that such payment shall
then be required to pay for repairs then being made, pay the amount of such
payment, and any interest or income earned thereon in accordance with Section 22
hereof, to Lessee or its order, and (ii) the entire amount of any such loss for
which proceeds are $5,000,000 ($2,500,000 if the Aircraft is under sublease) or
less or the amount of any proceeds of any such loss in excess of Stipulated Loss
Value for the Aircraft shall be paid to Lessee or its order unless a Default or
an Event of Default shall have occurred and be continuing and the insurers have
been notified thereof by Lessor or the Indenture Trustee.
SECTION 12. Inspection. At reasonable times, and upon at least 10
----------
days (or one day if a Section 14(a), 14(b), 14(d) (solely with respect to
Lessee's obligations under Section 7(a) or (b)(viii) or Section 8 hereof), 14(f)
or 14(g) Default or any Event of Default shall have occurred and be continuing)
prior written notice, the Owner Participant or the Indenture Trustee, or their
respective authorized representatives, may inspect the Aircraft (provided,
however, that such inspections by the Owner
61
<PAGE>
Participant and its authorized representatives or the Indenture Trustee and its
authorized representative shall, in regard to each of the Owner Participant and
the Indenture Trustee, be limited to one inspection of the Aircraft during any
consecutive twelve-month period except during the continuance of a Default or an
Event of Default when such inspection right shall not be so limited) and inspect
and make copies of the books and records of Lessee and any Sublessee required to
be maintained by the FAA or the regulatory agency or body of another
jurisdiction in which the Aircraft is then registered relating to the
maintenance of the Aircraft (at the Owner Participant's or the Indenture
Trustee's risk and expense (unless a Section 14(a), 14(b), 14(f) or 14(g)
Default or any Event of Default shall have occurred and be continuing in which
case such inspection shall be at Lessee's expense), as the case may be) and
shall keep any information or copies obtained thereby confidential and shall not
disclose the same to any Person, except (A) to Lessor and the Pass Through
Trustees and to prospective and permitted transferees of Lessor's, the Owner
Participant's, any Pass Through Trustee's or the Indenture Trustee's interest
(and such prospective and permitted transferee's counsel, independent insurance
advisors or other agents) who agree to hold such information confidential, (B)
to Lessor's, the Owner Participant's, any Pass Through Trustee's or the
Indenture Trustee's counsel, independent insurance advisors or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, (D) as may be necessary for purposes of protecting the interest of
any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) and (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of Persons for whom such disclosures are hereby
permitted. Any such inspection of the Aircraft shall be subject to Lessee's
safety and security rules applicable at the location of the Aircraft, shall be a
visual, walk-around inspection of the interior and exterior of the Aircraft and
shall not include opening any panels, bays or the like without the express
consent of Lessee (except in connection with a heavy maintenance visit when a
panel, bay or the like is scheduled or required to be open), which consent
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation or maintenance of the
Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt by
Lessee of a written request from the Owner Participant specifying that the Owner
Participant desires to have an authorized representative observe the last
scheduled heavy maintenance visit to be performed on the Aircraft (or
substantially equivalent successor type of maintenance work) during the Term,
Lessee shall cooperate with the Owner
62
<PAGE>
Participant to enable the Owner Participant's representative to observe such
last scheduled heavy maintenance visit to be performed on the Aircraft during
the Term, including reasonable advance notification to the Owner Participant of
the time and place of such scheduled heavy maintenance visit; provided that the
Owner Participant's authorized representative shall merely observe such
scheduled heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection with
such scheduled heavy maintenance visit. Neither the Owner Participant nor the
Indenture Trustee shall have any duty to make any such inspection nor shall any
of them incur any liability or obligations by reason of not making any such
inspection.
SECTION 13. Assignment. Except as otherwise provided in the
----------
Operative Documents, Lessee will not, without the prior written consent of
Lessor, assign any of its rights hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided in the Operative Documents. Subject to the
foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
-----------------
constitute an Event of Default (whether any such event 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) and each such Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) Lessee shall not have made a payment of Basic Rent, Stipulated
Loss Value, Termination Value, EBO Price, Special Termination Value or Premium
within ten (10) days after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Supplemental Rent referred to in paragraph (a) of this Section 14)
after the same shall have become due and such failure shall continue for fifteen
(15) days after Lessee's receipt of written demand therefor by the party
entitled thereto (provided that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to Lessor or
the Owner Participant when due any Excluded Payments shall not constitute an
Event of Default unless written notice is given by the Owner Participant to
Lessee and
63
<PAGE>
the Indenture Trustee that such failure shall constitute an Event of Default);
or
(c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained) insurance required to be
maintained in accordance with the provisions of Section 11 hereof; or
(d) Lessee shall have failed to perform or observe (or caused to be
performed and observed) any other covenant or agreement to be performed or
observed by it under any Operative Document, and such failure shall continue
unremedied for a period of thirty days after written notice thereof by Lessor or
the Indenture Trustee; provided, however, that if Lessee shall have undertaken
to cure any such failure and, notwithstanding the reasonable diligence of Lessee
in attempting to cure such failure, such failure is not cured within said thirty
day period but is curable with future due diligence, there shall exist no Event
of Default under this Section 14 so long as Lessee is proceeding with due
diligence to cure such failure and such failure is in fact cured within 180
days); or
(e) any representation or warranty made by Lessee herein or in the
Participation Agreement or any document or certificate furnished by Lessee in
connection herewith or therewith or pursuant hereto or thereto (except the
representations and warranties set forth in Section 4 of the Tax Indemnity
Agreement) shall prove to have been incorrect in any material respect at the
time made and shall remain material at the time in question; provided, however,
such incorrectness shall constitute a default hereunder only if such
incorrectness shall continue uncured for a period of thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(f) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed or unstayed for a
period of ninety (90) consecutive days or an order for relief under Chapter 11
of the Bankruptcy Code with respect to Lessee as debtor or any other order,
judgment or decree shall be entered in any proceeding by any court of competent
jurisdiction appointing, without the consent
64
<PAGE>
of Lessee, a receiver, trustee or liquidator of Lessee, or for all or
substantially all of its property, or sequestering of all or substantially all
of the property of Lessee and any such order, judgment or decree or appointment
or sequestration shall be final or shall remain in force undismissed, unstayed
or unvacated for a period of ninety (90) days after the date of entry thereof;
or
(g) the commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of Lessee or for all or substantially all of its
property, or the making by Lessee of any assignment for the benefit of creditors
or Lessee shall take any corporate action to authorize any of the foregoing; or
(h) Lessee shall not be a Certificated Air Carrier;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
--------
and at any time thereafter so long as any such Event of Default shall not have
been remedied, Lessor may, at its option, declare by written notice to Lessee
this Lease Agreement to be in default; and at any time thereafter, so long as
such Event of Default shall be continuing, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as 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, however, that during any period the Aircraft is
subject to the Civil Reserve Air Fleet Program in accordance with the provisions
of Section 7(b) hereof and in the possession of the United States Government or
an instrumentality or agency thereof, Lessor shall not, on account of any Event
of Default, be entitled to do any of the following in such manner as to limit
Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines, unless at least 60 days' (or such
lesser period as may then be applicable under the Military Airlift Command
program of the
65
<PAGE>
United States Government) prior written notice of default hereunder shall have
been given by Lessor by registered or certified mail to Lessee (and 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) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with all
the provisions of, Section 5 as if such Airframe or Engine were being
returned at the end of the Term, or Lessor, at its option, may enter upon
the premises where all or any part of the Airframe or any Engine is located
and take immediate possession of and remove the same by summary proceedings
or otherwise, (and, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such
action or otherwise;
(b) sell the Aircraft, the Airframe or any Engine at public or
private sale, as Lessor may determine, or otherwise dispose of, hold, use,
operate, lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) Lessor may hold, keep idle or lease to others the Aircraft,
the Airframe or any Engine or any Part thereof, as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and
without any duty to account to Lessee with respect thereto, except that
Lessee's obligation to pay Basic Rent with respect to the Aircraft on Lease
Period Dates subsequent to the date upon which Lessee shall have been
deprived of use of the Aircraft pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by Lessor from leasing the
Aircraft, the Airframe or any Engine to any Person other than Lessee;
(d) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a), (b)
or (c) above with respect to the Aircraft, Lessor, by written notice to
Lessee specifying a payment date which shall be the Lease Period Date not
earlier than ten days from the date of such notice, may
66
<PAGE>
demand that Lessee pay to Lessor, and Lessee shall pay Lessor, on the
payment date so specified, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the installments of Basic Rent for the
Aircraft due for Lease Periods commencing on or after the Commencement Date
or the Lease Period Date, as the case may be, specified as the payment date
in such notice), any unpaid Basic Rent due on Lease Period Dates on or
prior to the payment date so specified plus whichever of the following
amounts Lessor, in its sole discretion, shall specify in such notice (with
interest thereon at the Past Due Rate from such specified payment date
until the date of actual payment of such amount): (i) an amount equal to
the excess, if any, of the Stipulated Loss Value for the Aircraft, computed
as of the Lease Period Date specified as the payment date in such notice
over the aggregate fair market rental value (computed as hereafter in this
Section 15 provided) of such Aircraft for the remainder of the Term, after
discounting such aggregate fair market rental value to present value as of
the Lease Period Date specified as the payment date in such notice at an
annual rate equal to the Past Due Rate; or (ii) an amount equal to the
excess, if any, of the Stipulated Loss Value for such Aircraft, computed as
of the Lease Period Date specified as the payment date in such notice, over
the fair market sales value of such Aircraft (computed as hereafter in this
Section provided) as of the Lease Period Date specified as the payment date
in such notice;
(e) in the event Lessor pursuant to paragraph (b) above, shall
have sold the Aircraft, Lessor, in lieu of exercising its rights under
paragraph (d) above with respect to such Aircraft, may, if it shall so
elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor, on
the date of such sale, as liquidated damages for loss of a bargain and not
as a penalty, any unpaid Basic Rent with respect to the Aircraft due on or
prior to such date plus the amount of any deficiency between the net
proceeds of such sale (after deduction of all reasonable costs of sale) and
the Stipulated Loss Value of such Aircraft, computed as of the Stipulated
Loss Value date on or immediately following the date of such sale, together
with interest, if any, on the amount of such deficiency, at the Past Due
Rate, from the date of such sale to the date of actual payment of such
amount; and/or
(f) Lessor may rescind or terminate this Lease Agreement, and/or
may exercise any other right or remedy which may be available to it under
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for breach hereof.
67
<PAGE>
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an arm's-
length transaction between an informed and willing lessee or purchaser, as the
case may be, under no compulsion to lease or purchase, as the case may be, and
an informed and willing lessor or seller in possession, as the case may be, in
each case based upon the actual condition and location of the Aircraft, which
value shall be determined by mutual agreement or, in the absence of mutual
written agreement, pursuant to an appraisal prepared and delivered by a
nationally recognized firm of independent aircraft appraisers nominated by
Lessor, and Lessor shall promptly notify Lessee of such nomination. Any
appraisal obtained pursuant to this Section 15 shall take into account then
prevailing market conditions for aircraft of the same type as the Aircraft. The
cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies, for the payment of Premium, if any, and for all reasonable and actual
legal fees and other costs and expenses incurred by Lessor, the Indenture
Trustee, the Certificate Holders and the Owner Participant in connection with
any default or the exercise of remedies hereunder including the return of the
Airframe or any Engine in accordance with the terms of Section 5 or in placing
such Airframe or Engine in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor, the Indenture Trustee, a Certificate Holder or the Owner
Participant may bid for and purchase such property. Lessor agrees to give
Lessee at least 10 days' written notice of the date fixed for any public sale of
any Airframe or Engine or of the date on or after which will occur the execution
of any contract providing for any private sale. Except as otherwise expressly
provided above, no remedy referred to in this Section 15 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such remedies
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies. No waiver by Lessor of any Default or Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Default or Event of Default. To the extent permitted by applicable law, Lessee
hereby waives any right now or hereafter conferred by statute or otherwise which
may require
68
<PAGE>
Lessor to sell, lease, or otherwise use the Aircraft or Parts thereof in
mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights and remedies in this Section
15.
SECTION 16. Lessee's Cooperation Concerning Certain Matters. (a)
-----------------------------------------------
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the execution
and delivery of any amendment to this Lease or to the Trust Agreement or Trust
Indenture, Lessee at its expense will cause such Lease Supplement, Trust
Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well) or
amendment to be duly filed and recorded, and maintained of record, in accordance
with the applicable laws of the government of registry of the Aircraft. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor may from
time to time reasonably request in order more effectively to 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 Lessor and the Indenture
Trustee hereunder, including, without limitation, if requested by Lessor, at the
expense of Lessee, the execution and delivery of supplements or amendments
hereto, each in recordable form, subjecting to this Lease and the Trust
Indenture, any airframe or engine substituted for the Airframe or any Engine
pursuant to the terms thereof and the recording or filing of counterparts
thereof, in accordance with the laws of such jurisdictions as Lessor may from
time to time reasonably request.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, the Pass Through Trustees:
(i) Quarterly Statements - As soon as practicable after the end
--------------------
of the first, second, and third quarterly fiscal periods in each fiscal
year of Lessee, and in any event within 60 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such quarter setting forth in comparative form the amount for the end
of the corresponding period of the preceding fiscal year,
(2) consolidated statements of income and retained earnings
of Lessee for such quarterly period, setting forth in comparative form
the amount for the corresponding period of the preceding fiscal year,
and
69
<PAGE>
(3) consolidated statements of cash flow of Lessee for the
portion of the fiscal year ending with said quarter, setting forth in
comparative form the amount for the corresponding period of the
preceding fiscal year;
(ii) Annual Statements - As soon as practicable after the end of
-----------------
each fiscal year, and in any event within 120 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such year, and
(2) consolidated statements of income and retained earnings
and of cash flow of Lessee for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year and accompanied by an auditor's report of a firm of independent
certified public accountants of recognized national standing (which report
may be adverse, qualified or disclaim an opinion);
(iii) SEC Reports - Promptly upon their becoming available, one
-----------
copy of each financial statement, report, or proxy statement sent by UAL
Corporation to its shareholders generally, and of each regular or periodic
report and any prospectus (in the form in which it becomes effective) filed
by Lessee or UAL Corporation with the Securities and Exchange Commission or
any successor agency; and
(iv) Notice of Default or Claimed Default -Immediately upon an
------------------------------------
officer of Lessee becoming aware of the existence of a Default or an Event
of Default (or that Lessor has given notice or taken any other action with
respect to an Event of Default or a claimed default under this Lease), a
written notice specifying the nature of the Default, Event of Default, or
claimed default and any such notice given or action taken by Lessor and
what action Lessee is taking or proposes to take with respect thereto.
(c) Commencing in 1996, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate of
Lessee, signed by the President, a Vice President, the Chief Financial Officer
or the principal accounting officer of Lessee to the effect that the signer is
familiar with or has reviewed the relevant terms of this Lease and the signer
does not have knowledge of the
70
<PAGE>
existence, as of the date of such certificate, of any condition or event which
constitutes a Default or an Event of Default.
SECTION 17. Notices. All notices required under the terms and
-------
provisions hereof shall be in writing (including telex, telecopier or similar
writing) and shall be effective (a) if given by telecopier when transmitted and
the appropriate confirmation received; provided, that any such notice is
confirmed by certified mail, (b) if given by certified mail, three Business Days
after being deposited in the mails, (c) if given by telex, upon receipt by the
party transmitting the telex of such party's callback code at the end of such
telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at P. O. Box 66100, Chicago, Illinois 60666(or,
if given by overnight delivery service, 1200 East Algonquin Road, Elk Grove
Township, Illinois 60007) Attention: Vice President and Treasurer,
telecopier number (708) 952-7117, or to such other address or telecopier
number as Lessee shall from time to time designate in writing to Lessor;
(ii) if to Lessor, at 225 Franklin Street, Boston, Massachusetts
02110 (or, if given by overnight delivery service) Two International Place,
Boston, Massachusetts 02110) Attention: _____________________, telecopier
number (617) 664-5367 or to such other address or telecopier number as
Lessor shall from time to time designate in writing to Lessee;
(iii) if to the Indenture Trustee, the Owner Participant or any
Pass Through Trustee, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at such address or telecopier
number as the Indenture Trustee, the Owner Participant or such Pass Through
Trustee shall have furnished by notice to Lessor and to Lessee, and, until
an address is so furnished, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at its address or telecopier
number set forth in Schedule I to the Participation Agreement; and
(iv) If to a Certificate Holder which is not a Pass Through
Trustee, addressed to such Certificate Holder at its address stated in the
Loan Certificate Register maintained pursuant to the Trust Indenture.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
71
<PAGE>
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
----------------------------------------
(a) This Lease is a net lease, and it is intended that the Lessee
shall pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary or structural or non-structural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including the costs and expenses particularly set
forth in this Lease. Except as set forth in this Section 18(a), the Rent which
Lessee is obligated to pay shall be paid without the necessity of notice or
demand and without set-off, counterclaim, abatement, suspension, deduction or
defense. If at any time that Lessee is required (a) to make a payment of
Termination Value or Fair Market Sales Value pursuant to Section 9 or Stipulated
Loss Value pursuant to Section 10, or (b) to pay the purchase price of the
Aircraft pursuant to Section 19(b), there shall exist a Lessor Lien with respect
to the Aircraft (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens) relating to the Owner
Participant (or Lessee shall have previously incurred a charge to discharge such
a Lessor Lien), then Lessee shall be entitled to deduct from the portion
required to be paid to the Owner Participant of such payment of Termination
Value or Fair Market Sales Value, or such payment of the purchase price, or any
combination thereof, as the case may be, an amount sufficient to so reimburse
Lessee or to reimburse Lessee for the cost of discharging such Lessor Lien, as
the case may be. Notwithstanding anything contained in this Section 18(a) to
the contrary, any payments of Fair Market Sales Value, Termination Value,
Stipulated Loss Value, Special Termination Value or EBO Price made to the
Indenture Trustee shall be in an amount which, together with any other amounts
payable hereunder, is at least sufficient to pay in full, as of the date of
payment thereof, the amount of principal of, and any accrued and unpaid interest
on, the outstanding Loan Certificates, together with Premium, if any, thereon
and amounts due the Certificate Holders under the Trust Indenture, if any, and,
to such extent, shall not be subject to set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall not
terminate nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated to pay hereunder, nor shall the obligations hereunder of the
Lessee be affected, by reason of (A) any damage to or the destruction or loss of
all or any portion of the Airframe or any Engine from whatever cause, (B) the
loss or theft of any portion of the Airframe or any Engine, (C) the taking of
the Airframe or any Engine or any portion thereof by condemnation, confiscation,
requisition or otherwise, (D) the prohibition, limitation or
72
<PAGE>
restriction of the Lessee's use of all or any part of the Airframe or any
Engine, or the interference with such use by any Person, (E) the inadequacy or
incorrectness of the description of any portion of the Airframe or any Engine or
the failure of this Lease to demise to the Lessee the Airframe or any Engine or
any portion thereof, (F) the Lessee's acquisition or ownership of all or any
part of the Airframe or any Engine otherwise than pursuant to an express
provision of this Lease, (G) any defect in compliance with specifications,
condition, merchantability, design, airworthiness, quality, durability,
operation or fitness for use for any purpose of the Airframe or any Engine or
any portion thereof, (H) any defect in the title to, or registration of or the
existence of any Liens or rights of others whatsoever with respect to, the
Airframe or any Engine or any portion thereof, (I) any insolvency, bankruptcy,
reorganization or similar proceedings by or against any Sublessee or any Person
(J) any breach, default or misrepresentation by the Lessor, any Participant or
the Indenture Trustee under this Lease or any other Operative Document or any of
the documents referred to herein or therein or (K) any invalidity or
unenforceability, in whole or in part, of this Lease or any other Operative
Document or any of the documents referred to herein or therein, or any other
infirmity herein or therein, or any lack of power or authority of any party to
this Lease or any other Operative Document or any such documents to enter into
the same, or (L) any other circumstance, happening or act whatsoever, whether or
not unforeseen or similar to any of the foregoing, it being the intention of the
parties hereto that the obligations of the Lessee shall be absolute and
unconditional and shall be separate and independent covenants and agreements and
shall continue unaffected unless and until this Lease shall have terminated in
accordance with its terms upon payment by Lessee of all sums payable by Lessee
hereunder and performance by Lessee of all obligations required to be performed
by Lessee hereunder.
The Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or avoid
this lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting the Lessor or the Owner Participant or any assignee of the
Lessor the Owner Participant or any other action with respect to this Lease
which may be taken in any such proceeding by any trustee or receiver of the
Lessor or the Owner Participant or of any assignee of the Lessor or the Owner
Participant or by any court or any of the foregoing actions which may be taken
by or against any of the Lessor's predecessors in interest in the Airframe or
any Engine.
73
<PAGE>
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, without limitation of the other rights and
remedies of Lessor hereunder, to pay to Lessor an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Lease not been terminated in whole or in part.
Except as expressly provided herein, the Lessee waives all rights now
or hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Lease or the Airframe or any Engine or any part thereof, or (y) to any
abatement, suspension, deferment, return or reduction of the Rent.
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
--------------------------------------------
Renewal Options.
- ---------------
(1) Fixed Renewal Terms. Not less than 180 days nor more than
-------------------
365 days before the end of the Basic Term or any Fixed Renewal Term, Lessee
may, so long as no Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) hereof or Section 8 hereof),
(f) or (g) Default or any Event of Default has occurred and is continuing,
deliver to Lessor an irrevocable written notice (which at the option of
Lessee made at any time prior to 90 days prior to the end of the Basic Term
or such Fixed Renewal Term may be deemed a notice to exercise the
applicable purchase option in Section 19(b)) electing to renew this Lease
for a term or terms having a duration and at a Basic Rent as determined
below (each such term being herein referred to as a "Fixed Renewal Term").
At least 180 days, before the end of the Basic Term Lessee shall, as a
condition to its exercise of any option set forth in this Section 19(a)(1),
notify Lessor of its demand for an appraisal pursuant to the appraisal
procedures of Section 19(c) hereof. The appraiser(s) so appointed shall
determine the total useful life, the remaining useful life and the future
residual value of the Aircraft on the expiration date for a Fixed Renewal
Term as may be set by reason of the maximum period therefor in accordance
with the constraints set forth in the following two sentences. The
duration of each Fixed Renewal Term shall be a period specified by Lessee
before the end of the Basic Term (or the preceding Fixed Renewal Term, as
the case may be) which is not less than one year and not more than three
years (in integral multiples of six months). Notwithstanding the
foregoing, the aggregate term of all Fixed Renewal Terms shall not exceed
the lesser of (a) three years and (b) the longest period of time (i) which
would cause the Term, after giving
74
<PAGE>
effect to all such Fixed Renewal Terms, to be equal to at least 80% of the
then estimated useful life of the Aircraft as determined by the
appraiser(s) and (ii) at the expiration of which the residual value of the
Aircraft, as estimated by the appraiser(s), would be at least equal to 20%
of Lessor's Cost (without taking into account inflation or deflation during
the Term). The annual Basic Rent payable during each Fixed Renewal Term
shall be equal to one-half of the average annual Basic Rent payments for
the Aircraft over the Basic Term.
(2) Fair Market Renewal Term. So long as no Section 14(a), (b),
------------------------
(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) Default or any Event of
Default has occurred and is continuing, Lessee shall have the right to
renew this Lease for additional periods of at least one year commencing at
the end of the Basic Term, any Fixed Renewal Term or any prior Fair Market
Renewal Term for a Basic Rent equal to the Fair Market Rental Value of the
Aircraft for such period (each such renewal term, a "Fair Market Renewal
Term"); provided, however, each Fair Market Renewal Term shall be an
integral multiple of six months. Notwithstanding the foregoing, the
aggregate term for all Fair Market Renewal Terms shall not exceed three
years. Each such option to renew shall be exercised upon delivery by
Lessee to Lessor of irrevocable written notice of Lessee's intent to renew
the Lease at least 180 days (but not more than 365 days) prior to the
commencement of such Fair Market Renewal Term (which at the option of the
Lessee made at any time prior to 90 days prior to the anticipated
commencement of such Fair Market Renewal Term may be deemed a notice to
exercise the applicable purchase option in Section 19(b)).
(3) Waiver. If no written notice is delivered by Lessee to
------
Lessor pursuant to Section 19(a)(1) or (2) on or before the day specified
therefore, Lessee shall be deemed to have waived any right to renew this
Lease.
(4) Conditions Precedent, Payment of Basic Rent. At the end of
-------------------------------------------
the Basic Term or any Renewal Term, if Lessee has elected to renew this
Lease as aforesaid, and provided that there shall not then have occurred
and be continuing a Default or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above
provided, (i) this Lease shall continue in full force and effect during the
Renewal Term, and (ii) Basic Rent for such Renewal Term shall be
75
<PAGE>
payable in semi-annual installments in advance or arrears as was the basis
of the Basic Rent being paid immediately prior to such Renewal Term, each
such installment being due and payable on each Lease Period Date occurring
during the Renewal Term.
(5) Termination Value; Stipulated Loss Value. The amounts which
----------------------------------------
are payable during any Renewal Term in respect of Termination Value as used
in Section 15 and Stipulated Loss Value with respect to the Aircraft shall
be determined on the basis of the Fair Market Sales Value of the Aircraft
as of the commencement of such Renewal Term, amortized on a straight-line
basis over such Renewal Term to the projected Fair Market Sales Value of
the Aircraft as of the expiration of such Renewal Term, as such Fair Market
Sales Value in each case is determined prior to the commencement of such
Renewal Term. In determining Fair Market Sales Value for purposes of
calculating Stipulated Loss Value and Termination Value for any Renewal
Term effect shall be given to the encumbrance on the Aircraft of any Fixed
Renewal Term available or in force.
(b) Purchase Options. Lessee shall have the option, so long as no
----------------
Section 14(a), (b), (f) or (g) Default or any Event of Default exists on the
date notice of exercise may be given, (i) with respect to subsections (1) and
(2) below, upon not more than 365 days and not less than 90 days irrevocable
prior written notice to Lessor and (ii) with respect to subsections (3) and (4)
below, upon not more than 365 days and not less than 180 days irrevocable prior
written notice to Lessor (which at the option of the Lessee made at any time
prior to 90 days prior to the relevant purchase date may be deemed a notice of
the applicable renewal option pursuant to Section 19(a)(1) or 19(a)(2) as the
Lessee may designate) (each a "Purchase Option Date"), to terminate this Lease
and to purchase the Aircraft:
(1) on any Special Purchase Option Date for a purchase price
equal to the greater of (x) the Fair Market Sales Value of the Aircraft on
such date or (y) the amount determined by multiplying Lessor's Cost by the
Special Termination Value Percentage with respect to such Date (with
respect to any such Date, the "Special Termination Value");
(2) on the EBO Date for a purchase price equal to the amount
determined by multiplying Lessor's Cost by the EBO Percentage payable on
the EBO Date or as otherwise provided in, and subject to the conditions set
forth in, Exhibit H hereto (the "EBO Price");
76
<PAGE>
(3) on the last Business Day of the Basic Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date;
and
(4) on the last Business Day of any Renewal Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date.
Notwithstanding the foregoing but subject to the provisions of Section 8(r) of
the Participation Agreement, the purchase price on any Purchase Option Date
shall be sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of the
principal amount (and Premium, if any) of and interest on the Loan Certificates
then outstanding. Upon payment to Lessor in immediately available funds of the
full amount of the purchase price (less the principal amount of the Loan
Certificates assumed by the Lessee in accordance with Section 8(r) of the
Participation Agreement) plus all Basic Rent due on or prior to such purchase
date (unless denominated "advance" rental), all Supplemental Rent due on or
prior to such purchase date (including amounts equal to Premium, if any) and
payment of any other amounts then due hereunder (including all reasonable costs
or expenses of Lessor (including any applicable sales or transfer taxes) and the
Owner Participant in connection with such purchase), Lessor will transfer to
Lessee, without recourse or warranty (except as to the absence of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)), all of Lessor's right, title and interest
in and to the Aircraft.
(c) Valuation. At any time not earlier than 365 days prior to the
---------
date on which Lessee may purchase an Aircraft pursuant to Section 19(b) hereof
or renew this Lease pursuant to Section 19(a) hereof, Lessee may deliver to
Lessor a revocable notice of its intent to exercise its renewal option or
purchase option. For all purposes of this Section 19, including the appraisal
referred to in this Section 19(c), in determining Fair Market Rental Value or
Fair Market Sales Value, the Aircraft shall be valued (i) as if in the condition
and otherwise in compliance with the terms of Section 5 (but subject to Section
5(e)) upon a return of the Aircraft in the United States and as if it had been
maintained at all times as required in accordance with Section 7(a)(1) and (2)
and Section 8, (ii) on the basis of the value which would obtain in an arm's-
length transaction between an informed and willing buyer or user or lessee
(other than a lessee or an Affiliate of a lessee currently in possession or a
used equipment scrap dealer) under no compulsion to buy or lease and an informed
and willing seller or lessor unaffiliated with such buyer-user or lessee and
under no compulsion to sell or
77
<PAGE>
lease, and (iii) in the case of such valuation for determining Fair Market
Rental Value, assuming such lessee would have substantially the same obligations
during the Fair Market Renewal Term as provided hereunder including without
limitation the obligations of Lessee to carry and maintain the insurance
required by Section 11 hereof. Upon receipt of such notice Lessor and Lessee
shall confer in good faith with a view to reaching agreement on the Fair Market
Rental Value or Fair Market Sales Value of the Aircraft. If the parties have
not so agreed by 240 days prior to the end of the Basic Term or the Renewal Term
in question, then the question shall be determined by an appraisal mutually
agreed to by two recognized independent aircraft appraisers, one of which
appraisers shall be chosen by Lessor and one by Lessee within five Business Days
after Lessor or Lessee shall have received written notice from the other party
of a demand that such an appraisal be made, which notice shall specify the
appraiser chosen by the party giving the notice or, if such appraisers cannot
agree on the amount of such appraisal within five Business Days after the end of
such five-day period, each shall render its own appraisal and shall by mutual
consent choose another appraiser within five Business Days after the end of such
five-day period. If, within such five-day period, such two appraisers fail to
appoint a third appraiser, then either Lessor or Lessee, on behalf of both, may
apply to the American Arbitration Association (or any successor organization
thereto) in Chicago, Illinois for the appointment of such third appraiser. The
decision of the third appraiser so appointed shall be given within ten Business
Days after the appointment of such third appraiser. As soon as the third
appraiser has delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations than
each of the other two determinations, then the determination of such appraiser
shall be excluded, the remaining two determinations shall be averaged and such
average shall be final and binding upon the parties hereto; otherwise the
average of all three determinations shall be final and binding upon the parties
thereto. Lessee and Lessor shall equally bear all expenses relating to such
appraisal procedure (other than an appraisal procedure related to Lessee's
purchase option under Section 19(b)(1), the costs of which Lessee shall in all
events bear), provided, that if such transaction is not consummated (other than
as the result of the fault of Lessor) Lessee shall bear all expenses relating to
such appraisal procedure.
SECTION 20. Security for Lessor's Obligation to Certificate Holders.
-------------------------------------------------------
In order to secure the indebtedness evidenced by the Loan Certificates, Lessor
has agreed in the Trust Indenture, among other things, to assign to the
Indenture Trustee this Lease and to mortgage the Aircraft in favor of the
78
<PAGE>
Indenture Trustee, subject to the reservations and conditions therein set forth.
To the extent, if any, that this Lease 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 may be created through the
transfer or possession of any counterpart other than the original counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee as indenture trustee under the Trust Indenture
on the signature page thereof. Lessee hereby accepts and consents to the
assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Lessee agrees to pay directly to
the Indenture Trustee (or, after receipt by Lessee of notice from the Indenture
Trustee of the discharge of the Trust Indenture, to Lessor), all amounts of Rent
(other than Excluded Payments) due or to become due hereunder and assigned to
the Indenture Trustee and Lessee agrees that the Indenture Trustee's right to
such payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance. Notwithstanding the foregoing assignment of this
Lease, the obligations of Lessor to Lessee to perform the terms and conditions
of this Lease shall remain in full force and effect. Lessee further
acknowledges that the Trust Indenture provides that so long as the Loan
Certificates are outstanding Lessor may not consent to any amendment,
modification or waiver to this Lease without the prior consent of the Indenture
Trustee (except as provided in Section 11.06 of the Trust Indenture) and Lessee
agrees to provide to the Indenture Trustee a copy of all notices, consents,
certificates or other information provided hereunder to Lessor.
SECTION 21. Lessor's Right to Perform for Lessee. If 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, then (but in each case,
except in the case of failure to pay Rent or in the case of failure to maintain
insurance as required hereunder, no earlier than five Business Days after notice
as to the occurrence of such failure, whether or not it shall yet constitute an
Event of Default hereunder) Lessor may itself make such payment or perform or
comply with such agreement but shall not be obligated hereunder to do so, and
the amount of such payment and the amount of the reasonable expenses of 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 Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
-------------------------------------------------
Limited. (a) Investment of Security Funds. Any moneys
----------------------------
79
<PAGE>
held by Lessor as security hereunder for future payments to Lessee shall, until
paid to Lessee, be invested by Lessor or, if the Trust Indenture shall not have
been discharged, by the Indenture Trustee, as the case may be, as Lessee (or in
the event a Default under Section 14(a), (b), (f) or (g) or an Event of Default
has occurred and is continuing, Lessor) may from time to time direct in writing
(and in absence of a written direction by Lessee, there shall be no obligation
to invest such moneys) in (i) obligations of, or guaranteed by, the United
States Government or agencies thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States of America or any
State thereof rated at least P-1 or its equivalent by Moody's Investors Service,
Inc. or at least A-1 or its equivalent by Standard & Poor's Corporation, (iii)
certificates of deposit issued by commercial banks organized under the laws of
the United States or of any political subdivision thereof having a combined
capital and surplus in excess of $200,000,000 which banks or their holding
companies have a rating of A or its equivalent by Moody's Investors Service,
Inc. or Standard & Poor's Corporation; provided, however, that the aggregate
amount at any one time so invested in certificates of deposit issued by any one
bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar
denominated offshore certificates of deposit issued by, or offshore time
deposits with, any commercial bank described in (iii) or any subsidiary thereof
and (v) repurchase agreements with any financial institution having combined
capital and surplus of at least $200,000,000 with any of the obligations
described in clause (i) through (iv) as collateral. There shall be promptly
remitted to Lessee or its order (but no more frequently than monthly) any gain
(including interest received) realized as a result of any such investment (net
of any fees, taxes, commissions and other expenses, if any, incurred in
connection with such investment) unless a Section 14(a), (b), (d) (solely with
respect to Lessee's obligations under Section 7(a) or (b)(viii) or Section 8
hereof), (f) or (g) Default or an Event of Default shall have occurred and be
continuing. If a Default under Section 14(a), (b), (d) (solely with respect to
Lessee's obligations under Section 7(a) or (b)(viii) or Section 8 hereof), (f)
or (g) or an Event of Default shall have occurred and be continuing, Lessor or
if the Trust Indenture shall not have been discharged, the Indenture Trustee as
assignee of Lessor, shall hold any such gain as security for the obligations of
Lessee under this Lease and apply it against such obligations as and when due,
and once all such Defaults and Events of Default have been remedied any gain not
so applied shall be remitted to Lessee. Lessee shall be responsible for any net
loss realized as a result of any such investment and shall reimburse Lessor (or
the Indenture Trustee, as the case may be) therefor on demand.
80
<PAGE>
(b) Liability of Lessor Limited. It is expressly agreed and
---------------------------
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under the
Trust Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct or for breach of its covenants, representations and
warranties contained herein, to the extent covenanted or made in its individual
capacity.
SECTION 23. Miscellaneous. 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section and
paragraph headings in 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 and all references herein to numbered sections, unless
otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease 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 24. Successor Trustee. Lessee agrees that in the case of the
-----------------
appointment of any successor Owner Trustee pursuant to the terms of the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without in any way altering the terms of this Lease or Lessee's
obligations hereunder. One such appointment and designation of a successor
Owner Trustee shall not exhaust the right to appoint and designate further
successor Owner Trustees pursuant to the Trust Agreement, but such right may be
executed repeatedly as long as this Lease shall be in effect.
81
<PAGE>
SECTION 25. Bankruptcy. Lessee hereby acknowledges that Lessor and
----------
the Indenture Trustee are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft and that this Lease is a "lease"
within the meaning of said Section 1110, including that it is to be treated as a
lease for federal tax purposes. Lessee agrees not to take any position in
connection with any bankruptcy proceedings involving it that is inconsistent
with a lessor's rights under Section 1110 of the Bankruptcy Code or any
comparable or successor provision affording protection to lessors of aircraft.
* * *
82
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed as of the day and year first above written.
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly
provided in Section 4 hereof, but solely as
Owner Trustee,
Lessor
By_________________________________
Vice President
UNITED AIR LINES, INC.,
Lessee
By_________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged on this _____ day of May, 1995./1/
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
Indenture Trustee
By_________________________________
Authorized Officer
/1/This language contained in the original counterpart only.
83
<PAGE>
EXHIBIT A
LEASE SUPPLEMENT NO. 1 (1995 777 A)
-----------------------------------
LEASE SUPPLEMENT No. 1 (1995 777 A), dated May __, 1995, between STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement (1995 777 A), dated as of May 1, 1995,
between such Owner Trustee and the Owner Participant referred to therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and UNITED AIR LINES, INC. ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement (1995 777 A), dated as of May 1, 1995, relating to one Boeing 777-222
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document./2/
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, attached and made a part of Lease Supplement No. 1
(1995 777 A) dated May __, 1995, has been recorded by the Federal Aviation
Administration on ___________ __, 1995, as one document and assigned Conveyance
No. __________./3/
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the
following described Boeing Model 777-222 aircraft (the "Aircraft"), which
Aircraft as of the date hereof consists of the following components:
- -----------------------
/2/This language for Lease Supplement No. 1.
/3/This language for other Lease Supplements.
<PAGE>
(i) Airframe: U.S. Registration No. N777UA and
manufacturer's serial no. 26916; and
(ii) Engines: two (2) Pratt & Whitney Model PW4084 engines
bearing, respectively, manufacturer's serial nos. _______ and _______
(each of which engines has 750 or more rated takeoff horsepower or the
equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the
Delivery Date and end on the Lease Expiry Date.
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent
for the Aircraft throughout the Term therefor in accordance with Section 3
of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in
good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or
otherwise affect any right Lessee or Lessor may have with respect to the
Aircraft against The Boeing Company, or any subcontractor or supplier of
The Boeing Company, under the Purchase Agreement or otherwise.
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, 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.
* * *
A-2
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee,
Lessor
By:________________________________
Title:_____________________________
UNITED AIR LINES, INC.,
Lessee
By:________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged on this _____ day of May, 1995./4/
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION
Indenture Trustee
By_________________________________
Authorized Officer
- ----------------------
/4/This language contained in the original counterpart only.
A-3
<PAGE>
EXHIBIT B
BASIC RENT AND EXCESS AMOUNT SCHEDULE
-------------------------------------
<TABLE>
<CAPTION>
ARREARS RENT ADVANCE RENT EXCESS AMOUNT
AS A PERCENTAGE AS A PERCENTAGE AS A PERCENTAGE
DATE OF LESSOR'S COST OF LESSOR'S COST OF LESSOR'S COST
- ------ ---------------- ---------------- ----------------
<S> <C> <C> <C>
</TABLE>
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT B TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
EXHIBIT C
STIPULATED LOSS VALUE SCHEDULE
------------------------------
STIPULATED LOSS VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT C TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
EXHIBIT D
TERMINATION VALUE SCHEDULE
--------------------------
TERMINATION VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT D TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
EXHIBIT E
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage pursuant to the Lease and any calculation of any payment to the Owner
Participant or Lessee under the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement shall be determined by the Owner Participant, computed
on the basis of the same methodology and assumptions used by the Owner
Participant in determining the Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage as of the Delivery Date except as such assumptions have been modified
pursuant to Section 3 of the Lease; provided, however, Lessee may request (A)
Capstar Partners, Inc., or any other financial advisor to Lessee to verify such
calculations but without any requirement that the Owner Participant disclose to
such advisor such methodology and assumptions and (B) if Lessee believes that
such calculations by the Owner Participant are in error then a nationally
recognized firm of accountants selected by the Owner Participant and reasonably
acceptable to Lessee (which may be the Owner Participant's independent public
accountants) shall be permitted to verify such calculations and the Owner
Participant will make available to such firm (subject to the execution by such
firm of a confidentiality agreement reasonably acceptable to the Owner
Participant) such methodology and assumptions and any changes made therein
pursuant to Section 3 of the Lease and any other information reasonably
necessary for such verification requested by such firm. In the event of a
verification under clause (B) of this Exhibit E the determination by such firm
of accountants shall be final. Lessee will pay the reasonable costs and
expenses of the verification under clause (B) of this Exhibit E; provided,
however, if as a result of such verification process the Basic Rent is adjusted
and such adjustment causes the Net Present Value of Rents to decline by 10 or
more basis points or there is a material error in the computation of the
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages or EBO Percentage in the Owner Participant's
original statement in the Owner Participant's favor, or indemnity payment is
reduced by $10,000 or more, the Owner Participant shall pay the reasonable costs
and expenses of such verification process. Such recalculated Basic Rent,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage shall be set forth in an
amendment to the Lease.
<PAGE>
EXHIBIT F
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
_______________________
* Designates "Restricted Country".
<PAGE>
EXHIBIT G
SCHEDULE OF COUNTRIES AUTHORIZED
FOR AIRCRAFT REGISTRATION
--------------------------------
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
_______________________
* Designates "Restricted Country".
<PAGE>
EXHIBIT H
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
------------------------------------------------------
Lessor's Cost: $________
Engine Cost: $_________
Commencement Date: October 19, 1995
Lease Expiry Date: October 19, 2019
Stipulated Loss Value Date: the 19th day of each
calendar month during the
Interim Term, the Basic
Term and any Renewal Term
EBO Date: ______, 2012
EBO Percentage: ______%/1/
Special Purchase Special Termination
- -------------------
/1/ Alternatively, Lessee may elect to purchase the Aircraft in accordance with
Section 19(b)(2) of the Lease by paying the installment amounts on the dates
given below:
EBO Installment Percentages
EBO Installment (expressed as a percentage
Dates of Lessor's Cost)
--------------- ---------------------------
______, 2012 %
______, 2012 %
______, 2012 %
______, 2012 %
In the event that Lessee shall so elect and, so long as no payment or bankruptcy
Default, or Event of Default, shall be continuing, Lessee shall as of the EBO
Date purchase the Aircraft and receive title to the Aircraft and shall be
deemed, as of the EBO Date, to mortgage in favor of Lessor all of its right,
title and interest, on and after such date, in the Aircraft to secure the loan
and punctual payment of all EBO installment amounts payable under this Exhibit
H. On the EBO Date, Lessee shall execute and deliver such instruments, in due
form for filing or recording, as may be reasonably requested by the Owner
Participant, to grant, confirm and perfect the mortgage and security interest
deemed to be created by this Exhibit H and to confirm Lessee's obligations to
make the installment payments payable under this Exhibit H.
<PAGE>
Option Dates: Value Percentages:
---------------- -------------------
_______________ _____%
_______________ _____%
_______________ _____%
<PAGE>
EXHIBIT H
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
------------------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT H TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
Doc. No. 1.02
Aircraft N766UA
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(1995 777 B)
Dated as of May 1, 1995
Between
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly
provided herein, but solely as
Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
----------------------------
United Air Lines, Inc.
1995 777 B Equipment Trust
One Boeing 777-222 Aircraft
----------------------------
- --------------------------------------------------------------------------------
As set forth in Section 20 hereof, Lessor has assigned to the Indenture
Trustee (as defined herein) certain of its right, title and interest in and to
this Lease. To the extent, if any, that this Lease 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 may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
thereof.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Definitions................................................... 1
SECTION 2. Acceptance and Lease.......................................... 17
SECTION 3. Term and Rent................................................. 17
(a) Interim Term and Basic Term........................... 17
(b) Basic Rent............................................ 17
(c) Adjustments to Basic Rent, Excess Amount, Stipulated
Loss Values, Termination Values, Special Termination
Value Percentages and the EBO Percentage.............. 17
(d) Supplemental Rent..................................... 20
(e) Payments in General................................... 20
(f) [Intentionally Reserved for Potential Future Use]..... 21
(g) Prepayments of Certain Rent Payments.................. 21
SECTION 4. Lessor's Representations and Warranties....................... 22
SECTION 5. Return of the Aircraft........................................ 23
(a) Condition Upon Return................................. 23
(b) Return of Other Engines............................... 27
(c) Fuel and Manuals...................................... 28
(d) Storage Upon Return................................... 28
(e) Purchase of Engine.................................... 29
(f) Severable Parts....................................... 29
(g) Special Redelivery Provision.......................... 29
SECTION 6. Liens......................................................... 30
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia......................................... 30
(a) (1) Registration and Maintenance..................... 31
(2) Operation........................................ 32
(3) Reregistration................................... 33
(4) Operating Certificates........................... 33
(b) Possession and Subleases.............................. 33
(c) Insignia.............................................. 39
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications
and Additions............................................... 40
(a) Replacement of Parts.................................. 40
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(b) Pooling of Parts...................................... 41
(c) Alterations, Modifications and Additions.............. 41
SECTION 9. Early Termination............................................. 43
(a) [Intentionally reserved for potential future use]..... 43
(b) Termination for Obsolescence/Surplus.................. 43
(c) Sale of the Aircraft.................................. 43
(d) Termination as to Engines............................. 46
SECTION 10. Loss, Destruction, Requisition, etc. ........................ 46
(a) Event of Loss with Respect to the Aircraft............ 46
(b) Event of Loss with Respect to an Engine............... 50
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc. ....................... 52
(d) Requisition for Use of the Aircraft by the United
States Government or Government of Registry of the
Aircraft.............................................. 53
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the
Aircraft.............................................. 54
(f) Application of Payments During Existence of Events of
Default............................................... 54
SECTION 11. Insurance.................................................... 55
(a) Public Liability and Property Damage Insurance........ 55
(b) Insurance Against Loss or Damage to the Aircraft...... 55
(c) Reports, etc.......................................... 57
(d) Self-Insurance........................................ 59
(e) Additional Insurance by Lessor and Lessee............. 59
(f) Indemnification by Government in Lieu of Insurance.... 60
(g) Application of Payments During Existence of Default... 60
(h) Terms of Insurance Policies........................... 60
SECTION 12. Inspection................................................... 61
SECTION 13. Assignment................................................... 63
SECTION 14. Events of Default............................................ 63
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 15. Remedies..................................................... 65
SECTION 16. Lessee's Cooperation Concerning Certain Matters.............. 69
SECTION 17. Notices...................................................... 71
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc..................... 72
SECTION 19. Renewal Options; Purchase Options; Valuation................. 74
(a) Renewal Options....................................... 74
(1) Fixed Renewal Terms.............................. 74
(2) Fair Market Renewal Term......................... 75
(3) Waiver........................................... 75
(4) Conditions Precedent, Payment of Basic Rent...... 75
(5) Termination Value; Stipulated Loss Value......... 76
(b) Purchase Options...................................... 76
(c) Valuation............................................. 77
SECTION 20. Security for Lessor's Obligation to Certificate Holders...... 78
SECTION 21. Lessor's Right to Perform for Lessee......................... 79
SECTION 22. Investment of Security Funds; Liability of Lessor Limited.... 80
(a) Investment of Security Funds.......................... 80
(b) Liability of Lessor Limited........................... 81
SECTION 23. Miscellaneous................................................ 81
SECTION 24. Successor Trustee............................................ 81
SECTION 25. Bankruptcy................................................... 82
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent and Excess Amount Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Termination Value Schedule
EXHIBIT E Rent Recalculation and Indemnification Verification
EXHIBIT F Schedule of Countries Authorized for Domicile of Permitted
Sublessees
EXHIBIT G Schedule of Countries Authorized for Aircraft Registration
EXHIBIT H Lessor's Cost, Engine Cost, Commencement Date, Lease Expiry
Date, Stipulated Loss Value Date, EBO Date, EBO Percentage,
Special Purchase Option Dates and Special Termination Value
Percentages
</TABLE>
iv
<PAGE>
LEASE AGREEMENT (1995 777 B)
This LEASE AGREEMENT (1995 777 B), dated as of May 1, 1995, between
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (as defined in Section 1 hereof) (in such
capacity, "Lessor"), and UNITED AIR LINES, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware ("Lessee").
WITNESSETH:
SECTION 1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this Lease
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms herein defined:
"Acceptable Alternate Engine" means a Pratt & Whitney Model PW4084
engine or an engine of the same or another manufacturer of equivalent or greater
value and utility, and suitable for installation and use on the Airframe;
provided that such engine shall be of the same make, model and manufacturer as
the other engine installed on the Airframe and shall be an engine of a type then
being utilized by Lessee on other Boeing 777-222 aircraft operated by Lessee and
shall have been maintained, serviced, repaired and overhauled in substantially
the same manner as Lessee maintains, services, repairs and overhauls similar
engines utilized by Lessee and without in any way discriminating against such
engine.
"Actual Knowledge" means, (i) as it applies to the Owner Trustee or
Indenture Trustee, as the case may be, actual knowledge of a responsible officer
in the Trust Office, and (ii) as it applies to the Owner Participant, actual
knowledge of a Vice President or more senior officer of the Owner Participant or
other officer of the Owner Participant in each case having responsibility for
the transactions contemplated by the Operative Documents; provided that each of
the Owner Trustee, the Indenture Trustee and the Owner Participant shall be
deemed to have "Actual Knowledge" of any matter as to which it has been given
notice by any of Lessee, the Owner Participant, any Certificate Holder, the
Owner Trustee or the Indenture Trustee, such notice having been given pursuant
to and in accordance with Section 13(a) of the Participation Agreement.
"Additional Insured" means Lessor, in its individual capacity and as
owner of the Aircraft, the Indenture Trustee, the
<PAGE>
[Lease Agreement (1995 777 B)]
Owner Participant, Lessee in its capacity as sublessor under any Sublease, and,
so long as the Pass Through Trustees are Certificate Holders, each Pass Through
Trustee and each of their respective Affiliates, successors and permitted
assigns; and the respective directors, officers and employees of each of the
foregoing.
"Affiliate" means a Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under a common
control with, another Person, (ii) which beneficially owns or holds 10% or more
(by number of votes) of any class of voting securities of such other Person or
(iii) 10% or more (by number of votes) of the voting securities (or in the case
of a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by such other Person or a Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Aircraft" means the Airframe together with the two Engines whether or
not such Engines are installed on the Airframe or any other airframe.
"Airframe" means: (i) The Boeing Company Model 777-222 aircraft
(excluding Engines or engines from time to time installed thereon) specified by
United States Registration Number and Manufacturer's serial number in the Lease
Supplement; (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but where
title to which remains vested in Lessor in accordance herewith; and (iii) any
replacement airframe which may from time to time be substituted pursuant to
Section 10(a)(ii) hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended from
time to time.
"Base Rate" means the rate of interest announced from time to time by
The First National Bank of Chicago at its principal office in Chicago, Illinois
as its "corporate base rate" (or its equivalent successor rate if the corporate
base rate is no longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(b) hereof, as adjusted as provided in Section
3(c) and, for a Renewal Term, Basic Rent determined pursuant to Section 19.
2
<PAGE>
[Lease Agreement (1995 777 B)]
"Basic Term" means the term for which the Aircraft is leased hereunder
pursuant to Section 3(a) hereof beginning on the Commencement Date and ending on
the Lease Expiry Date or such earlier date as this Lease may be terminated in
accordance with the terms hereof.
"Business Day" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in the City of
Chicago, Illinois; New York City, New York; the city and state in which the
principal place of business of the Owner Trustee is located; and, so long as any
Loan Certificate is outstanding, the city and state in which the Indenture
Trustee has its principal place of business and the city and state in which the
Indenture Trustee receives and disburses funds.
"Certificate Holder" has the meaning assigned to the term "Holder" in the
Trust Indenture.
"Certificated Air Carrier" means a Citizen of the United States
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning given such term in
Section 40102(a)(15) of Title 49 of the United States Code.
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program administered by the United States Government pursuant to Executive Order
No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended through the
Delivery Date.
"Commencement Date" means the date specified as such in Exhibit H hereto.
"Commitments" means the respective commitments of the Pass Through
Trustees and the Owner Participant to finance the Owner Trustee's payment of
Lessor's Cost for the Aircraft and "Commitment" means any one of the
Commitments.
"Consent and Agreement" means the Consent and Agreement (1995 777 B),
dated as of the date hereof, executed by the
3
<PAGE>
[Lease Agreement (1995 777 B)]
Manufacturer, as the same may be amended, modified or supplemented from time to
time in accordance with the applicable provisions thereof.
"Debt Rate" means the weighted average interest rate borne by the Loan
Certificates then outstanding.
"Default" means any event which with the giving of notice or the lapse of
time or both would become an Event of Default.
"Delivery Date" means the date of the initial Lease Supplement for the
Aircraft, which date shall be the date the Aircraft is leased by Lessor to
Lessee and accepted by Lessee hereunder.
"Dollars" and "$" mean the lawful currency of the United States of America.
"EBO Date" means the date specified as such in Exhibit H hereto.
"EBO Percentage" means the percentage specified as such in Exhibit H
hereto.
"EBO Price" has the meaning set forth in Section 19(b)(2) hereof.
"Engine" means (i) each of the two Pratt & Whitney Model PW4084 engines
listed by manufacturer's serial numbers in the initial Lease Supplement and
installed on the Airframe at the time of the Manufacturer's delivery to Lessee
of such Airframe, and whether or not from time to time thereafter installed on
such Airframe or any other airframe; (ii) any Acceptable Alternate Engine which
may from time to time be substituted for any of such two engines pursuant to the
terms hereof; and (iii) in either case, any and all Parts which are from time to
time incorporated or installed in or attached to any such engine and any and all
parts removed therefrom so long as title thereto remains vested in Lessor in
accordance herewith. The term "Engines" means, as of any date of determination,
all Engines then leased hereunder.
"Engine Cost" means the amount specified as Engine Cost in Exhibit H
hereto.
"Event of Default" has the meaning specified in Section 14 hereof.
4
<PAGE>
[Lease Agreement (1995 777 B)]
"Event of Loss" with respect to the Aircraft, Airframe or any Engine means
any of the following events with respect to such property: (i) the loss of such
property or of the use thereof due to the destruction of or damage to such
property which renders repair uneconomic or which renders such property
permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or compromised
total loss; (iii) the theft or disappearance of such property, or the
confiscation, condemnation, or seizure of, or requisition of title to, or use
of, such property by any governmental or purported governmental authority (other
than a requisition for use by the United States Government or any government of
registry of the Aircraft or any agency or instrumentality thereof), which in the
case of any event referred to in this clause (iii) shall have resulted in the
loss of title or possession of such property by Lessee for a period in excess of
90 consecutive days or, if earlier, until the end of the Term; (iv) as a result
of any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, use of such property in the normal course of the business of air
transportation shall have been prohibited for a period in excess of 180
consecutive days, unless (A) such grounding is applicable to all Boeing 777-222
aircraft registered in such country, (B) Lessee, prior to the expiration of such
180 day period, shall have undertaken and shall be diligently carrying forward,
in a manner that does not discriminate against the Aircraft, all steps which are
necessary or desirable to permit the normal use of such property by Lessee, and
(C) Lessee, within one year from the time of grounding shall have conformed at
least one such aircraft in its fleet to the requirements of any such law, rule,
regulation, order or other action and commenced regular commercial use of the
same in such jurisdiction, provided that no such grounding shall extend beyond
the expiration of the Term; (v) the requisition for use by the United States
Government or any government of registry of the Aircraft or any instrumentality
or agency thereof, which shall have occurred during the Basic Term (or the
Interim Term or any Renewal Term) and shall have, in the case of any government
of registry of the Aircraft (other than the United States Government or any
agency or instrumentality thereof) or any agency or instrumentality thereof,
continued for more than two years (or if earlier, until the end of the Term),
and in the case of the United States Government or any agency or instrumentality
thereof shall have continued for a period that extends beyond the Term and
Lessor shall not have furnished the written notice specified in Section 10(d)
hereof; (vi) the operation of or location of the Aircraft, while under
requisition for use by any government, in any area excluded from coverage by any
insurance policy in effect
5
<PAGE>
[Lease Agreement (1995 777 B)]
with respect to the Aircraft required by the terms of Section 11, unless in the
case of a requisition by the government of the United States or any agency or
instrumentality thereof, Lessee shall have obtained an indemnity in lieu thereof
from such government; and (vii) any divestiture of title to an Engine treated as
an Event of Loss pursuant to Section 7(b) hereof. An Event of Loss with respect
to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.
"Excess Amount" for the Commencement Date means the amount determined
by multiplying Lessor's Cost by the percentage specified in Exhibit B hereto
opposite the Commencement Date (as such Exhibit B may be adjusted from time to
time as provided in Section 3(c) hereof).
"Excluded Payments" has the meaning set forth in the Trust Indenture.
"Expenses" means any and all liabilities, obligations, losses, damages,
penalties, claims (including, but not limited to, negligence, strict or absolute
liability, liability in tort and liabilities arising out of violation of laws or
regulatory requirements of any kind), actions, suits, costs, expenses and
disbursements (including reasonable legal fees and expenses and, to the extent
not required to be paid by the Owner Trustee pursuant to Section 16 of the
Participation Agreement, Transaction Expenses, and all costs and expenses
relating to amendments, supplements, waivers and consents to and under the
Operative Documents, any amounts that would be included in Premium, but
excluding internal costs and expenses such as salaries, and overhead of
whatsoever kind and nature).
"Fair Market Rental Value" means the fair market rental value determined as
provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value determined as
provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Act" means the sections of Title 49 of the United States
Code relating to aviation, as amended.
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any successor agency or agencies thereto.
"Indemnitees" means the Owner Participant, the Owner Trustee, in its
individual capacity and as trustee under the Trust Agreement, the Trust Estate,
the Trust Indenture Estate, the Indenture Trustee, in its individual capacity
and as trustee
6
<PAGE>
[Lease Agreement (1995 777 B)]
under the Trust Indenture, each Pass Through Trustee (so long as the Pass
Through Trustees are Certificate Holders), and each of their respective
Affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents.
"Indenture Trustee" has the meaning set forth in the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement, the
Trust Indenture, each Pass Through Trust Agreement, each Pass Through Trust
Supplement, each Loan Certificate and each Pass Through Certificate and any
other document executed by the Indenture Trustee or the Pass Through Trustee in
connection with the transactions contemplated by the Operative Documents.
"Interim Term" means the period commencing on the Delivery Date and
ending on and including the day immediately preceding the Commencement Date,
unless earlier terminated in accordance with the provisions hereof.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby", or other like words mean
this Lease Agreement as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions hereof and the terms
of the Trust Indenture, including, without limitation, supplementation hereof by
any Lease Supplement entered into in accordance with the applicable provisions
hereof and the terms of the Trust Indenture.
"Lease Expiry Date" means the date specified as such in Exhibit H.
"Lease Period" means each of the consecutive semi-annual periods
throughout the Basic Term and any Renewal Term ending on a Lease Period Date,
the first such period commencing on and including the Commencement Date.
"Lease Period Date" means April 19, 1996 and each succeeding semi-
annual anniversary thereof to and including the last such date in the Term.
"Lease Supplement" means a Lease Supplement (1995 777 B), substantially in
the form of Exhibit A hereto, to be entered into between Lessor and Lessee on
the Delivery Date for the purpose of leasing the Aircraft under and pursuant to
the terms of this Lease Agreement, and any subsequent Lease Supplement entered
into in accordance with the terms hereof and the terms of the Trust Indenture.
7
<PAGE>
[Lease Agreement (1995 777 B)]
"Lessee Documents" means the Participation Agreement, the Lease, any
Lease Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's FAA Bill of Sale, the Owner Trustee's Bill of
Sale, the Tax Indemnity Agreement, each Pass Through Trust Agreement, each Pass
Through Trust Agreement Supplement and any other document executed by Lessee in
connection with the transactions contemplated by the Operative Documents.
"Lessor Liens" means any Lien on, or disposition of title to, the Aircraft
or the Trust Estate arising as a result of (i) claims against Lessor, State
Street Bank and Trust Company, in its individual capacity, or the Owner
Participant not related to the transactions contemplated by the Operative
Documents, (ii) any act or omission of the Owner Participant, Lessor, or State
Street Bank and Trust Company, in its individual capacity, which is not related
to the transactions contemplated by the Operative Documents or is in violation
of any of the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or State Street Bank and Trust Company, in its individual
capacity, with respect to Taxes or Expenses against which Lessee is not required
to indemnify the Owner Participant, Lessor or State Street Bank and Trust
Company, in its individual capacity or (iv) claims against Lessor or the Owner
Participant arising out of any transfer by Lessor or the Owner Participant of
all or any portion of the respective interests of Lessor or the Owner
Participant in the Aircraft, the Trust Estate or the Operative Documents (other
than a transfer of possession of the Aircraft by Lessor pursuant to this
Agreement, a transfer pursuant to the Trust Indenture (other than a transfer
pursuant to Article 8 of the Trust Indenture not attributable to a Lease Event
of Default) or a transfer pursuant to Section 7, 8, 9, 10 or 19 hereof, pursuant
to Section 17 of the Participation Agreement or pursuant to the exercise of the
remedies set forth in Section 15 hereof); provided, however, that any Lien which
is attributable solely to State Street Bank and Trust Company or the Owner
Participant and would otherwise constitute a Lessor Lien hereunder shall not
constitute a Lessor Lien hereunder so long as (1) the existence of such Lien
poses no material risk of the sale, forfeiture or loss of the Airframe or any
Engine or any interest therein, (2) the existence of such Lien does not
interfere in any way with the use or operation of the Aircraft by Lessee (or any
Sublessee), (3) the existence of such Lien does not affect the priority or
perfection of, or otherwise jeopardize, the Lien of the Trust Indenture, (4)
State Street Bank and Trust Company or the Owner Participant, as the case may
be, is diligently contesting such Lien by appropriate proceeding and (5) the
existence of such Lien does not result in actual interruption in the payment of
Rent assigned to the Indenture Trustee for the benefit of the Certificate
Holders.
8
<PAGE>
[Lease Agreement (1995 777 B)]
"Lessor's Cost" for the Aircraft means the amount specified as Lessor's
Cost in Exhibit H hereto; provided, however, Lessor's Cost shall be reduced by
Engine Cost for each Engine for which Lessee has paid Stipulated Loss Value
pursuant to the terms of Section 10(b) hereof and has otherwise paid all other
amounts due and payable under said Section 10(b).
"Lien" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest.
"Loan Certificate" has the meaning assigned to the term "Certificate" in
the Trust Indenture.
"Loss Payment Date" has the meaning set forth in Section 10(a) hereof.
"Manufacturer" means The Boeing Company, a Delaware corporation, and its
subsidiaries, successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the Consent and
Agreement and any other document executed by the Manufacturer in connection with
the transactions contemplated by the Operative Documents.
"Net Economic Return" means the Owner Participant's net after-tax book
yield, aggregate after-tax cash flow and, with respect to any adjustments
required to maintain the Owner Participant's Net Economic Return, periodic FASB
13 earnings plus or minus 5% for any annual period, utilizing the multiple
investment sinking fund method of analysis, computed on the basis of the same
methodology and assumptions as were utilized by the Owner Participant in
determining Basic Rent, Stipulated Loss Value percentages, Special Termination
Value Percentages, EBO Percentage and Termination Value percentages as of the
Delivery Date, as such assumptions may be revised from time to time for events
which have been the basis for adjustments to Rent pursuant to Section 3(c)
hereof, provided that under no circumstances shall there be a reduction in Owner
Participant's 1995 FASB 13 earnings.
"Net Present Value of Rents" means the net present value, as of the
Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted at a rate
per Lease Period equal to (a) 11% per annum divided by (b) the number of Lease
Periods per year.
"Operative Documents" means the Lease (including any Lease Supplement); the
Participation Agreement; the Tax Indemnity Agreement; the Trust Agreement; any
Trust Supplement; the Purchase Agreement; the Owner Trustee's Bill of Sale; the
Owner
9
<PAGE>
[Lease Agreement (1995 777 B)]
Trustee's FAA Bill of Sale; the Owner Trustee's Purchase Agreement; an
acceptance certificate covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate"); the Trust Indenture; the
Loan Certificates outstanding at the time of reference; and the Consent and
Agreement.
"Original Amount", with respect to a Loan Certificate, means at any
time prior to the Commencement Date, the Original Issue Price (as defined in the
Trust Indenture) of such Loan Certificate, or, at any time on or after the
Commencement Date, the stated original principal amount of such Loan
Certificate, and with respect to all Loan Certificates means, at any time prior
to the Commencement Date, the aggregate Original Issue Prices for such Loan
Certificates or, at any time on or after the Commencement Date, the aggregate
stated original principal amounts of such Loan Certificates.
"Owner Participant" means the Person executing the Participation
Agreement as the Owner Participant and any Person to which such Person transfers
all or any portion of its right, title and interest in and to the Trust
Agreement, the Trust Estate and the Participation Agreement, to the extent
permitted thereby.
"Owner Participant Documents" means the Participation Agreement, the
Trust Agreement, the Tax Indemnity Agreement and any other document executed by
the Owner Participant in connection with the transactions contemplated by the
Operative Documents.
"Owner Participant Parent" means _________________, a Delaware corporation.
"Owner Participant Parent Guaranty" means the guaranty, dated the
Delivery Date, by the Owner Participant Parent in favor of Lessee, the Pass
Through Trustees, and certain other parties, of certain obligations of the Owner
Participant, as the same may be amended or modified in compliance with the
provisions thereof.
"Owner Trustee" means the Person executing the Participation Agreement
as Owner Trustee and any Person appointed as successor Owner Trustee in each
case not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the Trust
Agreement, this Lease, any Lease Supplement, the Owner Trustee's Purchase
Agreement, the Trust Indenture, any Trust Supplement, the Loan Certificates and
any other document
10
<PAGE>
[Lease Agreement (1995 777 B)]
executed by the Owner Trustee in connection with the transactions contemplated
by the Operative Documents.
"Owner Trustee's Bill of Sale" means a bill of sale for the Aircraft,
dated the Delivery Date, executed by Lessee in favor of Lessor in form and
substance satisfactory to Lessor.
"Owner Trustee's FAA Bill of Sale" means a bill of sale for the Aircraft on
AC Form 8050-2 or such other form as may be approved by the FAA on the Delivery
Date executed by Lessee in favor of Lessor in form and substance satisfactory to
Lessor.
"Owner Trustee's Purchase Agreement" means the Owner Trustee's
Purchase Agreement and Assignment (1995 777 B), dated as of the date hereof,
between Lessee and the Owner Trustee, as the same may be amended, modified or
supplemented from time to time in accordance with the applicable provisions
thereof and the terms of the Trust Indenture.
"Participants" means and includes the Pass Through Trustees and the Owner
Participant.
"Participation Agreement" means that certain Participation Agreement
(1995 777 B), dated as of the date hereof, among Lessee, the Indenture Trustee,
the Owner Participant, the Pass Through Trustees and the Owner Trustee, as such
Participation Agreement may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engines or engines, which are from time to time incorporated or
installed in or attached to an Airframe or any Engine or which have been removed
therefrom, but where title to which remains vested in Lessor in accordance with
Section 8 hereof.
"Pass Through Certificates" has the meaning set forth in the Trust
Indenture.
"Pass Through Trust Agreements" means the Pass Through Trust Agreement
dated as of February 1, 1992, as amended and restated as of May 1, 1995, in each
case between the Lessee and State Street Bank and Trust Company of Connecticut,
National Association, as supplemented by each of the two Pass Through Trust
Supplements, in each case between the Lessee and the Pass Through Trustee, and
as the same may be further modified, amended or supplemented pursuant to the
applicable provisions thereof and the Participation Agreement.
11
<PAGE>
[Lease Agreement (1995 777 B)]
"Pass Through Trustee" shall mean First Security Bank of Utah, National
Association, a national banking association, in its capacity as Trustee under
each Pass Through Trust Agreement, and each other Person which may from time to
time be acting as successor trustee under any such Pass Through Trust Agreement.
"Pass Through Trust Supplement" means each of the two separate Trust
Supplements Nos. 1995-A1 and 1995-A2, in each case dated as of May __, 1995
between Lessee and the Pass Through Trustee.
"Past Due Rate" means (i) with respect to the portion of any payment of
Rent that may be required by the Trust Indenture to be paid by the Indenture
Trustee to any Certificate Holder, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of any payment of Rent
(and the entire amount of any payment of Rent after the satisfaction and
discharge of the Trust Indenture), a fluctuating rate per annum equal to 2% over
the Debt Rate.
"Permitted Lien" means any Lien referred to in clauses (i) through (vi) of
Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled in a country listed
in Exhibit F hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Premium" has the meaning assigned to the term in Section 6.01(b) of the
Trust Indenture.
"Prepaid Rent" has the meaning set forth in Section 3(g) hereof.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
"Redemption Date" has the meaning set forth in the Trust Indenture.
"Reimbursement Amount" has the meaning set forth in Section 3(g) hereof.
12
<PAGE>
[Lease Agreement (1995 777 B)]
"Renewal Term" means the Fair Market Renewal Term or a Fixed Renewal Term
as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Replacement Airframe" means any airframe substituted for an airframe in
accordance with Sections 10(a) of the Lease.
"Replacement Engine" means any engine substituted for an Engine in
accordance with Sections 9(d), 10(a) or 10(b) of the Lease.
"Restricted Country" has the meaning set forth on Exhibits F and G hereto.
"Restricted Period" means the period ending on the last open day of the
calendar year in which there occurs the seventh anniversary of the Delivery
Date.
"Special Purchase Option Dates" means each of the dates specified as such
on Exhibit H hereto.
"Special Termination Value", with respect to any Special Purchase Option
Date, has the meaning set forth in Section 19(b)(1) hereof.
"Special Termination Value Percentage" means, with respect to any Special
Purchase Option Date, the percentage set forth opposite such Date on Exhibit H
hereto.
"Stipulated Loss Value" with respect to the Aircraft as of any date through
and including the last day of the Basic Term, means the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified in
Exhibit C hereto opposite the Stipulated Loss Value Date with respect to which
the amount of Stipulated Loss Value is determined (as such Exhibit C may be
adjusted from time to time as provided in Section 3(c) hereof and in Section 8
of the Tax Indemnity Agreement). "Stipulated Loss Value" with respect to the
Aircraft, as of any date during any Renewal Term, shall be the amount determined
as provided in Section 19 hereof. To the extent that an event giving rise to an
obligation to pay any Stipulated Loss Value occurs (with respect to the Airframe
or either Engine), and the actual date on which the loss of tax benefits
resulting from such event occurs shall be earlier or later than the date assumed
in calculating the United States Federal income tax consequences reflected in
the applicable Stipulated Loss Value, such Stipulated Loss Value shall be
appropriately adjusted upwards or downwards to reflect
13
<PAGE>
[Lease Agreement (1995 777 B)]
the actual date of such loss of tax benefits, but shall be otherwise based on
the original assumptions used in determining such Stipulated Loss Value.
"Stipulated Loss Value Date" has the meaning specified therefore in Exhibit
H hereto.
"Sublease" means any sublease permitted by the terms of Section 7(b)(viii)
hereof.
"Sublessee" means any Person for so long, but only so long, as such Person
is in possession of the Airframe and or any Engine pursuant to the terms of a
Sublease which is then in effect pursuant to Section 7(b)(viii) hereof.
"Subsidiary" means, with respect to any Person that is a corporation, any
other corporation a majority of the voting securities of which are owned by such
person, whether directly or indirectly.
"Supplemental Rent" means all amounts, liabilities and obligations (other
than Basic Rent) which Lessee assumes or agrees to pay to Lessor or others
hereunder or under any of the other Operative Documents, including payments of
Stipulated Loss Value and Termination Value and amounts calculated by reference
thereto, an amount equal to the Premium, if any, payable in accordance with
Section 3(d) hereof and indemnity payments. The parties acknowledge that
Supplemental Rent is a general category and, accordingly, agree that any
provision of any Operative Document which calls for the payment of Supplemental
Rent and also calls for the payment of specific items which are includable in
Supplemental Rent is not to be interpreted as requiring any double payment.
"Tax Indemnity Agreement" means that certain Tax Indemnity Agreement (1995
777 B), dated as of the date hereof, between the Owner Participant and Lessee,
as originally executed or as modified, amended or supplemented pursuant to the
applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation, license,
documentation and registration fees), taxes (including, without limitation,
income, gross receipts, sales, rental, use, turnover, value added, property
(tangible and intangible), excise and stamp taxes), licenses, levies, imposts,
duties, recording charges or fees, charges, assessments, or withholdings of any
nature whatsoever, together with any assessments, penalties, fines, additions to
tax and interest thereon (each, individually, a "Tax").
14
<PAGE>
[Lease Agreement (1995 777 B)]
"Term" means the Interim Term, Basic Term and, if actually entered into,
any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(b) hereof.
"Termination Value" with respect to the Aircraft as of any date through and
including the last day of the Basic Term means the amount determined by
multiplying Lessor's Cost for the Aircraft by the percentage specified in
Exhibit D hereto opposite the Termination Date with respect to which the amount
of Termination Value is determined (as such Exhibit D may be adjusted from time
to time as provided in Section 3(c) hereof and in Section 8 of the Tax Indemnity
Agreement). To the extent that an event giving rise to an obligation to pay any
Termination Value occurs, and the actual date on which the loss of tax benefits
resulting from such event occurs shall be earlier or later than the date assumed
in calculating the United States Federal income tax consequences reflected in
the applicable Termination Value, such Termination Value shall be appropriately
adjusted upwards or downwards to reflect the actual date of such loss of tax
benefits, but shall be otherwise based on the original assumptions used in
determining such Termination Value.
"Transaction Expenses" means (i) the reasonable and actual fees, expenses
and disbursements of (1) Ray, Quinney & Nebeker, special counsel for the
Indenture Trustee and the Pass Through Trustee, (2) Bingham, Dana & Gould,
counsel for the Owner Trustee, (3) Crowe & Dunlevy, P.C., special counsel in
Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel for the
underwriters (to the extent not payable by the underwriters), (5) Vedder, Price,
Kaufman & Kammholz, special counsel for Lessee, and (6) Dewey Ballantine,
special counsel for the Owner Participant, (ii) all fees, taxes and other
charges payable in connection with the recording or filing of instruments and
financing statements, (iii) the initial fee and reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement, (iv) the initial
fee and reasonable and actual disbursements of the Indenture Trustee under the
Trust Indenture, (v) the fee of BK Associates (or of such other appraiser as
shall be selected by the Owner Participant) with respect to the appraisal of the
Aircraft required on or before the Delivery Date pursuant to Section 4(a) of the
Participation Agreement, (vi) the fees, commissions and expenses of Capstar
Partners, Inc., (vii) the reasonable out-of-pocket expenses of the Owner
Participant relating to the transactions contemplated by the Participation
Agreement including, without limitation, the expenses related to the
organization of the foreign sales corporation, as well as those transactions
relating to the investment by the Owner Participant in the second quarter of
1995 in one Boeing 777-222
15
<PAGE>
[Lease Agreement (1995 777 B)]
aircraft to be operated by the Lessee up to an aggregate of $25,000 (but
excluding from Transaction Expenses airfare charges incurred for travel on an
airline other than United Air Lines, unless such travel is necessitated by the
foreign sales corporation structure to the extent that United Air Lines does not
offer regularly scheduled flights directly from New York to such foreign
location where negotiations with respect to the transactions will be conducted
for purposes of the foreign sales corporation nature of the transactions) plus
airfare charges incurred for travel on United Air Lines, (viii) the placement or
underwriting fees, commissions and expenses, if any, in placing the debt
contemplated by the Participation Agreement and all costs and expenses
associated with the public offering pursuant thereto and the actual expenses of
each Pass Through Trustee under its respective Pass Through Trust Agreement and
(ix) printing and distribution costs.
"Trust Agreement" means that certain Trust Agreement (1995 777 B), dated as
of the date hereof, between the Owner Participant and State Street Bank and
Trust Company, in its individual capacity, as originally executed or as
modified, amended or supplemented in accordance with the applicable provisions
thereof and the terms of the Trust Indenture, including, without limitation, any
Trust Supplement entered into pursuant to the applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Mortgage (1995 777
B), dated as of the date hereof, between Lessor and the Indenture Trustee, as
originally executed or as modified, amended or supplemented in accordance with
the provisions thereof and the terms of the Participation Agreement, including,
without limitation, any Trust Supplement entered into pursuant to the applicable
provisions thereof.
"Trust Indenture Estate" has the meaning assigned to the term "Indenture
Estate" in the Trust Indenture.
"Trust Office" has the meaning set forth in the Trust Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and the Trust
Indenture, substantially in the form of Exhibit A to the Trust Agreement.
"U.S. Air Carrier" means any United States air carrier as to which there is
in force a certificate issued pursuant to Section 44102 of the Federal Aviation
Act, and as to which there
16
<PAGE>
[Lease Agreement (1995 777 B)]
is in force an air carrier operating certificate issued pursuant to Part 121 of
the regulations under such Act, or which may operate as an air carrier by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which such Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Federal Aviation Act (or if the Aircraft is not
registered in the United States, all certificates and licenses required by the
laws of the jurisdiction of registry) for the performance by such employees of
similar functions within the United States of America (or such jurisdiction of
registry) (it is understood that cabin attendants need not be employees of
Lessee) and (ii) shall be maintained by Lessee in accordance with its normal
maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees to accept from
the Lessee the transfer of title to and simultaneously to lease to Lessee
hereunder, and Lessee hereby agrees to lease on the Delivery Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees that Lessor will
authorize one or more employees of Lessee, designated by Lessee in writing, as
the authorized representative or representatives of Lessor to accept delivery of
the Aircraft. Lessee hereby agrees that in the event delivery of the Aircraft
shall be accepted by an employee or employees of Lessee pursuant to such
authorization by Lessor, such acceptance of delivery by such employee or
employees on behalf of Lessor shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease.
SECTION 3. Term and Rent. (a) Interim Term and Basic Term. The
Interim Term shall commence on the Delivery Date and end on and include the day
immediately preceding the Commencement Date unless earlier terminated pursuant
to the provisions hereof. The Basic Term shall commence on the Commencement
Date and end on the Lease Expiry Date or such earlier date as this Lease may be
terminated in accordance with the provisions hereof.
(b) Basic Rent. Lessee shall pay Basic Rent in Dollars with respect
to each Lease Period during the Basic Term on each Lease Period Date during the
Basic Term, in the respective amounts for each Lease Period Date determined in
accordance with Exhibit B hereto.
17
<PAGE>
[Lease Agreement (1995 777 B)]
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss Values,
Termination Values, Special Termination Value Percentages and the EBO
Percentage.
(i) In the event that (A) Transaction Expenses paid by Lessor are
determined to be other than __% of Lessor's Cost, (B) there shall be an
optional redemption or a refinancing or a refunding of the Loan
Certificates in accordance with Section 17 of the Participation Agreement,
(C) the Delivery Date occurs other than on May 15, 1995, or (D) there is an
optimization in accordance with Section 18 of the Participation Agreement;
then in each case the Basic Rent and Excess Amount set forth in Exhibit B,
the Stipulated Loss Value percentages set forth in Exhibit C, the
Termination Value percentages set forth in Exhibit D, and the EBO
Percentage and the Special Termination Value Percentages set forth in
Exhibit H shall be adjusted (upwards or downwards as the case may be) using
the same methods and assumptions (as modified on account of the occurrence
of any of the events referred to in clauses (A)-(D)) used to calculate the
Basic Rent and Excess Amount, the Stipulated Loss Value percentages, the
Termination Value percentages and the EBO Percentage and the Special
Termination Value Percentages set forth in Exhibits B, C, D and H,
respectively, in each case in compliance with clauses (iv) and (v) of this
paragraph (c) and in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to Lessee
to the extent possible consistent with clause (1) hereof; provided,
however, in no event will the EBO Price be adjusted below the greatest of
(i) the Termination Value for the Aircraft as of the EBO Date, (ii) __% of
Lessor's Cost (i.e., the fair market value of the Aircraft as of the EBO
Date as the same was determined on the Delivery Date) and (iii) __%
multiplied by the present value as of the EBO Date of (x) the remaining
Basic Rent plus (y) __% of Lessor's Cost (i.e., the fair market value of
the Aircraft as of the end of the Term as the same was determined on the
Delivery Date) (the present value calculation described in this clause
(iii) shall utilize a semi-annual discount rate that on a compound basis is
equal to ___% per annum).
(ii) [Intentionally reserved for potential future use.]
(iii) Any recalculation of Basic Rent and Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, EBO
Percentage and Special Termination Value Percentages pursuant to this
Section 3(c) (or pursuant to the definition of Stipulated Loss Value or
Termination
18
<PAGE>
[Lease Agreement (1995 777 B)]
Value) shall be determined by the Owner Participant and shall be subject to
the verification procedures set forth in Exhibit E hereto. Such
recalculated Basic Rent and Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, EBO Percentage and Special
Termination Value Percentages shall be set forth in an amendment hereto.
(iv) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic Rent
payable hereunder, whether or not adjusted in accordance with this Section
3(c), together with the amount of Excess Amount and Supplemental Rent, if
any, in respect of the date on which such installment is payable, and each
payment of Termination Value, Stipulated Loss Value, EBO Price and Special
Termination Value whether or not adjusted in accordance with this Section
3(c) or Section 8 of the Tax Indemnity Agreement, and all other amounts
(excluding Excluded Payments payable simultaneously by Lessee pursuant to
this Lease), in each case, on the date on which such payment is due, shall
be in an amount at least sufficient to pay in full, and shall be available
to be applied by Lessor in payment on account of, any payments then
required to be made on account of the principal amount (and Premium, if
any) of and interest on the Loan Certificates then outstanding. It is
agreed that no installment of Basic Rent or payment of Excess Amount,
Termination Value, Stipulated Loss Value, Special Termination Value or EBO
Price, shall be increased or adjusted by reason of (A) any attachment or
diversion of Rent on account of (x) Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) or (y) any other Lien on or against the Trust
Estate, any part thereof or the Operative Documents arising as a result of
claims against the Indenture Trustee or a Certificate Holder, not related
to the transactions contemplated by the Operative Documents, (B) any
modification of the payment terms of the Loan Certificates made without the
prior written consent of Lessee, or (C) the acceleration of any Loan
Certificate due to the occurrence of an "Event of Default" (as defined in
the Trust Indenture) which does not constitute an Event of Default
hereunder.
(v) All adjustments to Basic Rent under this Section 3(c) shall
be consistent with the requirements of Sections 4.02(5), 4.07(1) and (2)
and Section 4.08(1) of Rev. Proc. 75-28 (provided that the requirements of
Section 4.08(1) shall apply on a prospective basis), as modified and in
effect on the Delivery Date, and shall not cause the Lease to be a
"disqualified leaseback or long-term
19
<PAGE>
[Lease Agreement (1995 777 B)]
agreement" within the meaning of Section 467 of the Code as then in effect
and any final, temporary or proposed regulations thereunder or any
administrative or judicial interpretation thereof in effect on the date of
such adjustment (a "Section 467 Agreement") (it being understood that any
such adjustment shall not be treated as causing the Lease to be a Section
467 Agreement to the extent the Lease would have been a Section 467
Agreement if no such adjustment to Basic Rent had occurred).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid) promptly to
Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent constituting Stipulated Loss Value, Termination Value, EBO Price and
Special Termination Values as the same shall become due and owing and all other
amounts of Supplemental Rent within five Business Days after demand or on such
date, or within such other relevant period, as may be provided in any Operative
Document, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent when due, Lessor shall have all rights, powers and remedies
provided for herein or in any other Operative Document or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall also pay on
behalf of Lessor as Supplemental Rent an amount equal to any amount payable by
Lessor as Premium as and when any such Premium shall be due and payable;
provided, however, that Lessee shall have no obligation to pay on behalf of
Lessor any Premium payable under Section 6.01 or 6.02 of the Trust Indenture due
to the occurrence of an "Event of Default" (as defined in the Trust Indenture)
which does not constitute an Event of Default hereunder. Lessee also will pay to
Lessor, or on behalf of Lessor to whomsoever shall be entitled thereto, on
demand, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Past Due Rate with respect to any part of any installment of
Basic Rent not paid prior to 11:00 a.m., New York City time, on the date when
due for any period for which the same shall be overdue and on any payment of
Supplemental Rent not paid prior to 11:00 a.m., New York City time, on the date
when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent other than Excluded
Payments payable to Lessor shall be made directly by Lessee by wire transfer of
immediately available funds prior to 11:00 a.m., New York time, on the date of
payment in Dollars, to Lessor at its office at 225 Franklin Street, Boston,
Massachusetts 02110, Attention: _________________________ (or such other office
of Lessor in the continental United States or such other account as Lessor shall
direct in a notice to Lessee at least 10 Business Days prior to the date such
payment of Rent is due); provided, that so long as the Trust Indenture shall not
20
<PAGE>
[Lease Agreement (1995 777 B)]
have been fully discharged, Lessor hereby directs and Lessee agrees, that all
Basic Rent shall be paid directly to the Indenture Trustee at the times and in
funds specified in this Section 3(e) at the offices of the Indenture Trustee at
Two International Place, Boston, MA 02110, Attention: Corporate Trust Department
(or such other office of Indenture Trustee in the continental United States or
such other account as Indenture Trustee shall direct in a notice to Lessee at
least 10 Business Days prior to the date such payment of Basic Rent is due).
Excluded Payments shall be paid in Dollars in immediately available funds to the
Person to whom payable at the address of such Person specified in Schedule I of
the Participation Agreement.
Notwithstanding anything to the contrary contained herein, if any date
on which a payment of Rent becomes due and payable is not a Business Day then
such payment shall be made on the next succeeding Business Day and no interest
shall accrue on the amount of such payment, if such payment is made on such next
succeeding Business Day.
(f) [Intentionally Reserved for Potential Future Use].
-----------------------------------------------
(g) Prepayments of Certain Rent Payments. Lessor agrees to pay, on
behalf of the Owner Participant, to the Indenture Trustee for the account of the
Certificate Holders on the Commencement Date an amount equal to the Excess
Amount. To the extent, if any, that there shall not have been received by the
Indenture Trustee at the account of the Indenture Trustee referred to in Section
3(e) by 11:00 a.m., New York City time, on the Commencement Date from Lessor, an
amount equal to the Excess Amount payable for such date, Lessee shall advance to
Lessor, as Prepaid Rent, by paying to the Indenture Trustee on behalf of Lessor
on the Commencement Date an amount equal to the Excess Amount not so paid (such
amount being herein called "Prepaid Rent"); provided that Lessee will also pay
to the Indenture Trustee, on demand, as Supplemental Rent, to the extent
permitted by applicable law, interest at the Debt Rate on any Prepaid Rent not
paid when due for any period for which the same shall be overdue. Lessor agrees
to reimburse Lessee in the manner and subject to the conditions provided in the
following sentence for (x) the Prepaid Rent so paid by Lessee determined as of
the date such payment was made, plus (y) the Supplemental Rent so paid by Lessee
pursuant to this Section 3(g), plus (z) accrued interest on the unreimbursed
portion thereof at a rate per annum equal to the greater of the Base Rate plus
2% or the Debt Rate plus 2% from the date such amount is paid by Lessee to but
not including the date of each such reimbursement (such amounts to be reimbursed
being herein called the "Reimbursement Amount"). So
21
<PAGE>
[Lease Agreement (1995 777 B)]
long as no Default or Event of Default has occurred and is continuing, Lessee
may with written notice to the Owner Participant and Indenture Trustee offset
(without duplication) against each succeeding payment (other than as limited by
the proviso to this sentence) due from Lessee to Lessor in respect of Basic
Rent, Stipulated Loss Value, Termination Value or any other amount due hereunder
to Lessor, until Lessee has been fully reimbursed for the Reimbursement Amount;
provided, however, that in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of offset
shall be limited to amounts distributable to Lessor or the Owner Participant
thereunder. No such offset or aggregate combined effect of separate offsets
shall reduce the amount of any installment of Basic Rent to an amount
insufficient, together with all other amounts payable simultaneously by Lessee,
to pay in full the payments then required to be made on account of the principal
amount (and Premium, if any) of and interest on the Loan Certificates then
outstanding.
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES AND
LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES AND AGREES THAT
AS BETWEEN LESSOR, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND LESSEE (A) THE
AIRFRAME AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH
ENGINE IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR NOR OWNER PARTICIPANT IS
A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR, IN
ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE, THE INDENTURE TRUSTEE NOR THE OWNER
PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION, DESIGN, OPERATION, VALUE,
MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR 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 STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except as set forth in Sections
8(f)(vi) and 8(p)(ii) of the Participation Agreement as to Lessor Liens and
except that State Street Bank and Trust Company, in its individual capacity, (i)
represents and warrants that on the Delivery Date, Lessor shall have received
whatever title to the Aircraft was conveyed to it by Lessee, (ii) represents and
warrants that on the Delivery Date the Aircraft shall be free of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) attributable to it in its individual
capacity, (iii) covenants that it will not, through its own actions or
22
<PAGE>
[Lease Agreement (1995 777 B)]
inactions, in such capacity, interfere in Lessee's or any Sublessee's quiet
enjoyment, use, operation or possession of the Aircraft unless this Lease shall
have been declared in default pursuant to Section 15 hereof, (iv) agrees that it
will not directly or indirectly create, incur, assume or suffer to exist any
Lessor Lien attributable to it in its individual capacity on or with respect to
the Airframe or any Engine or any portion of the Trust Estate and (v) represents
and warrants that it is a Citizen of the United States and agrees that if at any
time it shall cease to be a Citizen of the United States, it will promptly
resign as Owner Trustee (if and so long as such citizenship is necessary under
the Federal Aviation Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on the Owner Participant, the Certificate Holders or Lessee), effective upon the
appointment of a successor Owner Trustee in accordance with the provisions of
the Trust Agreement. None of the provisions of this Section 4 or any other
provision of this Agreement shall be deemed to amend, modify or otherwise affect
the representations, warranties or other obligations (express or implied) of the
Manufacturer, any subcontractor or supplier of the Manufacturer with respect to
the Airframe, Engines, or any Parts, or to release the Manufacturer, or any such
subcontractor or supplier from any such representation, warranty or obligation.
Unless a Section 14(a), 14(b), 14(f) or 14(g) Default or any Event of Default
shall have occurred and be continuing, Lessor agrees to make available to Lessee
such rights as Lessor may have under any warranty with respect to the Aircraft
made by the Manufacturer or any of its subcontractors or suppliers and any other
claims against the Manufacturer or any such subcontractor or supplier with
respect to the Aircraft, all pursuant to and in accordance with the terms of the
Owner Trustee's Purchase Agreement.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return. Unless
purchased by Lessee pursuant to Section 19(b) hereof, upon the termination of
this Lease at the end of the Basic Term or any Renewal Term or pursuant to
Section 9(b) or 15 hereof, Lessee will at its expense return the Aircraft to
Lessor at Lessee's maintenance base located at San Francisco International
Airport (or any principal maintenance base established by Lessee in the
continental United States subsequent to the date hereof), provided that upon the
request of the Lessor given to Lessee at least ten (10) days prior to the date
of such return, Lessee shall return the Airframe to Lessor at a location on
Lessee's route system in the continental United States selected by Lessor,
provided that such location is served on a normal basis by Boeing Model 777-222
aircraft operated by Lessee, and Lessor shall reimburse Lessee on a net after-
tax basis for Lessee's out-of-pocket Expenses (including for this purpose
23
<PAGE>
[Lease Agreement (1995 777 B)]
salary costs for Lessee's personnel) resulting from Lessee's return of the
Aircraft to such alternate return location to the extent such out-of-pocket
Expenses exceed the out-of-pocket Expenses (including, for this purpose, salary
costs for Lessee's personnel) Lessee would have incurred in returning the
Aircraft to its principal maintenance base at San Francisco International
Airport, provided, further, however, that if Lessor shall have made the request
for storage pursuant to Section 5(d) hereof, Lessee shall at its expense return
the Aircraft at the site of storage. At the time of such return, (A) Lessee
will, at its own cost and expense, unless otherwise requested by Lessor to
retain the existing registration of the Aircraft, cause the Aircraft, if it is
not then so registered, to be registered under the laws of the United States
with the FAA in the name of Lessor or its designee, provided that Lessee shall
be relieved of its obligations under this sentence if such registration is
prohibited by reason of the failure of Lessor, the Owner Participant or Lessor's
designee to be eligible on such date to own an aircraft registered with the
Federal Aviation Administration, and (B) subject to Section 5(e) hereof, the
Airframe will be fully equipped with the Engines (or Acceptable Alternate
Engines) installed thereon. Also, at the time of such return, Lessor shall have
good title to such Airframe and Engines or Acceptable Alternate Engines, and
such Airframe and Engines or Acceptable Alternate Engines (i) shall be certified
(or, if not then registered under the Federal Aviation Act by reason of the
proviso to clause (A) in the preceding sentence or because Lessor has so
requested that the Aircraft not be so registered, shall hold a valid certificate
of airworthiness issued by the country of registry and be eligible for
certification by the FAA) as an airworthy aircraft by the Federal Aviation
Administration, (ii) shall be free and clear of all Liens (other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and rights of third parties under
pooling, interchange, overhaul, repair or other similar agreements or
arrangements, (iii) shall be in a regular passenger configuration, and in as
good a condition as when delivered by Lessee to Lessor, ordinary wear and tear
excepted and otherwise in the condition required to be maintained under the
Lease and under Lessee's FAA-approved maintenance plan (notwithstanding any
Sublease theretofore in effect) and shall be in compliance with all mandatory
environmental, noise, air pollution and other standards prescribed by the
federal government of the United States and applicable to the Aircraft
including, without limitation, standards relating to corrosion and structural
integrity and all other applicable manufacturer's mandatory service bulletins
(except for standards, laws, regulations, directives and bulletins that permit
compliance at a later time and would not, in the normal course of Lessee's
maintenance plan, be complied with by the date of return without
24
<PAGE>
[Lease Agreement (1995 777 B)]
discriminating on the basis of the status of the Aircraft as a leased aircraft),
(iv) in the event that Lessee shall not then be using a continuous maintenance
program with respect to the Airframe immediately prior to such return but
instead shall have been using a block overhaul program with respect to the
Airframe, then (A) such block overhaul program shall have been approved by the
government of registry of the Aircraft and (B) the Airframe shall have remaining
until the next scheduled block overhaul at least 25% of the allowable hours
between block overhauls permitted under the block overhaul program then used by
Lessee, (v) in the event that Lessee during the period of operation of the
Aircraft immediately prior to such return shall not have been using an on-
condition maintenance program with respect to the Engines (or Acceptable
Alternate Engines), Lessee agrees that the average number of hours or cycles of
operation (whichever shall be applicable under the maintenance program then in
use with respect to such Engines (or Acceptable Alternate Engines)) on such
Engines (or Acceptable Alternate Engines) remaining until the next scheduled
engine heavy maintenance shall be at least 25% of the hours or cycles (whichever
shall be applicable) between engine heavy maintenance allowed under the
maintenance program then in use with respect to such Engines (or Acceptable
Alternate Engines), (vi) shall have all Lessee's and any Sublessee's exterior
marking removed or painted over with areas thereof refinished to match adjacent
areas, and (vii) shall be in a state of cleanliness suitable under Lessee's
normal service standards for operation in Lessee's revenue passenger service and
in all such cases the Aircraft shall not have been discriminated against whether
by reason of its leased status or otherwise in maintenance, use, operation or in
any other manner whatsoever.
In addition, the following conditions shall be complied with at the
time of the return of the Aircraft: (i) Lessee shall deliver to Lessor any "no
cost" modification kits designated for the Aircraft that Lessee has in its
possession and that have not been incorporated at the time of the return of the
Aircraft, (ii) Lessor may purchase from Lessee at Lessee's cost any service
bulletin kits purchased or manufactured by Lessee for the Aircraft (provided
that Lessee shall not be obligated to sell to Lessor any service bulletin kit
manufactured by Lessee to the extent Lessee, in its reasonable judgment,
considers the same proprietary) and (iii) without limiting the obligations of
the Lessee set forth in the preceding paragraph, in the event the FAA shall
issue any directive which requires termination thereof prior to the return date,
then such directive shall be terminated prior to the return date, and if Lessee
shall have not been required to terminate such directive in the normal course of
its operations without discriminating against the Aircraft by reason of its
leased status or otherwise prior to the return of the
25
<PAGE>
[Lease Agreement (1995 777 B)]
Aircraft but such directive must be terminated on or before six months following
such return, then Lessee shall, at the sole cost and expense of Lessor, comply
with such directive but only if (x) at least 540 days prior to the return of the
Aircraft Lessee receives from Lessor a written request to comply with such
directive at Lessor's sole cost and expense (determined on the basis of what a
third party would charge for comparable services) and (y) after receipt by
Lessee of such request, the Aircraft is subject to a maintenance check of the
type at which such modification is made, in accordance with Lessee's general
maintenance program, and Lessee has, or can obtain using commercial reasonable
efforts taking into account the 540 day prior notice received by Lessee, the
personnel, parts, facilities and other resources available to accomplish the
modification and the modification can be made without materially disrupting the
operations of Lessee's maintenance facility or Lessee's operations.
For purposes of this Section 5(a), any maintenance program used by
Lessee for airframes (including the Airframe) substantially similar to the
maintenance program described in the excerpts from ["United Air Lines 777
Maintenance Program"] furnished to Lessor and the Owner Participant prior to the
Delivery Date (a copy of which was attached to the certificate of the Assistant
Secretary of the Lessee delivered pursuant to Section 4(a)(vii)(6) of the
Participation Agreement) shall be considered a continuous maintenance program
(and not a block maintenance program) and any engine maintenance program used by
Lessee for engines (including the Engines) substantially similar to the
maintenance program described in "United Air Lines 777 Maintenance Program"
shall be considered an on-condition maintenance program.
In the event that the provisions of the preceding paragraph are
inapplicable and upon a return of the Aircraft pursuant to this Section 5,
Lessee and Lessor cannot agree as to whether Lessee, during the period of
operation of the Aircraft immediately prior to such return, shall have been
using a continuous maintenance program or a block overhaul program with respect
to the Airframe (including, without limitation, a dispute as to whether Lessee's
program is substantially similar to the program described in the excerpts to the
["United Air Lines 777 Maintenance Program"] furnished to Lessor as set forth in
the preceding paragraph), then Lessee and Lessor shall mutually appoint an
independent third party, satisfactory to both Lessee and Lessor, who shall make
such a determination, which determination shall be conclusive and final. Lessee
will provide, on a confidential basis, such independent third party with the
maintenance program and records applicable to the
26
<PAGE>
[Lease Agreement (1995 777 B)]
Aircraft necessary to make such determination. The fee of such third party shall
be paid equally by Lessor and Lessee.
If clause (iv) of the first paragraph of this Section 5(a) shall be
applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor, concurrently with
the return thereof, a Dollar amount computed by multiplying (i) the fair market
cost of obtaining an airframe block overhaul of the type referred to in such
clause (iv) at a location in the United States that has been approved by the FAA
for such work by (ii) a fraction of which (x) the numerator shall be the excess
of 25% of the hours of operation allowable between such block overhauls over the
actual number of hours of operation remaining on the Airframe to the next such
block overhaul and (y) the denominator shall be the number of hours of operation
allowable between such block overhauls in accordance with such block overhaul
program.
If clause (v) of the first paragraph of this Section 5(a) shall be
applicable but the Engines (or Acceptable Alternate Engines) do not meet the
conditions specified in said clause (v), Lessee shall pay or cause to be paid to
Lessor, concurrently with the return thereof, a Dollar amount computed by
multiplying (i) the fair market cost of obtaining the scheduled engine heavy
maintenance under the maintenance program then used by Lessee for engines of the
same model as the Engines (or Acceptable Alternate Engines) at a location in the
United States that has been approved by the FAA for such work by (ii) a fraction
which (x) the numerator shall be the excess of 25% of the hours or cycles
(whichever is applicable) of operation of one Engine between engine heavy
maintenance allowable under the maintenance program then in use with respect to
such Engines (or Acceptable Alternate Engines) over the actual average number of
hours or cycles of operation of such Engines (or Acceptable Alternate Engines)
remaining until the next such scheduled engine heavy maintenance and (y) the
denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last six months of the Term (unless Lessee shall have
irrevocably elected to purchase the Aircraft or renew this Lease in accordance
with the terms of this Lease), with reasonable notice, Lessee will cooperate,
and cause any Sublessee to cooperate, at Lessor's sole cost, in all reasonable
respects with the efforts of Lessor to sell or lease the Aircraft, including,
without limitation, permitting prospective purchasers or lessees to inspect the
Aircraft, any maintenance records relating to the Aircraft then required to be
retained by the FAA or by the comparable government agency of the country in
which the Aircraft is registered, all in accordance with Section 12 hereof,
provided that any such cooperation shall not interfere
27
<PAGE>
[Lease Agreement (1995 777 B)]
with the normal operation or maintenance of the Aircraft by, or the business of,
Lessee or any Sublessee.
(b) Return of Other Engines. In the event that an Acceptable Alternate
Engine shall be delivered with the returned Airframe as set forth in paragraph
(a) of this Section 5, Lessee, concurrently with such delivery, will, at no cost
to Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to
title) bill of sale with respect to each such Acceptable Alternate Engine, in
form and substance reasonably satisfactory to Lessor (together with an opinion
of counsel (which may be Lessee's General Counsel) to the effect that such full
warranty bill of sale has been duly authorized and delivered and is enforceable
in accordance with its terms and that each such Acceptable Alternate Engine is
free and clear of all Liens other than Lessor Liens (including for this purpose
Liens that would be Lessor Liens but for the proviso to the definition of Lessor
Liens)) and will, to the extent applicable, comply with the provisions of
Section 9(d) as if Lessee had irrevocably elected, in accordance with Section
9(d) hereof, to terminate the Lease with respect to the Engine in replacement
for which such Acceptable Alternate Engine is being delivered and Lessor will
provide a bill of sale, at Lessee's expense, evidencing the transfer, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)) by Lessor to Lessee or its designee of all of
Lessor's right, title and interest in and to any Engine not installed on the
Airframe at the time of the return of the Airframe.
(c) Fuel and Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessee shall invoice Lessor, and Lessor shall pay to Lessee the amount of
Lessee's cost for any fuel or oil contained in the fuel or oil tanks on the
Airframe, and (ii) Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data and inspection, modification and overhaul records in the
English language (or an English translation of the same), (A) required to be
maintained with respect to the Airframe, the Engines or any part thereof in
accordance with Section 7(a) hereof, (B) created since the Airframe's or
Engine's or Acceptable Alternate Engine's (whichever is applicable) last heavy
maintenance visit and (C) required to lawfully operate the Aircraft in the
United States under a United States Certificate of Airworthiness without
performing additional maintenance.
(d) Storage Upon Return. If, at any time at least 30 days prior to the
end of the Basic Term or any Renewal Term or pursuant to Section 9(c) or Section
15, Lessee receives from
28
<PAGE>
[Lease Agreement (1995 777 B)]
Lessor a written request for storage of the Aircraft upon its return hereunder,
Lessee will provide Lessor, or cause Lessor to be provided, with storage
facilities for the Aircraft (at Lessor's risk and at Lessor's cost for
insurance, maintenance and Lessee's reasonable out-of-pocket expenses other than
storage fees) for a period not exceeding forty-five (45) days (and upon prior
written notice from Lessor to Lessee given at least 10 days prior to the end of
such 45 day period, at Lessor's risk and at Lessor's cost for insurance,
maintenance and Lessee's reasonable out-of-pocket expenses including storage
fees, for an additional period not exceeding 45 days) commencing on the date of
such termination, at a location in the forty-eight contiguous states of the
United States selected by Lessee and used as a location for the storage of
aircraft. Lessee shall, at Lessor's written request, maintain insurance (if
available) for the Aircraft during such period and shall be reimbursed by Lessor
for the premiums thereon.
(e) Purchase of Engine. In the event that Lessee shall have paid the
Stipulated Loss Value for any Engine pursuant to Section 10(b) hereof and all
other amounts due and owing under said Section 10(b), then, notwithstanding
anything contained in this Section 5, Lessee shall, subject to the proviso
below, be under no obligation to return any engine installed on the Airframe in
replacement for such Engine to Lessor upon the termination of this Lease;
provided, however, that in such event Lessor shall have the right upon
termination of this Lease (unless Lessee shall have exercised any of its options
to purchase the Aircraft pursuant to Section 19), at its sole option, to
purchase from Lessee an engine or engines suitable for use on the Airframe and
compatible with the other Engine (if any) or the other engine purchased under
this Section 5(e) for such engine's then Fair Market Sales Value and any such
engine shall be installed at no cost to Lessor on the Airframe on the return
thereof.
(f) Severable Parts. At any time after Lessee has advised Lessor that
it has determined not to renew this Lease or purchase the Aircraft, or the
Aircraft is otherwise to be returned to Lessor, Lessee shall, at Lessor's
request, advise Lessor of the nature and condition of all severable Parts owned
by Lessee which have been used by Lessee during the prior six months and which
Lessee has or intends to remove from the Aircraft as permitted by Section 8
hereof. Lessor may, at its option, upon 30 days written notice to Lessee,
purchase any or all of such Parts from Lessee upon the expiration of the Term at
their then fair market value.
(g) Special Redelivery Provision. Not less than 30 days prior to (A)
the date of redelivery of the Aircraft by
29
<PAGE>
[Lease Agreement (1995 777 B)]
Lessee to Lessor in accordance with this Section 5, (B) the date of redelivery
to Lessor or a purchaser pursuant to Section 9(c) or Section 15 hereof, or (C) a
purchase of the Aircraft by Lessee pursuant to Section 19(b), Lessor may provide
Lessee with a proposal regarding the arranging of delivery of the Aircraft so as
to enable Lessor to realize "foreign trade income" (as defined in Section 923(b)
of the Code or any successor provision thereto) from the sale or re-lease of the
Aircraft, and Lessee shall (i) arrange delivery at Lessor's cost (unless the
delivery site is as provided in Section 5(a) hereof) either inside or outside
the United States, as specified in Lessor's proposal, and (ii) otherwise comply
with such proposal to the extent Lessee can do so without incurring any cost,
expense or liability not indemnified against by Lessor in a manner in form and
substance reasonably satisfactory to Lessee.
SECTION 6. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided (including any Sublease permitted pursuant to Section 7(b)), the Lien
of the Trust Indenture, and any other rights existing pursuant to the Operative
Documents, (ii) Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), (iii) Liens
for Taxes of Lessee (or any Sublessee) either not yet due or being contested in
good faith by appropriate proceeding so long as such proceedings do not involve
any material risk of the sale, forfeiture or loss of the Airframe or any Engine
or any interest thereon, (iv) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of Lessee's or any
Sublessee's business securing obligations that are not overdue for a period of
more than 30 days or are being contested in good faith by appropriate
proceedings so long as during such 30 day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
the Airframe or any Engine or any interest therein, (v) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless there exists a
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein or unless the judgment secured shall not, within 45 days
after the entry thereof, have been discharged, vacated, reversed or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within 45 days after the expiration of such stay, and (vi) any other
Lien with respect to which Lessee (or any Sublessee) shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to
Lessor. Lessee will promptly, at its own expense, take (or cause to be taken)
such actions as may be
30
<PAGE>
[Lease Agreement (1995 777 B)]
necessary duly to discharge any such Lien not excepted above if the same shall
arise at any time.
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia. (a) (1) Registration and Maintenance. Lessee, at its
own cost and expense, shall (or shall cause any Sublessee to): (i) upon
delivery of the Aircraft, cause the Aircraft to be duly registered in the name
of Lessor, and, subject to subparagraph (3) of this Section 7(a), to remain duly
registered in the name of Lessor under the Federal Aviation Act (except to the
extent that such registration cannot be effected because of Lessor's or the
Owner Participant's failure to comply with the citizenship requirements for
registration of aircraft under such Act), provided that Lessor and the Owner
Participant shall execute and deliver all such documents as Lessee (or any
Sublessee) may reasonably request for the purpose of effecting and continuing
such registration, and Lessee shall cause the Trust Indenture to be duly
recorded and maintained of record as a first mortgage on the Aircraft; (ii)
maintain, service, repair, and overhaul (or cause to be maintained, serviced,
repaired, and overhauled) the Aircraft (and any engine which is not an Engine
but which is installed on the Aircraft) (x) so as (p) at all times to keep the
Aircraft in as good an operating condition as when delivered by Manufacturer to
Lessee, ordinary wear and tear excepted, and (q) to keep the Aircraft in such
condition as may be necessary to enable the airworthiness certification for the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations) under
(I) the Federal Aviation Act, except when all of Lessee's Boeing Model 777-222
aircraft (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of such grounding) registered in the United States
have been grounded by the FAA unless such grounding was caused by the failure of
Lessee to maintain, service, repair or overhaul the Aircraft in accordance with
this Lease, or (II) the applicable laws of any other jurisdiction in which the
Aircraft may then be registered from time to time, except when all of Lessee's
Boeing Model 777-222 aircraft (powered by engines of the same type as those with
which the Airframe shall be equipped at the time of such grounding) registered
in such jurisdiction have been grounded by the aeronautical authority of such
jurisdiction unless such grounding was caused by the failure of Lessee to
maintain, service, repair or overhaul the Aircraft in accordance with this Lease
and (y) in substantially the same manner as Lessee (or any Sublessee) maintains,
services, repairs or overhauls similar aircraft operated by Lessee (or such
Sublessee) in similar circumstances and without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise,
including, without limitation, in regard to the
31
<PAGE>
[Lease Agreement (1995 777 B)]
termination of airworthiness directives; or such other manner as shall have been
approved in writing by the Owner Participant; (iii) maintain or cause to be
maintained in the English language (or with appropriate English translation) all
records, logs and other materials required to be maintained in respect of the
Aircraft by the FAA or the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered (which records, logs
and other materials, as between Lessor and Lessee and all parties claiming
through Lessee, shall be the property of Lessor but shall be maintained by
Lessee during the Term of this Lease and shall become the property of Lessee
upon Lessee's purchase of the Aircraft pursuant to the terms of this Lease or
upon the occurrence of an Event of Loss and Lessee's compliance with Section
10); and (iv) promptly furnish or cause to be furnished to Lessor or the Owner
Participant such information as may be reasonably required to enable Lessor or
the Owner Participant to file any reports required to be filed by Lessor or the
Owner Participant with any governmental authority because of Lessor's ownership
of the Aircraft.
(2) Operation. Lessee will not (or permit any Sublessee to) maintain,
use, service, repair, overhaul or operate the Aircraft in violation of any law
or any rule, regulation, treaty, order or certificate of any government or
governmental authority (domestic or foreign) having jurisdiction, or in
violation of any airworthiness certificate, license or registration relating to
the Aircraft issued by any such authority, except that, after Lessee shall have
provided Lessor and, so long as the Lien of the Trust Indenture shall not have
been released, the Indenture Trustee with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer stating all relevant
facts pertaining thereto, Lessee or any Sublessee may contest in good faith the
validity or application of any such law, rule, regulation, order, certificate,
license, registration or violation in any reasonable manner which does not
jeopardize the right, title and interest of the Lessor or the Owner Participant
in and to the Airframe and/or the Engines or otherwise materially adversely
affect Lessor, the Indenture Trustee or the Owner Participant but only so long
as such proceedings do not involve any risk of criminal liability or any
unindemnified material risk of civil liability to Lessor or the Owner
Participant for which the Lessee is not then willing to indemnify Lessor or the
Owner Participant in a manner reasonably satisfactory to such Person. If the
indemnities or insurance specified in Section 11(f), or some combination thereof
in amounts equal to amounts required by Section 11(f), have not been obtained,
Lessee will not operate the Aircraft, or permit any Sublessee to operate the
Aircraft, in or to any area excluded from coverage by any insurance required to
be maintained by the
32
<PAGE>
[Lease Agreement (1995 777 B)]
terms of Section 11, provided, however, that the failure of Lessee to comply
with the provisions of this sentence shall not give rise to an Event of Default
hereunder where such failure is attributable to a hijacking, medical emergency,
equipment malfunction, weather conditions, navigational error or other isolated
extraordinary event beyond the control of Lessee and Lessee is taking all
reasonable steps to remedy such failure as soon as is reasonably practicable.
(3) Reregistration. At any time after the Restricted Period, Lessor
shall, at the request and sole expense of Lessee, cooperate with Lessee and take
all actions required to change the country of registration of the Aircraft in
compliance with and subject to the terms and conditions of Section 8(e) of the
Participation Agreement.
(4) Operating Certificates. Lessor hereby authorizes Lessee, at
Lessee's sole cost, expense and risk, to act as its agent for the purpose (but
only for the purpose) of obtaining any required replacement operating
certificates from the FAA; provided, however, that in the event that Lessee
shall have received from Lessor written notice that an Event of Default shall
have occurred and be continuing, this authority shall not apply for a period
from the date of receipt of such notice to such time as such Event of Default
shall have been cured by Lessee or waived by Lessor. This authority includes
(without expanding in any way the nature of the limited authority granted
pursuant to the first sentence of this Section 7(a)(4)), but is not limited to,
obtaining registration certificates, airworthiness certificates, certificates of
sanitary construction and ferry permits. In particular, this authority includes
the ability to make use of Exemption No. 5318 issued by the FAA. This authority
will allow duly authorized personnel of Lessee to sign any application forms
required in the process of obtaining such operating certificates, and this
authority will also allow such personnel, where necessary and appropriate, to
sign certificates as the attorney-in-fact for Lessor. Lessee hereby agrees that
it will promptly notify Lessor of any action that it has taken in accordance
with this Section 7(a)(4) as agent for the Lessor. Nothing in this Section
7(a)(4) shall permit the Lessee to change the country of registry of the
Aircraft except as provided in Section 7(a)(3) above.
(b) Possession and Subleases. Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver, transfer
or relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe; provided that,
so long as no Section 14(a), (b), (f) or (g) Default or, in the case of
paragraph (viii) of this Section 7(b),
33
<PAGE>
[Lease Agreement (1995 777 B)]
no Section 14(d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) hereof or Section 8 hereof) Default, or any Event of Default shall
have occurred and be continuing at the time of such sublease, delivery, transfer
or relinquishment of possession or installation, and so long as the action to be
taken shall not deprive the Indenture Trustee of the Lien of the Trust Indenture
on the Airframe or any Engine and Lessee and any Sublessee shall continue to
comply with the provisions of Sections 7(a) and 11, Lessee may, without the
prior written consent of Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by Lessee (or any Sublessee) in the ordinary
course of its business and, in the case of the Airframe, (x) with a U.S.
Air Carrier not in bankruptcy or a Permitted Sublessee or (y) any other air
carrier approved by Lessor; provided, that (A) no such agreement or
arrangement contemplates or requires the transfer of title to the Airframe,
and (B) if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, Lessee shall be deemed to have irrevocably
elected, in accordance with Section 9(d) hereof, to terminate the Lease
with respect to such Engine on the Business Day next following the 44th day
following such divestiture and Lessee shall (or shall cause any Sublessee
to) comply with Section 9(d) hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof or to any other Person for testing, service, repair,
maintenance or overhaul work on the Airframe or Engine or any Part of any
thereof or for alterations or modifications in or additions to such
Airframe or Engine to the extent required or permitted by the terms of
Section 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee (or any
Sublessee) which airframe is free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of third
parties under interchange agreements which would be permitted under clause
(i) above, provided that Lessor's title to such Engine shall not be
divested as a result thereof and (C) mortgage Liens or other security
interests, provided, that (as regards this clause (C)), such
34
<PAGE>
[Lease Agreement (1995 777 B)]
mortgage Liens or other security interests effectively provide that such
Engine shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such lease,
conditional sale or other security agreement effectively provides that such
Engine shall not become subject to the lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on
such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee (or
any Sublessee) subject to a conditional sale or other security agreement
under circumstances where neither subparagraph (iii) nor subparagraph (iv)
of this paragraph (b) is applicable, provided that in the event of such
installation, Lessee shall be deemed to have irrevocably elected, in
accordance with Section 9(d) hereof, to terminate the Lease with respect to
such Engine on the Business Day next following the 44th day following such
installation and Lessee shall (or shall cause any Sublessee to) comply with
Section 9(d) hereof in respect thereof, Lessor not intending hereby to
waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 9(d);
(vi) transfer (or permit any Sublessee to transfer) possession of
the Airframe or any Engine to the United States of America or any
instrumentality or agency thereof pursuant to the Civil Reserve Air Fleet
Program for a period, including all permissible renewal periods (so long as
such renewal options have been irrevocably exercised by Lessee), that does
not extend beyond the end of the Term so long as Lessee (or any Sublessee)
shall promptly notify Lessor (x) upon transferring possession of the
Airframe or any Engine to the United States of America or any agency or
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program and
(y) of the name and the address of the Contracting Office Representative
for the Military Airlift
35
<PAGE>
[Lease Agreement (1995 777 B)]
Command of the United States Air Force to whom notice must be given
pursuant to Section 15 hereof;
(vii) transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor provided that
the term of such contract, including all permissible renewal periods (so
long as such renewal options have been irrevocably exercised by Lessee),
shall not continue beyond the end of the Term; or
(viii) So long as the Sublessee is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the Sublease is entered into, Lessee may, at any time, enter
into a sublease with (1) a U.S. Air Carrier, (2) after the Restricted
Period any Permitted Sublessee, provided that in the event such Permitted
Sublessee is domiciled in a country listed on Exhibit F hereto and
designated therein as a "Restricted Country" such Sublessee shall be deemed
a Permitted Sublessee only if its country of domicile at the time of such
subleasing imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central aviation
authority of any of Canada, France, Germany, Japan or the United Kingdom,
or (3) after the Restricted Period any other Person approved in writing by
the Owner Participant, which approval shall not be unreasonably withheld if
in regard to this subclause (3) (x) the proposed sublessee's country of
domicile imposes maintenance standards not materially less stringent than
those of the FAA or the central aviation authority of any of Canada,
France, Japan, Germany, or the United Kingdom and (y) Lessor, Owner
Participant and the Indenture Trustee receive an opinion of counsel
reasonably acceptable to Lessor, in its individual capacity, and Owner
Participant that the terms of the sublease and other Operative Documents
will be valid in the country where Sublessee is domiciled; that no
Participant is required to register to do business in the Sublessee's
country of domicile; that there is no tort liability for owners not in
possession that is more extensive than under United States law or any state
law (it being understood that if such opinion cannot be given in a form
reasonably satisfactory to the Owner Participant such opinion will be
waived if insurance reasonably satisfactory to the Owner Participant and
the Lessor, in its individual capacity, is provided at Lessee's expense to
cover such risk); that fair compensation in a currency freely convertible
into Dollars is mandated if there is a requisition of use or title of the
Aircraft by the country
36
<PAGE>
[Lease Agreement (1995 777 B)]
in which the Sublessee is domiciled (it being understood that if such
opinion cannot be given in a form reasonably satisfactory to the Owner
Participant such opinion will be waived if insurance reasonably
satisfactory to the Owner Participant, is provided at Lessee's expense to
cover such risk); that there exist no possessory rights in favor of the
Sublessee which upon Lessee's bankruptcy or other Default hereunder
(assuming the Sublessee is not then bankrupt) would prevent the return of
the Aircraft in accordance with the terms hereof or inhibit the Lessor's
rights therein; and as to such other matters as Lessor, in its individual
capacity, and the Owner Participant may reasonably request, provided,
however, (A) that no sublease, including all permissible renewal periods,
shall extend beyond the Basic Term or any Renewal Term then in effect,
unless Lessee shall have irrevocably committed to purchase the Aircraft or
renew the Lease in accordance with the terms thereof at the end of the
Basic Term or Renewal Term, as the case may be, to a date beyond the latest
permissible expiration date of such sublease, (B) that, on the date of such
sublease, the United States and the country in which sublessee is domiciled
and principally located maintain diplomatic relations, (C) that on or prior
to entering into such sublease, Lessee shall provide to the Lessor, the
Owner Participant and, so long as the Lien of the Trust Indenture shall not
have been released, the Indenture Trustee assurances reasonably
satisfactory to Lessor, in its individual capacity, and Owner Participant
to the effect that the provisions of Section 11 hereof have been complied
with after giving effect to such sublease and (D) that, in the case of a
sublease to a sublessee described in (3) above, if the country of domicile
of the proposed sublessee at the time of such subleasing has not
unqualifiedly ratified the Geneva Convention for International Recognition
of Rights in Aircraft, the Lessee shall provide Lessor to the Lessor and,
so long as the Lien of the Trust Indenture shall not have been released,
the Indenture Trustee an opinion of counsel, which counsel and opinion
shall be reasonably satisfactory to the Owner Participant, to the effect
that the country in which such sublessee has its principal office and
domicile would give effect to (i) the title of Lessor in and to the
Aircraft, (ii) the registry of the Aircraft in the name of Lessor (or
Lessee or Sublessee, as "lessee" or "sublessee" as appropriate) and (iii)
the priority and validity of the Lien of the Trust Indenture.
The rights of any Sublessee or other transferee (other than a
transferee where the transfer is of an Engine which is deemed a termination
under Section 9(d)) shall be subject and subordinate to, all the terms of the
Lease (and any Sublease
37
<PAGE>
[Lease Agreement (1995 777 B)]
shall expressly state that it is so subject and subordinate), including, without
limitation, the covenants contained in Section 7(a) hereof, the inspection
rights contained in Section 12 hereof and Lessor's (and, so long as the Trust
Indenture is in effect, the Indenture Trustee's (as Lessor's assignee)) rights
to repossess the Aircraft and to void any Sublease upon such repossession, and
Lessee shall remain primarily liable for the performance of all of the terms of
the Lease, and the terms of any such Sublease shall not permit any Sublessee to
take any action not permitted to be taken by Lessee in the Lease with respect to
the Aircraft. No pooling agreement, Sublease or other relinquishment of
possession of the Airframe or any Engine shall in any way discharge or diminish
any of Lessee's obligations to Lessor under this Lease or constitute a waiver of
Lessor's rights or remedies hereunder. Lessor agrees, for the benefit of Lessee
(and any Sublessee) and for the benefit of any mortgagee or other holder of a
security interest in any engine owned by Lessee (or any Sublessee), any lessor
of any engine other than an Engine leased to Lessee (or any Sublessee) and any
conditional vendor of any engine other than an Engine purchased by Lessee (or
any Sublessee) subject to a conditional sale agreement or any other security
agreement, that no interest shall be created under the Lease in any engine so
owned, leased or purchased and that neither Lessor nor its successors or assigns
will acquire or claim, as against Lessee (or any Sublessee) or any such
mortgagee, lessor or conditional vendor or other holder of a security interest
or any successor or assignee of any thereof, any right, title or interest in
such engine as the result of such engine being installed on the Airframe;
provided, however, that such agreement of Lessor shall not be for the benefit of
any lessor or secured party of an airframe leased to Lessee (or any Sublessee)
or purchased by Lessee (or any Sublessee) subject to a conditional sale or other
security agreement or for the benefit of any mortgagee or any other holder of a
security interest in an airframe owned by Lessee (or any Sublessee), on which
airframe Lessee (or any Sublessee) then proposes to install an Engine, unless
such lessor, conditional vendor, other secured party or mortgagee has expressly
agreed (which agreement may be contained in such lease, conditional sale or
other security agreement or mortgage) that neither it nor its successors or
assigns will acquire, as against Lessor, any right title or interest in an
Engine as a result of such Engine being installed on such airframe. Lessee
shall provide the Owner Participant and the Indenture Trustee (A) written notice
(which notice shall be given (i) no later than thirty (30) days prior to
entering into any Sublease with a term of more than one (1) year or (ii) at any
time prior to (to the extent that the giving of prior notice is reasonably
possible) or promptly after entering into any Sublease with a term of one (1)
year or less) of any
38
<PAGE>
[Lease Agreement (1995 777 B)]
Sublease and (B) a copy of any Sublease which has a term of more than one (1)
year.
Lessee shall assign any Sublease to Lessor as security for its
obligations hereunder pursuant to an assignment instrument reasonably
satisfactory to Lessor; provided, however, that any such assignment instrument
shall provide that the assignment of the Sublease shall only be effective,
without any further action, immediately upon the occurrence of a Section 14(a),
14(b), 14(f) or 14(g) Default or any Event of Default (and such effectiveness
shall terminate upon the curing or waiver of the aforesaid Defaults or Events of
Default). In addition, any Sublease entered into by Lessee shall provide that
all payments due under such Sublease shall be paid by the Sublessee to Lessor
during the continuance of a Section 14(a), 14(b), 14(f) or 14(g) Default or an
Event of Default.
In the event that during the term of a Sublease the Aircraft shall
have been maintained under a block-overhaul program, Lessee shall at its option
either (i) cause the Aircraft to be returned to the Lessee by the Sublessee no
later than three months prior to the end of the Term and Lessee shall upon such
return incorporate the Aircraft into Lessee's continuous maintenance program for
aircraft of the same make and model and in active commercial service or (ii)
upon return of the Aircraft to Lessor pursuant to Section 5(a), Lessee shall
comply with those return conditions set forth in such Section 5(a) applicable in
the event Lessee had adopted a block-overhaul program.
Any Wet Lease or similar arrangement under which Lessee maintains
operational control of the Aircraft shall not constitute a delivery, transfer or
relinquishment of possession for purposes of this section. Lessor acknowledges
that any consolidation or merger of Lessee or conveyance, transfer or lease of
all or substantially all of Lessee's assets permitted by the Operative Documents
shall not be prohibited by this Section.
No Sublease permitted pursuant to this Section shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Delivery Date, or as soon thereafter
as practicable, Lessee agrees to affix and maintain (or cause to be affixed and
maintained) in the cockpit of the Airframe adjacent to the registration
certificate therein and on each Engine a nameplate bearing the inscription:
39
<PAGE>
[Lease Agreement (1995 777 B)]
Leased From
State Street Bank and Trust Company, not in its individual capacity
but solely as Owner Trustee, Owner and Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien of
the Trust Indenture, bearing the following additional inscription:
Mortgaged To
First Security Bank of Utah, National Association, as Indenture
Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents).
Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Airframe or on any Engine
as a designation that might be interpreted as a claim of ownership; provided,
that nothing herein contained shall prohibit Lessee (or any Sublessee) from
placing its customary colors and insignia on the Airframe or any Engine.
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(a) Replacement of Parts. Lessee, at its own cost and expense, will
promptly replace or cause to be replaced all Parts which 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, except
as otherwise provided in Section 8(c). All replacement Parts shall be owned by
Lessee free and clear of all Liens (except Permitted Liens, pooling arrangements
permitted by Section 8(b) hereof and replacement Parts temporarily installed on
an emergency basis) and shall be in as good operating condition as, and shall
have a value and utility substantially equal to, the Parts replaced assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof. All Parts at any time removed from the Airframe or any
Engine shall remain the property of Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the Airframe or any
40
<PAGE>
[Lease Agreement (1995 777 B)]
Engine, without further act (subject only to Permitted Liens and any pooling
arrangement permitted by Section 8(b) hereof and except replacement Parts
temporarily installed on an emergency basis), (i) title shall vest in and such
replacement Part shall become the property of Lessor and shall become subject to
this Lease and be deemed a Part for all purposes hereof to the same extent as
the Parts originally incorporated or installed in or attached to the Airframe or
such Engine and (ii) the replaced Part shall no longer be the property of Lessor
and shall no longer be deemed a Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in Section 8(a) hereof may be subjected by Lessee (or any
Sublessee) to a pooling arrangement of the type which is permitted by Section
7(b)(i) hereof; provided, that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) 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 an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Lessee (or any Sublessee), at its expense, as promptly thereafter
as practicable, and in any event within 90 days, either (i) causes such
replacement Part to become the property of Lessor free and clear of all Liens
other than Permitted Liens or (ii) replaces such replacement Part with a further
replacement Part owned by Lessee (or any Sublessee) which shall become the
property of Lessor, free and clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Lessee, at its own
expense, will make (or cause to be made) such alterations and modifications in
and additions to the Airframe and Engines as may be required from time to time
to be made during the Term so as to comply with any law, rule, regulation or
order of any regulatory agency or body of any jurisdiction in which the Aircraft
may then be registered; provided, however, that, after Lessee shall have
provided Lessor and, so long as the Lien of the Trust Indenture shall not have
been released, the Indenture Trustee, with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer stating all relevant
facts pertaining thereto, Lessee or any Sublessee may, in good faith, and by
appropriate proceedings contest the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not jeopardize the
right, title and interest of the Lessor or the Owner Participant in and to the
Airframe and/or the Engines, or otherwise materially adversely affect Lessor,
the Owner Participant or the Indenture Trustee but only so long as such
proceedings do not
41
<PAGE>
[Lease Agreement (1995 777 B)]
involve any risk of criminal liability or any unindemnified material risk of
civil liability to Lessor or the Owner Participant for which the Lessee is not
then willing to indemnify Lessor or the Owner Participant in a manner reasonably
satisfactory to such Person. In addition, Lessee (or any Sublessee), at its own
expense, may from time to time make such alterations and modifications in and
additions to the Airframe or any Engine as Lessee (or any Sublessee) may deem
desirable in the proper conduct of its business, including removal of Parts
which Lessee (or any Sublessee) deems to be obsolete or no longer suitable or
appropriate for use on the Airframe or such Engine (such parts, "Obsolete
Parts"); provided that no such alteration, modification, removal or addition
impairs the condition or airworthiness of the Airframe or such Engine, or
decreases the value or the utility (or, in regard to the Airframe, remaining
useful life) of the Airframe or such Engine below the value or utility (or, in
regard to the Airframe, remaining useful life) thereof immediately prior to such
alteration, modification, removal or addition assuming the Airframe or such
Engine was then in the condition required to be maintained by the terms of this
Lease. In addition, the value (but not the utility, condition, airworthiness
or, in the case of the Airframe, remaining economic useful life) of the Airframe
or any Engine may be reduced by the value, if any, of Obsolete Parts which shall
have been removed so long as the aggregate original cost of all Obsolete Parts
which shall have been removed and not replaced shall not exceed $900,000. All
Parts incorporated or installed in or attached or added to the Airframe or an
Engine as the result of such alteration, modification or addition (except those
parts which Lessee has leased from others and which may be removed by Lessee
pursuant to the next sentence) (the "Additional Parts") shall, without further
act, become the property of, and title to such Parts shall vest in, Lessor.
Notwithstanding the foregoing sentence, Lessee (or any Sublessee), subject to
Lessor's rights under Section 5(f) hereof, may, at its own expense, at any time
during the Term, so long as no Default under Section 14(a), (b), (d) (solely
with respect to Lessee's obligations under Section 7(a) or (b)(viii) or Section
8 hereof), (f) or (g) or an Event of Default shall have occurred and be
continuing, remove or suffer to be removed any Additional Part, provided that
such Additional Part (i) is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or attached
to such Airframe or any Engine at the time of delivery thereof hereunder or any
Part in replacement of or substitution for any such Part, (ii) is not required
to be incorporated or installed in or attached or added to the Airframe or any
Engine pursuant to the terms of Section 7 hereof or the first sentence of this
paragraph (c) and (iii) can be removed from the Airframe or such Engine without
impairing the condition or airworthiness or diminishing the value or utility
(or, in
42
<PAGE>
[Lease Agreement (1995 777 B)]
regard to the Airframe, remaining useful life) of the Airframe or such Engine
which the Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred. Upon the removal thereof as
provided above, such Additional Part shall no longer be deemed the property of
Lessor or part of the Airframe or Engine from which it was removed. Any
Additional Part not removed as above provided prior to the return of the
Airframe or Engine to Lessor hereunder shall remain the property of Lessor.
SECTION 9. Early Termination.
(a) [Intentionally reserved for potential future use].
(b) Termination for Obsolescence/Surplus. So long as no Section
14(a), (b), (d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) or Section 8 hereof), (f) or (g) Default or any Event of Default
shall have occurred and be continuing, Lessee shall have the right to terminate
this Lease on the third Business Day prior to any Lease Period Date occurring
on or after the Restricted Period if Lessee shall have made a good faith
determination, which shall be evidenced by a certificate of any financial
officer of Lessee, who is the Treasurer or more senior officer, that the
Aircraft is surplus to Lessee's requirements or economically obsolete to Lessee.
Lessee shall give to Lessor and Indenture Trustee at least one hundred
and eighty (180) days revocable (except as provided below) advance written
notice of Lessee's intention to so terminate this Lease (any such notice, a
"Termination Notice") specifying (i) the date on which Lessee intends to
terminate this Lease in accordance with this Section 9(b) (such specified date,
a "Termination Date") and (ii) that Lessee has determined that the Aircraft is
surplus to its requirements or economically obsolete to Lessee. Lessee shall
exercise this option by arranging for the sale of the Aircraft pursuant to
Section 9(c), provided, however, that Lessee may not withdraw its notice if
Lessor has elected to retain the Aircraft pursuant to Section 9(c) or if the
highest bid obtained by Lessee pursuant to Section 9(c) is greater than the then
applicable Termination Value; provided, further, that if no sale of the Aircraft
shall have occurred on or prior to the Termination Date and if Lessor shall not
have elected to retain the Aircraft, Lessee's Termination Notice shall be deemed
withdrawn. The Termination Notice shall become irrevocable twenty-five (25)
days prior to the Termination Date.
(c) Sale of the Aircraft. In the event that Lessee shall have
proposed to terminate this Lease under Section 9(b),
then during the period commencing with the date of the
43
<PAGE>
[Lease Agreement (1995 777 B)]
Termination Notice until the proposed Termination Date Lessee, as non-exclusive
agent for Lessor and at no expense to Lessor, shall use reasonable efforts to
obtain bids in Dollars for the purchase of the Aircraft and, in the event it
receives any bid, Lessee shall, within five Business Days after receipt thereof
and at least ten Business Days prior to the proposed Termination Date, advise
Lessor in writing of the amount and terms of such bid, and the name and address
of the party or parties (who shall not be Lessee or any Affiliate of Lessee or
any person with whom Lessee or any such Affiliate has an arrangement or
understanding regarding the future use of the Aircraft by Lessee or any such
Affiliate but who may be the Owner Participant, any Affiliate thereof or any
person contacted by the Owner Participant) submitting such bid. After Lessee
shall have advised Lessor of all bids received, the Owner Participant, any
Affiliate thereof or any Person contacted by the Owner Participant may submit a
further bid or bids to Lessee not later than five Business Days prior to the
Termination Date proposed by Lessee (unless Lessee shall have revoked the
Termination Notice specifying such proposed Termination Date). Subject to the
next succeeding sentence, on or before the Termination Date, subject to the
release of all mortgage and security interests with respect to the Aircraft
under the Trust Indenture: (1) Lessee shall deliver the Aircraft, or cause the
Aircraft to be delivered to the highest bidder as determined below, in the same
manner and in the same condition and otherwise in accordance with all the terms
of this Lease as if delivery were made to Lessor pursuant to Section 5, and
Lessee shall duly transfer to Lessor title to any engine installed on the
Airframe and not owned by Lessor, all in accordance with the terms of Section 5
(but subject to the provisions of Section 5(e) hereof), (2) Lessor shall comply
with the terms of the Trust Indenture and shall, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
subject to prior or concurrent payment by Lessee of all amounts due under clause
(3) of this sentence, sell the Aircraft for cash in Dollars to the entity, if
any, which shall have submitted the highest bona fide bid (evaluated on a net
cash basis) therefor, the total selling price realized at such sale to be
retained by Lessor, and (3) Lessee shall simultaneously pay or cause to be paid
to Lessor in the manner provided in Section 3(e), (A) if the proceeds of the
sale of the Aircraft so sold, net of reasonable out-of-pocket costs and expenses
incurred by Lessor and the Owner Participant in connection therewith, including,
without limitation, applicable sales or transfer taxes and legal fees, are less
than the Termination Value for the Aircraft computed as of the Redemption Date,
the difference in Dollars, (B) all unpaid Basic Rent due on or prior to the
applicable Redemption Date (other than Basic Rent payable in advance on the
Redemption Date, if
44
<PAGE>
[Lease Agreement (1995 777 B)]
any) and all unpaid Supplemental Rent with respect to the Aircraft due on or
prior to such Redemption Date, and (C) Premium, if any, due on the Loan
Certificates and upon receiving all such payments referred to in clauses (2) and
(3) above Lessor simultaneously will transfer to Lessee, without recourse or
warranty (except as to the absence of Lessor Liens (including for this purpose
Liens that would be Lessor Liens but for the proviso to the definition of Lessor
Liens)), all of Lessor's right, title and interest in and to any Engines
constituting part of the Aircraft which were not sold with the Aircraft.
Notwithstanding the preceding sentence, Lessor may, if Lessee has not already
revoked the Termination Notice, elect to retain title to the Aircraft. If
Lessor so elects, Lessor shall give to Lessee written notice of such election at
least ten Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to Lessor for
payment to the Indenture Trustee on the Termination Date the amount required to
pay in full the unpaid Original Amount of the Loan Certificates outstanding on
the applicable Redemption Date together with all other amounts due on such
Redemption Date thereunder less amounts to be paid by Lessee as a result of the
payment thereof as set forth in the second following sentence. Upon receipt of
notice of such an election by Lessor and the accompanying undertaking by the
Owner Participant, Lessee shall cease its efforts to obtain bids as provided
above and shall reject all bids theretofore or thereafter received. On the
Termination Date, Lessor shall (subject to the payment by Lessee of all Rent due
on or prior to the Redemption Date as set forth below) pay in full the unpaid
Original Amount of the Loan Certificates outstanding on the Redemption Date,
plus interest accrued to, or to accrue thereon to but excluding the applicable
Redemption Date, together with all other amounts due thereunder less any amounts
to be paid by Lessee as a result of the payment thereof and, provided that the
Loan Certificates are paid as aforesaid, Lessee shall deliver the Airframe and
Engines or engines to Lessor in accordance with Section 5 and shall pay all
Basic Rent due on or prior to the Redemption Date (other than Basic Rent payable
in advance on the Redemption Date, if any) and all unpaid Supplemental Rent due
on or prior to such Redemption Date, and Premium, if any, on the Loan
Certificates. If no sale shall have occurred on the Termination Date for any
reason (including, without limitation, by reason of Lessee's revocation of its
Termination Notice) or Lessor has not, after making its election referred to
above, made the payment contemplated by the preceding sentence and thereby
caused this Lease to terminate, this Lease shall continue in full force and
effect as to the Aircraft, Lessee shall be entitled to keep any deposits or
other advances received from the proposed purchaser(s) of the Aircraft (without
in any way limiting any other rights or remedies against such proposed
purchaser(s) available to Lessor or Lessee), Lessee
45
<PAGE>
[Lease Agreement (1995 777 B)]
shall pay the reasonable out-of-pocket costs and expenses, including legal fees,
incurred by the Owner Participant, Indenture Trustee and Lessor (unless such
failure to terminate this Lease is a consequence of the failure of Lessor or the
Owner Participant without due cause to make, or cause to be made, the payment
referred to in the immediately preceding sentence), if any, in connection with
preparation for such sale and Lessee may give one or more additional Termination
Notices, provided no more than three such notices may be given during the Term
and only one such notice may be given during any 365 day period (not counting,
in either case, any Termination Notice for a Termination Date on which this
Lease does not terminate as a consequence of the failure of Lessor or the Owner
Participant without due cause to make or cause to be made the payment referred
to in the immediately preceding sentence). In the event of any such sale or
such retention of the Aircraft by Lessor and upon compliance by Lessee with the
provisions of this paragraph, the obligation of Lessee to pay Basic Rent or any
other amounts hereunder shall cease to accrue. Upon payment of all amounts that
may then be due hereunder, this Lease shall terminate. Lessor may, but shall be
under no duty to, solicit bids, inquire into the efforts of Lessee to obtain
bids or otherwise take any action in connection with any such sale other than to
transfer (in accordance with the foregoing provisions) to the purchaser named in
the highest bid certified by Lessee to Lessor all of Lessor's right, title and
interest in the Aircraft, against receipt of the payments provided herein.
(d) Termination as to Engines. Upon compliance with the terms of the
Tax Indemnity Agreement, Lessee shall have the right at its option at any time
during the Term, on at least 30 days' prior written notice, to terminate this
Lease with respect to any Engine. In such event, and prior to the date of such
termination, Lessee shall replace such Engine hereunder by complying with the
terms of Section 10(b) to the same extent as if an Event of Loss had occurred
with respect to such Engine (provided that Lessee shall have no right to pay
Stipulated Loss Value with respect to such Engine), and Lessor shall transfer
title to the replaced Engine as provided in Section 5(b). No termination of
this Lease with respect to any Engine as contemplated by this Section 9(d) shall
result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of Loss
with Respect to the Aircraft. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall (1) forthwith (and in any event, within fifteen
days after such occurrence) give Lessor written notice of such Event of Loss and
(2) within 60 days after such occurrence,
46
<PAGE>
[Lease Agreement (1995 777 B)]
give Lessor written notice of its election to perform one of the following
options (it being understood that the failure to give such notice shall be
deemed to be an election of the option set forth in clause (i) below):
(i) Not later than the earlier of (x) the Business Day next
succeeding the 100th day following the occurrence of such Event of Loss or
(y) the third Business Day following receipt by the loss payee of the
insurance proceeds in respect to such Event of Loss (but not earlier than
the first Business Day next succeeding the 65th day following the
occurrence of such Event of Loss) (the applicable day being the "Loss
Payment Date"), Lessee shall, to the extent not paid to Lessor or Indenture
Trustee, as the case may be, as insurance proceeds, pay or cause to be paid
to Lessor as specified in Section 3(e) hereof, (A) the Stipulated Loss
Value of the Aircraft computed as of the Stipulated Loss Value Date
occurring on or immediately following the date of such Event of Loss, plus
(B) if such Stipulated Loss Value Date is a Lease Period Date, Basic Rent
due on such Lease Period Date (excluding Basic Rent payable in advance on
such Lease Period Date), plus (C) unpaid Supplemental Rent with respect to
the Aircraft due on or prior to the date of payment, plus (D) interest on
such Stipulated Loss Value at the Debt Rate from and including such
Stipulated Loss Value Date to, but not including, the date of any advance
payment in respect of Stipulated Loss Value as provided below, and
thereafter on the unpaid balance of such Stipulated Loss Value from and
including the date of such advance payment to, but excluding, the date such
Stipulated Loss Value is paid in full; provided, however, that if a Lease
Period Date shall occur after the Stipulated Loss Value Date with respect
to which Stipulated Loss Value is determined but prior to the date of such
payment of the sum of the amounts specified in clauses (A), (B), (C) and
(D) above or if Basic Rent is payable in advance on the Stipulated Loss
Value Date, Lessee shall pay on such Lease Period Date an amount equal to
the Basic Rent that would have been due on such Lease Period Date if such
Event of Loss had not occurred, which amount shall be credited as an
advance against the amounts payable pursuant to clauses (A), (B), (C) and
(D) above, or
(ii) Not later than the Business Day next succeeding the 100th day
following the occurrence of such Event of Loss, Lessee shall, provided that
no Section 14(a), (b), (f) or (g) Default or any Event of Default shall
have occurred and be continuing, substitute an aircraft or an airframe or
an airframe and one or more engines, as the case
may be in accordance with the terms hereof, provided that if
47
<PAGE>
[Lease Agreement (1995 777 B)]
Lessee shall have elected to make a substitution under this clause (ii) and
shall fail for any reason to make such substitution in accordance with the
terms hereof, Lessee shall make the payments required by clause (i) above
as and when due thereunder.
At such time as Lessor shall have received the sum of the amounts
specified in clauses (A), (B), (C) and (D) of subparagraph (i) above, together
with all other amounts that then may be due hereunder (including, without
limitation, all Basic Rent due on or before the date of such payment (other than
Basic Rent payable in advance, if any, on such date)), under the Participation
Agreement and under the Tax Indemnity Agreement, (1) the obligation of Lessee to
pay the installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
all Lessor's right, title and interest in and to the Airframe and the Engines
"as-is, where-is" and furnish to or at the direction of Lessee, at Lessee's
expense, a bill of sale in form and substance reasonably satisfactory to Lessee
(or any Sublessee), evidencing such transfer, and (4) Lessee will be subrogated
to all claims of Lessor if any against third parties (other than Lessor's or the
Owner Participant's insurers under policies independently maintained at its own
cost and expense in accordance with Section 11(e) hereof), but only to the
extent the same relate to physical damage to or loss of the Airframe and any
Engines which were subject to such Event of Loss.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall (A) convey or cause to be conveyed to Lessor an aircraft (or an airframe
or an airframe and an engine which, together with the Engines or Engine
constituting a part of the Aircraft but not installed thereon at the time of
such Event of Loss, constitute the Aircraft) free and clear of all Liens (other
than Permitted Liens) and having at least the fair market value, utility and
remaining useful life and being in as good an operating condition as, the
Aircraft subject to such Event of Loss assuming that the Aircraft had been
maintained in accordance with this Lease; provided that any aircraft or airframe
so substituted hereunder shall be of the same make and model or improved model
as those initially leased hereunder and any engine substituted hereunder shall
be an Acceptable Alternate Engine and (B) prior to or at the time of any such
substitution, Lessee (or any Sublessee), at its own expense, will (1) furnish
48
<PAGE>
[Lease Agreement (1995 777 B)]
Lessor with a full warranty bill of sale and a FAA bill of sale, in form and
substance reasonably satisfactory to the Owner Participant, evidencing such
transfer of title, (2) cause a Lease Supplement and a Trust Supplement to be
duly executed by Lessee and filed for recording pursuant to the Federal Aviation
Act, or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in order
to perfect the security interests therein created by or pursuant to the Trust
Indenture (and, with regard to precautionary filings, this Lease), (3) furnish
the Owner Participant with such evidence of Lessor's title to such replacement
aircraft and of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor, in its individual capacity, and
the Owner Participant may reasonably request, (4) provide Owner Participant an
opinion of outside tax counsel, which opinion and counsel shall be satisfactory
to Owner Participant, to the effect that such substitution will not result in
any adverse tax consequences (including under Section 861 of the Code as then in
effect) to Lessor and/or the Owner Participant (it being understood that if such
opinion cannot be given Lessee may indemnify Owner Participant for such adverse
tax consequences in lieu of such opinion in a manner satisfactory in form and
substance to the Owner Participant), (5) provide Lessor, Owner Participant and
the Indenture Trustee an opinion of counsel, which counsel and opinion shall be
reasonably acceptable to Lessor, in its individual capacity, and the Owner
Participant, to the effect that Lessor and the Indenture Trustee (as assignee of
all right, title and interest of Lessor under the Lease) shall be entitled to
the benefits and protections of Section 1110 of the Bankruptcy Code with respect
to the aircraft substituted hereunder, (6) provide an opinion of counsel to
Lessor and the Indenture Trustee, which opinion and counsel shall be reasonably
acceptable to the Lessor, in its individual capacity, and the Owner Participant,
to the effect that title to such replacement aircraft has been duly conveyed to
Lessor free and clear of all Liens except Permitted Liens and that such
replacement aircraft is duly subjected to the Lien of the Trust Indenture and
(7) provide Lessor, Owner Participant and Indenture Trustee all the
documentation required (or, following the termination of the Trust Indenture,
all the documentation that prior to such termination would have been required)
to be provided by it pursuant to Section 5.01(b) of the Trust Indenture, and
Lessor simultaneously will comply with the terms of the Trust Indenture and
transfer to or at the direction of Lessee, without recourse or warranty (except
as to the absence of Lessor Liens (including for this purpose Liens that would
be Lessor Liens but for the proviso to the definition of Lessor Liens)), all of
Lessor's
49
<PAGE>
[Lease Agreement (1995 777 B)]
right, title and interest, if any, in and to the Aircraft or the Airframe and
one or more Engines, as the case may be, "as-is, where-is" with respect to which
such Event of Loss occurred and furnish to or at the direction of Lessee, at
Lessee's expense, a bill of sale in form and substance reasonably satisfactory
to Lessee, evidencing such transfer. Lessee will be subrogated to all claims
of Lessor, if any, against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at their own cost
and expense in accordance with Section 11(e) hereof) but only to the extent the
same relate to physical damage to or loss of the Airframe and any Engine which
were subject to such Event of Loss. For all purposes hereof, the property so
substituted shall after such transfer be deemed part of the property leased
hereunder and shall be deemed an "Aircraft," "Airframe" and "Engine," as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines or engines then installed thereon for which
substitution has been elected pursuant to Section 10(a)(ii) hereof shall result
in any reduction in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss with respect to the Airframe, Lessee shall
forthwith (and in any event, within fifteen days after such occurrence) give
Lessor written notice thereof and shall, within forty-five (45) days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, as
replacement for the Engine with respect to which such Event of Loss occurred,
title to an Acceptable Alternate Engine free and clear of all Liens (other than
Permitted Liens, which engine may upon its transfer to Lessor become subject to
any and all Permitted Liens) and having a value and utility at least equal to,
and being in as good an operating condition as and having been maintained in the
same manner as, the Engine subject to such Event of Loss (assuming that such
Engine had been maintained in accordance with this Lease); provided, however,
upon written notice to Lessee given within 20 days after Lessor has received
notice of such Event of Loss, the Lessor may require Lessee to pay with respect
to the Engine subject to such Event of Loss within 45 days after the occurrence
of such Event of Loss (provided that in no event shall such payment be required
to be made prior to the Commencement Date) an amount equal to (A) Engine Cost
multiplied by the percentage specified in Exhibit C hereto opposite the
Stipulated Loss Value Date occurring on or immediately following the date of
such Event of Loss, plus (B) interest on the amount determined pursuant to
clause (A) above at the Debt Rate from and including such Stipulated Loss Value
Date to, but excluding, the date such amount is paid in full; and provided,
further, if Lessee pays
50
<PAGE>
[Lease Agreement (1995 777 B)]
such Stipulated Loss Value and interest, then, subject to Section 5(e), Lessee
shall only be obligated to return the Aircraft to Lessor with any Engine
attached thereto with respect to which Lessee has not paid Stipulated Loss Value
pursuant to this Section 10(b) at any time that Lessee is required to return the
Aircraft to Lessor pursuant to the terms hereof; provided further, however,
that, in lieu of paying such Stipulated Loss Value and interest, Lessee may
replace the Engine in accordance with this Section 10(b) if Lessee provides to
the Owner Participant either: (x) an opinion of outside tax counsel, which
opinion and counsel shall be satisfactory to the Owner Participant, to the
effect that such substitution will not result in any adverse tax consequences to
the Owner Participant, or (y) an indemnity, satisfactory in form and substance
to the Owner Participant, for any adverse tax consequences resulting from such
substitution. Prior to or at the time of any such conveyance, Lessee, at its
own expense, will (i) furnish Lessor with a warranty (as to title) bill of sale,
in form and substance reasonably satisfactory to Lessor, with respect to such
replacement engine, (ii) cause a Lease Supplement and Trust Supplement to be
duly executed by Lessee and to be filed for recording pursuant to the Federal
Aviation Act, or the applicable laws, rules and regulations of any other
jurisdiction in which the Airframe may then be registered, and cause a financing
statement or statements or other requisite documents of a similar nature
(including precautionary filings) to be filed in such place or places as
necessary in order to perfect the security interests therein created by or
pursuant to the Trust Indenture (and, with regard to precautionary filings, this
Lease), (iii) furnish Lessor with such evidence of Lessor's title to such
Acceptable Alternate Engine and of compliance with the insurance provisions of
Section 11 hereof with respect to such replacement engine as Lessor, in its
individual capacity, or the Owner Participant may reasonably request, (iv)
provide Lessor and the Indenture Trustee an opinion of Lessee's counsel which
counsel and opinion shall be reasonably satisfactory to Lessor, in its
individual capacity, or the Owner Participant to the effect that title to such
Acceptable Alternate Engine has been duly conveyed to Lessor free and clear of
all Liens except Permitted Liens and that such Acceptable Alternate Engine is
duly subjected to the Lien of the Trust Indenture, and (v) provide Lessor, Owner
Participant and Indenture Trustee all the documentation required (or, following
the termination of the Trust Indenture, all the documentation that prior to such
termination would have been required) to be provided by it pursuant to Section
5.01(b) of the Trust Indenture, and Lessor will comply with the terms of the
Trust Indenture and transfer to or at the direction of Lessee without recourse
or warranty (except as to absence of Lessor Liens (including for this purpose
Liens that would be Lessor Liens but for the proviso to the definition of Lessor
Liens)) all
51
<PAGE>
[Lease Agreement (1995 777 B)]
of Lessor's right, title and interest, if any, in and to (1) the Engine with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee, and at Lessee's expense, a bill of sale in form and substance
reasonably satisfactory to Lessee, evidencing such transfer and (2) all claims,
if any, against third parties (other than Lessor's or the Owner Participant's
insurers under policies independently maintained at their own cost and expense
in accordance with Section 11(e) hereof), for damage to or loss of the Engine
subject to such Event of Loss, and such Engine shall thereupon cease to be an
Engine leased hereunder. For all purposes hereof, each such replacement engine
shall, after such conveyance, be deemed part of the property leased hereunder,
and shall be deemed an "Engine." Except to the extent Lessor's Cost is reduced
pursuant to the definition thereof, no Event of Loss with respect to an Engine
under the circumstances contemplated by the terms of this paragraph (b) shall
result in any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from any governmental authority or other Person with respect
to an Event of Loss, other than a requisition for use by the United States
Government or other government of registry of the Aircraft or any
instrumentality or agency of any thereof not constituting an Event of Loss, will
be applied as follows:
(i) if payments are received with respect to the Airframe (or the
Airframe and any Engine or engines then installed thereon), (A) unless the
same are replaced pursuant to the last paragraph of Section 10(a), after
reimbursement of Lessor (as provided in Section 7.01 of the Trust
Agreement) and the Owner Participant for reasonable costs and expenses, so
much of such payments remaining as shall not exceed the Stipulated Loss
Value and the other amounts payable under Section 10(a) hereof required to
be paid by Lessee pursuant to Section 10(a), shall be applied in reduction
of Lessee's obligation to pay Stipulated Loss Value and the other amounts
payable under Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of Stipulated Loss Value and such other amounts, and following the
foregoing application, the balance, if any, of such payments shall be
distributed between Lessee and Lessor as their respective interests may
appear; or (B) if such property is replaced pursuant to the last paragraph
of Section 10(a), such payments shall be paid over to or retained by,
Lessee; provided, that Lessee shall have fully
performed or, concurrently therewith, will fully perform the
52
<PAGE>
[Lease Agreement (1995 777 B)]
terms of the last paragraph of Section 10(a) with respect to the Event of
Loss for which such payments are made; and
(ii) if such payments are received with respect to an Engine under
circumstances contemplated by Section 10(b) hereof, (A) unless the same is
replaced pursuant to the terms of Section 10(b), after reimbursement of
Lessor (as provided for in Section 7.01 of the Trust Agreement) and the
Owner Participant for reasonable costs and expenses, so much of such
payments remaining as shall not exceed the amounts payable under Section
10(b) hereof by Lessee, shall be applied in reduction of Lessee's
obligation to pay the same, if not already paid by Lessee, or if already
paid by Lessee, shall be applied to reimburse Lessee for its payment of
such amounts and following the foregoing application, the balance, if any,
shall be paid to Lessee; or (B) if such property is replaced pursuant to
Section 10(b), such payments shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed, or concurrently therewith
will perform, the terms of Section 10(b) with respect to the Event of Loss
for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any thereof,
Lessee shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this Lease Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred (unless
deemed prior to the end of the Term an Event of Loss in which case the foregoing
provisions of this Section 10 shall be applicable). If Lessee shall fail to
return the Aircraft (i) on or before the end of the Term, in the case of a
requisition by the United States government or any agency or instrumentality
thereof or (ii) within the earlier of the end of the Term or two years after
such requisition in the case of a requisition for use by the government of
registry of the Aircraft or any agency or instrumentality thereof (other than
the United States government or any agency or instrumentality thereof), such
failure shall constitute an Event of Loss which shall be deemed to have occurred
in the case of clause (i) on the last day of the Term, and in the case of clause
(ii), on the earlier of the last day of the Term or the expiration of such two-
year period, provided, however, that Lessor may notify Lessee in writing on or
before the twentieth day prior to the last day of the Term that, in the event
Lessee shall fail by reason of such requisition to return the Airframe and such
Engines or
53
<PAGE>
[Lease Agreement (1995 777 B)]
engines on or before the end of the Term, such failure shall not be deemed an
Event of Loss. Upon the giving of such notice and such failure to return by the
end of the Term, Lessee shall be relieved of all of its obligations pursuant to
the provisions of Section 5 (but not under any other Section), except that if
any engine not owned by Lessor shall then be installed on the Airframe, Lessee
will, at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) bill of sale with respect to each such engine, in form
and substance reasonably satisfactory to Lessor, in its individual capacity, and
the Owner Participant (together with an opinion of counsel (which may be
Lessee's General Counsel) to the effect that such full warranty bill of sale has
been duly authorized and delivered and is enforceable in accordance with its
terms and that such engines are free and clear of Liens other than Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens), against receipt from Lessor, at Lessee's
expense, of a bill of sale evidencing the transfer, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
by Lessor to Lessee or its designee of all of Lessor's right, title and interest
in and to any Engine constituting part of the Aircraft but not then installed on
the Airframe. All payments received by Lessor or Lessee from such government for
the use of such Airframe and Engines or engines during the Term shall be paid
over to, or retained by, Lessee (or, if directed by Lessee, any Sublessee); and
all payments received by Lessor or Lessee from such government for the use of
such Airframe and Engines or engines after the end of the Term shall be paid
over to, or retained by, Lessor unless Lessee shall have exercised its purchase
option hereunder, or there is a deemed Event of Loss hereunder, in which case
such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
or the Government of Registry of the Aircraft. In the event of the requisition
for use of an Engine during the Term by the United States Government or any
other government of registry of the Aircraft or any agency or instrumentality of
any thereof (other than in the circumstances contemplated by subsection (d))
which shall have continued for more than 180 days or, if earlier, until the end
of the Term, Lessee shall replace (or cause any Sublessee to replace) such
Engine hereunder and Lessor and Lessee (or Sublessee as the case may be) shall
comply with the terms of Section 10(b) to the same extent as if an Event of Loss
had occurred with respect to such Engine. Upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government with
respect to such requisition shall be paid over to, or retained by Lessee.
54
<PAGE>
[Lease Agreement (1995 777 B)]
(f) Application of Payments During Existence of Events of Default.
Any amount referred to in this Section 10 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or any
Sublessee) if at the time of such payment or retention a Default or an Event of
Default shall have occurred and be continuing, but shall be held by or paid over
to Lessor as security for the obligations of Lessee (or such Sublessee) under
this Lease and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (1) Except as provided in clause (2) of this Section 11(a), and
subject to self-insurance to the extent permitted by Section 11(d) hereof,
Lessee will carry or cause to be carried with respect to the Aircraft at its or
any Sublessee's expense (i) comprehensive airline liability (including, without
limitation, passenger, contractual, bodily injury, and property damage
liability) insurance (exclusive of manufacturer's product liability insurance)
and (ii) cargo liability insurance, (A) in an amount not less than the greater
of (x) the amounts of comprehensive airline liability insurance from time to
time applicable to aircraft owned or leased, and operated by Lessee of the same
type as the Aircraft and (y) $450,000,000 per occurrence, (B) of the type and
covering the same risks as from time to time are applicable to aircraft owned or
leased, and operated by Lessee of the same type as the Aircraft, and (C) which
is maintained in effect with insurers of recognized reputation and
responsibility; provided, however, that Lessee need not maintain cargo liability
insurance, or may maintain such insurance in an amount less than $450,000,000
per occurrence, as long as the amount of cargo liability insurance, if any,
maintained with respect to the Aircraft is the same as the cargo liability
insurance, if any, maintained for other Boeing Model 777-222 aircraft owned or
leased, and operated by Lessee.
(2) During any period that the Airframe or an Engine, as the case may
be, is on the ground and not in operation, Lessee may carry or cause to be
carried as to such non-operating property, in lieu of the insurance required by
clause (1) above, and subject to the self-insurance to the extent permitted by
Section 11(d) hereof, insurance by insurers of recognized reputation and
responsibility otherwise conforming with the provisions of clause (1) except
that (A) the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable to
property owned or leased by Lessee of the same type as such non-
55
<PAGE>
[Lease Agreement (1995 777 B)]
operating property and which is on the ground and not in operation; and (B) the
scope of the risks covered and the type of insurance shall be the same as from
time to time shall be applicable to property owned or leased by Lessee of the
same type as such non-operating property and which is on the ground and not in
operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1) Except as
provided in clause (2) of this Section 11(b), and subject to the provisions of
Section 11(d) hereof permitting self-insurance, Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized reputation and responsibility, all-risk aircraft hull insurance
covering the Aircraft and fire and extended coverage and all-risk aircraft hull
insurance covering Engines and Parts while temporarily removed from the Aircraft
and not replaced by similar components (including, without limitation, aircraft
war risk and governmental confiscation and expropriation (other than by the
government of registry of the Aircraft) and hijacking insurance, if and to the
extent the same is maintained by Lessee (or any Sublessee) with respect to other
aircraft owned or leased, and operated by Lessee (or such Sublessee) on the same
routes); provided, that such insurance shall at all times while the Aircraft is
subject to this Lease be for an amount (taking into account self-insurance to
the extent permitted by Section 11(d) hereof) not less than the Stipulated Loss
Value for the Aircraft; and provided further, that subject to compliance with
Section 11(d) hereof, such all-risk property damage insurance covering Engines
and Parts while temporarily removed from the Airframe or an airframe of (in the
case of Parts) an Engine need be obtained only to the extent available at
reasonable cost (as reasonably determined by Lessee). In the case of a loss
with respect to an engine (other than an Engine) installed on the Airframe in
circumstances which do not constitute an Event of Loss with respect to the
Airframe, Lessor shall promptly remit any payment made to it of any insurance
proceeds in respect of such loss to Lessee or any other third party that is
entitled to receive such proceeds.
Except during a period when a Section 14(a), (b), (f) or (g) Default
or an Event of Default has occurred and is continuing, all losses will be
adjusted by Lessee with the insurers giving due regard to Lessor's interest. As
between Lessor and Lessee, it is agreed that all proceeds of insurance
maintained in compliance with the preceding paragraph and received as the result
of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the Airframe (or the
Airframe and the Engines installed
56
<PAGE>
[Lease Agreement (1995 777 B)]
thereon), (i) unless such property is replaced pursuant to the last
paragraph of Section 10(a) hereof, so much of such payments remaining,
after reimbursement of Lessor (as provided in Section 7.01 of the Trust
Agreement) and the Owner Participant for reasonable costs and expenses, as
shall not exceed the Stipulated Loss Value and the other amounts payable
under Section 10(a) hereof required to be paid by Lessee pursuant to
Section 10(a) hereof shall be applied in reduction of Lessee's obligation
to pay such Stipulated Loss Value and the other amounts payable under
Section 10(a) hereof, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value and the other amounts payable under Section 10(a)
hereof, and the balance, if any, of such payments remaining thereafter will
be paid over to, or retained by, Lessee (or if directed by Lessee, any
Sublessee); or (ii) if such property is replaced pursuant to the last
paragraph of Section 10(a) hereof, such payments shall be paid over to, or
retained by, Lessee (or if directed by Lessee, any Sublessee), provided
that Lessee shall have fully performed or, concurrently therewith, will
fully perform the terms of the last paragraph of Section 10(a) hereof with
respect to the Event of Loss for which such payments are made; and
(y) if such payments are received with respect to an Engine under
the circumstances contemplated by Section 10(b) hereof, so much of such
payments remaining after reimbursement of Lessor and the Owner Participant
for reasonable costs and expenses shall be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed or, concurrently therewith, will fully perform
the terms of Section 10(b) hereof with respect to the Event of Loss for
which such payments are made.
(2) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (1) above, and subject to the self-insurance to the extent
permitted by Section 11(d) hereof, insurance otherwise conforming with the
provisions of said clause (1) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
leased by Lessee of the same type as the Aircraft similarly on the ground and
not in operation, provided that, subject to the self-insurance to the extent
permitted by Section 11(d) hereof, Lessee shall maintain insurance against risk
of loss or damage to the Aircraft in an amount at least equal to the Stipulated
Loss Value of the
57
<PAGE>
[Lease Agreement (1995 777 B)]
Aircraft during such period that the Aircraft is on the ground and not in
operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished, to
Lessor, the Indenture Trustee, the Owner Participant and, so long as the Pass
Through Trustees are the Certificate Holders, each Pass Through Trustee, on or
before the Delivery Date, and each annual anniversary of the Delivery Date
during the Term, a report, signed by Rollins Hudig Hall of Illinois, Inc. or any
other independent firm of insurance brokers reasonably acceptable to Lessor
which brokers may be in the regular employ of Lessee (the "Insurance Brokers"),
describing in reasonable detail the hull and liability insurance (and property
insurance for detached engines and parts) then carried and maintained with
respect to the Aircraft and stating the opinion of such firm that (a) such
insurance complies with the terms hereof and (b) that such insurance together
with any self-insurance permitted hereby provides coverage that are in
substantially similar forms, are of such types and have limits within the range
of limits as are customarily carried by U.S. carriers; provided, however, that
the opinion set forth in clause (b) shall not be required if the Insurance
Broker then generally does not provide such an opinion or will provide such an
opinion for material additional cost; and provided further that all information
contained in the foregoing report shall not be made available by Lessor, the
Indenture Trustee, the Pass Through Trustees or the Owner Participant to anyone
except (A) to prospective and permitted transferees of Lessor's, the Owner
Participant's, any Pass Through Trustee's or the Indenture Trustee's interest or
their respective counsel, independent certified public accountants, independent
insurance brokers or other agents, who agree to hold such information
confidential, (B) to Lessor's, Owner Participant's, any Pass Through Trustee's
or the Indenture Trustee's counsel or independent certified public accountants,
independent insurance brokers or other agents who agree to hold such information
confidential, (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation, or (D) as may be necessary
for purposes of protecting the interest of any such Person or for enforcement of
this Lease by Lessor or the Indenture Trustee; provided, however, that any and
all disclosures permitted by clauses (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted. Lessee will cause such Insurance
Broker to agree to advise Lessor, the Indenture Trustee, the Owner Participant
and, so long as the Pass Through Trustees are the Certificate Holders, each Pass
Through Trustee in writing of any act or omission on the part of Lessee of which
it has knowledge and which might invalidate or render unenforceable, in whole or
in part, any insurance on the Aircraft
58
<PAGE>
[Lease Agreement (1995 777 B)]
and to advise such Persons in writing at least 30 days (7 days in the case of
war risk and allied perils coverage) prior to the cancellation or material
adverse change of any insurance maintained pursuant to this Section 11, provided
that if the notice period specified above is not reasonably obtainable, the
Insurance Broker shall provide for as long a period of prior notice as shall
then be reasonably obtainable. In addition, Lessee will also cause such
Insurance Broker to deliver to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, each Pass Through Trustee, on or prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of insurance,
a new certificate of insurance, substantially in the same form as delivered by
Lessee to such parties on the Delivery Date except for the changes in the report
or the coverage consistent with the terms hereof. In the event that Lessee or
any Sublessee shall fail to maintain or cause to be maintained insurance as
herein provided, Lessor, the Indenture Trustee or, so long as the Pass Through
Trustees are the Certificate Holders, each Pass Through Trustee may at its sole
option, but shall be under no duty to, provide such insurance and, in such
event, Lessee shall, upon demand, reimburse Lessor, the Indenture Trustee or
such Pass Through Trustee, as Supplemental Rent, for the cost thereof to Lessor,
such Pass Through Trustee or the Indenture Trustee, as the case may be;
provided, however, that no exercise by Lessor, a Pass Through Trustee or the
Indenture Trustee, as the case may be, of said option shall affect the
provisions of this Lease, including the provisions that failure by Lessee to
maintain the prescribed insurance shall constitute an Event of Default.
(d) Self-Insurance. Lessee may self-insure the risks required to be
insured against pursuant to this Section 11 under a program applicable to all
aircraft (whether owned or leased) in Lessee's fleet, but in no case shall the
aggregate amount of such self-insurance in regard to Sections 11(a) and 11(b)
hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Lessee's fleet (including, without limitation, the
Aircraft) the lesser of (A) 50% of the highest replacement value of any single
aircraft in Lessee's fleet or (B) 1-1/2% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft (including, without
limitation, the Aircraft) on which Lessee carries insurance. In addition to the
foregoing right to self-insure, Lessee (and any Sublessee) may self-insure to
the extent of any applicable mandatory minimum per aircraft (or, if applicable,
per annum or other period) hull or liability insurance deductible imposed by the
aircraft hull or liability insurer.
59
<PAGE>
[Lease Agreement (1995 777 B)]
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11. The Owner Participant or Lessor may carry for its own account at
its sole cost and expense insurance with respect to its interest in the
Aircraft, provided that such insurance does not prevent Lessee (or any
Sublessee) from carrying the insurance required or permitted by this Section 11
or adversely affect such insurance or materially increase the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the United States
Government or any agency or instrumentality thereof, the obligations of which
are supported by the full faith and credit of the federal government of the
United States, against such risk in an amount which, when added to the amount of
insurance against such risk maintained by Lessee (or any Sublessee) shall be at
least equal to the amount of insurance against such risk otherwise required by
this Section 11 (taking into account self-insurance permitted by Section 11(d)
hereof).
(g) Application of Payments During Existence of Default. Any amount
referred to in this Section 11 which is payable to or retainable by Lessee (or
any Sublessee) shall not be paid to or retained by Lessee (or any Sublessee) if
at the time of such payment or retention a Default or an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to Lessor as
security for the obligations of Lessee under this Lease and, if such a Default
or an Event of Default shall have occurred and be continuing, applied against
Lessee's obligations hereunder as and when due. At such time as there shall not
be continuing any such Default or Event of Default, such amount shall be paid to
Lessee to the extent not previously applied in accordance with the preceding
sentence.
(h) Terms of Insurance Policies. Any policies carried in accordance
with Sections 11(a) and 11(b) hereof covering the Aircraft, and any policies
taken out in substitution or replacement for any such policies, (A) shall name
the Additional Insureds as additional insureds, or, if appropriate, loss payees,
as their respective interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurance), (B) may provide for
self-insurance to the extent permitted in Section 11(d) hereof, (C) shall
provide that if the insurers cancel such insurance for any reason whatever, or
if the same is allowed to lapse for non-payment of premium or if any
60
<PAGE>
[Lease Agreement (1995 777 B)]
material change is made in the insurance which adversely affects the interest of
any Additional Insured, such lapse, cancellation or change shall not be
effective as to any Additional Insured for thirty days (ten days in the case of
lapse for nonpayment of premium and seven days in the case of war risk and
allied perils coverage) after receipt by such Additional Insured of written
notice by such insurers of such lapse, cancellation or change; provided,
however, that if any notice period specified above is not reasonably obtainable,
such policies shall provide for as long a period of prior notice as shall then
be reasonably obtainable, (D) shall provide that in respect of the respective
interests of each Additional Insured in such policies the insurance shall not be
invalidated by any action or inaction of Lessee (or any Sublessee) or any other
Person and shall insure the respective interests of the Additional Insureds, as
they appear, regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by Lessee (or any Sublessee) or by any
other Person, (E) shall be primary without any right of contribution from any
other insurance which is carried by any Additional Insured, (F) shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured, (G) shall waive any right of the insurers to set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any Additional Insured, and (H) shall provide that
(i) in the event of a loss involving the Aircraft, Airframe, or an Engine for
which proceeds are in excess of $5,000,000 ($2,500,000 if the Aircraft is under
sublease), the proceeds in respect of such loss up to the amount of Stipulated
Loss Value for the Aircraft shall be payable to Lessor (or, so long as the Trust
Indenture shall be in effect, the Indenture Trustee), it being understood and
agreed that in the case of any payment to Lessor (or the Indenture Trustee)
otherwise than in respect of an Event of Loss, Lessor (or the Indenture Trustee)
shall, upon receipt of evidence reasonably satisfactory to it that the damages
giving rise to such payment shall have been repaired or that such payment shall
then be required to pay for repairs then being made, pay the amount of such
payment, and any interest or income earned thereon in accordance with Section 22
hereof, to Lessee or its order, and (ii) the entire amount of any such loss for
which proceeds are $5,000,000 ($2,500,000 if the Aircraft is under sublease) or
less or the amount of any proceeds of any such loss in excess of Stipulated Loss
Value for the Aircraft shall be paid to Lessee or its order unless a Default or
an Event of Default shall have occurred and be continuing and the insurers have
been notified thereof by Lessor or the Indenture Trustee.
SECTION 12. Inspection. At reasonable times, and upon at least 10
days (or one day if a Section 14(a), 14(b), 14(d)
61
<PAGE>
[Lease Agreement (1995 777 B)]
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) or
Section 8 hereof), 14(f) or 14(g) Default or any Event of Default shall have
occurred and be continuing) prior written notice, the Owner Participant or the
Indenture Trustee, or their respective authorized representatives, may inspect
the Aircraft (provided, however, that such inspections by the Owner Participant
and its authorized representatives or the Indenture Trustee and its authorized
representative shall, in regard to each of the Owner Participant and the
Indenture Trustee, be limited to one inspection of the Aircraft during any
consecutive twelve-month period except during the continuance of a Default or an
Event of Default when such inspection right shall not be so limited) and inspect
and make copies of the books and records of Lessee and any Sublessee required to
be maintained by the FAA or the regulatory agency or body of another
jurisdiction in which the Aircraft is then registered relating to the
maintenance of the Aircraft (at the Owner Participant's or the Indenture
Trustee's risk and expense (unless a Section 14(a), 14(b), 14(f) or 14(g)
Default or any Event of Default shall have occurred and be continuing in which
case such inspection shall be at Lessee's expense), as the case may be) and
shall keep any information or copies obtained thereby confidential and shall not
disclose the same to any Person, except (A) to Lessor and the Pass Through
Trustees and to prospective and permitted transferees of Lessor's, the Owner
Participant's, any Pass Through Trustee's or the Indenture Trustee's interest
(and such prospective and permitted transferee's counsel, independent insurance
advisors or other agents) who agree to hold such information confidential, (B)
to Lessor's, the Owner Participant's, any Pass Through Trustee's or the
Indenture Trustee's counsel, independent insurance advisors or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, (D) as may be necessary for purposes of protecting the interest of
any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) and (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of Persons for whom such disclosures are hereby
permitted. Any such inspection of the Aircraft shall be subject to Lessee's
safety and security rules applicable at the location of the Aircraft, shall be a
visual, walk-around inspection of the interior and exterior of the Aircraft and
shall not include opening any panels, bays or the like without the express
consent of Lessee (except in connection with a heavy maintenance visit when a
panel, bay or the like is scheduled or required to be open), which consent
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation or maintenance of the
Aircraft by, or the business of, Lessee (or any Sublessee).
62
<PAGE>
[Lease Agreement (1995 777 B)]
Upon receipt by Lessee of a written request from the Owner Participant
specifying that the Owner Participant desires to have an authorized
representative observe the last scheduled heavy maintenance visit to be
performed on the Aircraft (or substantially equivalent successor type of
maintenance work) during the Term, Lessee shall cooperate with the Owner
Participant to enable the Owner Participant's representative to observe such
last scheduled heavy maintenance visit to be performed on the Aircraft during
the Term, including reasonable advance notification to the Owner Participant of
the time and place of such scheduled heavy maintenance visit; provided that the
Owner Participant's authorized representative shall merely observe such
scheduled heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection with
such scheduled heavy maintenance visit. Neither the Owner Participant nor the
Indenture Trustee shall have any duty to make any such inspection nor shall any
of them incur any liability or obligations by reason of not making any such
inspection.
SECTION 13. Assignment. Except as otherwise provided in the
Operative Documents, Lessee will not, without the prior written consent of
Lessor, assign any of its rights hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided in the Operative Documents. Subject to the
foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
constitute an Event of Default (whether any such event 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) and each such Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) Lessee shall not have made a payment of Basic Rent, Stipulated
Loss Value, Termination Value, EBO Price, Special Termination Value or Premium
within ten (10) days after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Supplemental Rent referred to in paragraph (a) of this Section 14)
after the same shall have become due and such failure shall continue for fifteen
(15) days after Lessee's receipt of written demand therefor by the party
63
<PAGE>
[Lease Agreement (1995 777 B)]
entitled thereto (provided that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to Lessor or
the Owner Participant when due any Excluded Payments shall not constitute an
Event of Default unless written notice is given by the Owner Participant to
Lessee and the Indenture Trustee that such failure shall constitute an Event of
Default); or
(c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained) insurance required to be
maintained in accordance with the provisions of Section 11 hereof; or
(d) Lessee shall have failed to perform or observe (or caused to be
performed and observed) any other covenant or agreement to be performed or
observed by it under any Operative Document, and such failure shall continue
unremedied for a period of thirty days after written notice thereof by Lessor or
the Indenture Trustee; provided, however, that if Lessee shall have undertaken
to cure any such failure and, notwithstanding the reasonable diligence of Lessee
in attempting to cure such failure, such failure is not cured within said thirty
day period but is curable with future due diligence, there shall exist no Event
of Default under this Section 14 so long as Lessee is proceeding with due
diligence to cure such failure and such failure is in fact cured within 180
days); or
(e) any representation or warranty made by Lessee herein or in the
Participation Agreement or any document or certificate furnished by Lessee in
connection herewith or therewith or pursuant hereto or thereto (except the
representations and warranties set forth in Section 4 of the Tax Indemnity
Agreement) shall prove to have been incorrect in any material respect at the
time made and shall remain material at the time in question; provided, however,
such incorrectness shall constitute a default hereunder only if such
incorrectness shall continue uncured for a period of thirty (30) days after the
receipt by Lessee of a written notice from Lessor or the Indenture Trustee
advising Lessee of the existence of such incorrectness; or
(f) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding
64
<PAGE>
[Lease Agreement (1995 777 B)]
undismissed or unstayed for a period of ninety (90) consecutive days or an order
for relief under Chapter 11 of the Bankruptcy Code with respect to Lessee as
debtor or any other order, judgment or decree shall be entered in any proceeding
by any court of competent jurisdiction appointing, without the consent of
Lessee, a receiver, trustee or liquidator of Lessee, or for all or substantially
all of its property, or sequestering of all or substantially all of the property
of Lessee and any such order, judgment or decree or appointment or sequestration
shall be final or shall remain in force undismissed, unstayed or unvacated for a
period of ninety (90) days after the date of entry thereof; or
(g) the commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of Lessee or for all or substantially all of its
property, or the making by Lessee of any assignment for the benefit of creditors
or Lessee shall take any corporate action to authorize any of the foregoing; or
(h) Lessee shall not be a Certificated Air Carrier;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as any such Event of Default shall not have
been remedied, Lessor may, at its option, declare by written notice to Lessee
this Lease Agreement to be in default; and at any time thereafter, so long as
such Event of Default shall be continuing, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as 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, however, that during any period the Aircraft is
subject to the Civil Reserve Air Fleet Program in accordance with the provisions
of Section 7(b) hereof and in the possession of the United States Government or
an instrumentality or agency thereof, Lessor shall not, on account of any Event
of
65
<PAGE>
[Lease Agreement (1995 777 B)]
Default, be entitled to do any of the following in such manner as to limit
Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines, unless at least 60 days' (or such
lesser period as may then be applicable under the Military Airlift Command
program of the United States Government) prior written notice of default
hereunder shall have been given by Lessor by registered or certified mail to
Lessee (and 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) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with all
the provisions of, Section 5 as if such Airframe or Engine were being
returned at the end of the Term, or Lessor, at its option, may enter upon
the premises where all or any part of the Airframe or any Engine is located
and take immediate possession of and remove the same by summary proceedings
or otherwise, (and, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such
action or otherwise;
(b) sell the Aircraft, the Airframe or any Engine at public or
private sale, as Lessor may determine, or otherwise dispose of, hold, use,
operate, lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) Lessor may hold, keep idle or lease to others the Aircraft,
the Airframe or any Engine or any Part thereof, as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and
without any duty to account to Lessee with respect thereto, except that
Lessee's obligation to pay Basic Rent with respect to the Aircraft on Lease
Period Dates subsequent to the date upon which Lessee shall have been
deprived of use of the Aircraft pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by Lessor from leasing the
Aircraft, the Airframe or any Engine to any Person other than Lessee;
66
<PAGE>
[Lease Agreement (1995 777 B)]
(d) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a), (b)
or (c) above with respect to the Aircraft, Lessor, by written notice to
Lessee specifying a payment date which shall be the Lease Period Date not
earlier than ten days from the date of such notice, may demand that Lessee
pay to Lessor, and Lessee shall pay Lessor, on the payment date so
specified, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the installments of Basic Rent for the Aircraft due for Lease
Periods commencing on or after the Commencement Date or the Lease Period
Date, as the case may be, specified as the payment date in such notice),
any unpaid Basic Rent due on Lease Period Dates on or prior to the payment
date so specified plus whichever of the following amounts Lessor, in its
sole discretion, shall specify in such notice (with interest thereon at the
Past Due Rate from such specified payment date until the date of actual
payment of such amount): (i) an amount equal to the excess, if any, of the
Stipulated Loss Value for the Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice over the aggregate fair
market rental value (computed as hereafter in this Section 15 provided) of
such Aircraft for the remainder of the Term, after discounting such
aggregate fair market rental value to present value as of the Lease Period
Date specified as the payment date in such notice at an annual rate equal
to the Past Due Rate; or (ii) an amount equal to the excess, if any, of the
Stipulated Loss Value for such Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice, over the fair market
sales value of such Aircraft (computed as hereafter in this Section
provided) as of the Lease Period Date specified as the payment date in such
notice;
(e) in the event Lessor pursuant to paragraph (b) above, shall
have sold the Aircraft, Lessor, in lieu of exercising its rights under
paragraph (d) above with respect to such Aircraft, may, if it shall so
elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor, on
the date of such sale, as liquidated damages for loss of a bargain and not
as a penalty, any unpaid Basic Rent with respect to the Aircraft due on or
prior to such date plus the amount of any deficiency between the net
proceeds of such sale (after deduction of all reasonable costs of sale) and
the Stipulated Loss Value of such Aircraft, computed as of the Stipulated
Loss Value date on or immediately following the date of such sale, together
with interest, if any, on the amount of such deficiency, at the Past Due
Rate, from the date of such sale to the date of actual payment of such
amount; and/or
67
<PAGE>
[Lease Agreement (1995 777 B)]
(f) Lessor may rescind or terminate this Lease Agreement, and/or may
exercise any other right or remedy which may be available to it under
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for breach hereof.
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an arm's-
length transaction between an informed and willing lessee or purchaser, as the
case may be, under no compulsion to lease or purchase, as the case may be, and
an informed and willing lessor or seller in possession, as the case may be, in
each case based upon the actual condition and location of the Aircraft, which
value shall be determined by mutual agreement or, in the absence of mutual
written agreement, pursuant to an appraisal prepared and delivered by a
nationally recognized firm of independent aircraft appraisers nominated by
Lessor, and Lessor shall promptly notify Lessee of such nomination. Any
appraisal obtained pursuant to this Section 15 shall take into account then
prevailing market conditions for aircraft of the same type as the Aircraft. The
cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies, for the payment of Premium, if any, and for all reasonable and actual
legal fees and other costs and expenses incurred by Lessor, the Indenture
Trustee, the Certificate Holders and the Owner Participant in connection with
any default or the exercise of remedies hereunder including the return of the
Airframe or any Engine in accordance with the terms of Section 5 or in placing
such Airframe or Engine in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor, the Indenture Trustee, a Certificate Holder or the Owner
Participant may bid for and purchase such property. Lessor agrees to give
Lessee at least 10 days' written notice of the date fixed for any public sale of
any Airframe or Engine or of the date on or after which will occur the execution
of any contract providing for any private sale. Except as otherwise expressly
provided above, no remedy referred to in this Section 15 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such remedies
shall not preclude the simultaneous or
68
<PAGE>
[Lease Agreement (1995 777 B)]
later exercise by Lessor of any or all of such other remedies. No waiver by
Lessor of any Default or Event of Default shall in any way be, or be construed
to be, a waiver of any future or subsequent Default or Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any right now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease, or otherwise use the Aircraft or Parts thereof in mitigation of Lessor's
damages as set forth in this Section 15 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 15.
SECTION 16. Lessee's Cooperation Concerning Certain Matters. (a)
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the execution
and delivery of any amendment to this Lease or to the Trust Agreement or Trust
Indenture, Lessee at its expense will cause such Lease Supplement, Trust
Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well) or
amendment to be duly filed and recorded, and maintained of record, in accordance
with the applicable laws of the government of registry of the Aircraft. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor may from
time to time reasonably request in order more effectively to 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 Lessor and the Indenture
Trustee hereunder, including, without limitation, if requested by Lessor, at the
expense of Lessee, the execution and delivery of supplements or amendments
hereto, each in recordable form, subjecting to this Lease and the Trust
Indenture, any airframe or engine substituted for the Airframe or any Engine
pursuant to the terms thereof and the recording or filing of counterparts
thereof, in accordance with the laws of such jurisdictions as Lessor may from
time to time reasonably request.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, the Pass Through Trustees:
(i) Quarterly Statements - As soon as practicable after the end
of the first, second, and third quarterly fiscal periods in each fiscal
year of Lessee, and in any event within 60 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such quarter setting forth in
69
<PAGE>
[Lease Agreement (1995 777 B)]
comparative form the amount for the end of the corresponding period of
the preceding fiscal year,
(2) consolidated statements of income and retained earnings
of Lessee for such quarterly period, setting forth in comparative form
the amount for the corresponding period of the preceding fiscal year,
and
(3) consolidated statements of cash flow of Lessee for the
portion of the fiscal year ending with said quarter, setting forth in
comparative form the amount for the corresponding period of the
preceding fiscal year;
(ii) Annual Statements - As soon as practicable after the end of
each fiscal year, and in any event within 120 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such year, and
(2) consolidated statements of income and retained earnings
and of cash flow of Lessee for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year and accompanied by an auditor's report of a firm of independent
certified public accountants of recognized national standing (which report
may be adverse, qualified or disclaim an opinion);
(iii) SEC Reports - Promptly upon their becoming available, one
copy of each financial statement, report, or proxy statement sent by UAL
Corporation to its shareholders generally, and of each regular or periodic
report and any prospectus (in the form in which it becomes effective) filed
by Lessee or UAL Corporation with the Securities and Exchange Commission or
any successor agency; and
(iv) Notice of Default or Claimed Default -Immediately upon an
officer of Lessee becoming aware of the existence of a Default or an Event
of Default (or that Lessor has given notice or taken any other action with
respect to an Event of Default or a claimed default under this Lease), a
written notice specifying the nature of the Default, Event of Default, or
claimed default and any such notice given or action taken by Lessor and
what action Lessee is taking or proposes to take with respect thereto.
70
<PAGE>
[Lease Agreement (1995 777 B)]
(c) Commencing in 1996, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate of
Lessee, signed by the President, a Vice President, the Chief Financial Officer
or the principal accounting officer of Lessee to the effect that the signer is
familiar with or has reviewed the relevant terms of this Lease and the signer
does not have knowledge of the existence, as of the date of such certificate, of
any condition or event which constitutes a Default or an Event of Default.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, telecopier or similar
writing) and shall be effective (a) if given by telecopier when transmitted and
the appropriate confirmation received; provided, that any such notice is
confirmed by certified mail, (b) if given by certified mail, three Business Days
after being deposited in the mails, (c) if given by telex, upon receipt by the
party transmitting the telex of such party's callback code at the end of such
telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at P. O. Box 66100, Chicago, Illinois 60666(or,
if given by overnight delivery service, 1200 East Algonquin Road, Elk Grove
Township, Illinois 60007) Attention: Vice President and Treasurer,
telecopier number (708) 952-7117, or to such other address or telecopier
number as Lessee shall from time to time designate in writing to Lessor;
(ii) if to Lessor, at 225 Franklin Street, Boston, Massachusetts
02110 (or, if given by overnight delivery service) Two International Place,
Boston, Massachusetts 02110) Attention: _____________________, telecopier
number (617) 664-5367 or to such other address or telecopier number as
Lessor shall from time to time designate in writing to Lessee;
(iii) if to the Indenture Trustee, the Owner Participant or any
Pass Through Trustee, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at such address or telecopier
number as the Indenture Trustee, the Owner Participant or such Pass Through
Trustee shall have furnished by notice to Lessor and to Lessee, and, until
an address is so furnished, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at its address or telecopier
number set forth in Schedule I to the Participation Agreement; and
71
<PAGE>
[Lease Agreement (1995 777 B)]
(iv) If to a Certificate Holder which is not a Pass Through
Trustee, addressed to such Certificate Holder at its address stated in the
Loan Certificate Register maintained pursuant to the Trust Indenture.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
(a) This Lease is a net lease, and it is intended that the Lessee
shall pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary or structural or non-structural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including the costs and expenses particularly set
forth in this Lease. Except as set forth in this Section 18(a), the Rent which
Lessee is obligated to pay shall be paid without the necessity of notice or
demand and without set-off, counterclaim, abatement, suspension, deduction or
defense. If at any time that Lessee is required (a) to make a payment of
Termination Value or Fair Market Sales Value pursuant to Section 9 or Stipulated
Loss Value pursuant to Section 10, or (b) to pay the purchase price of the
Aircraft pursuant to Section 19(b), there shall exist a Lessor Lien with respect
to the Aircraft (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens) relating to the Owner
Participant (or Lessee shall have previously incurred a charge to discharge such
a Lessor Lien), then Lessee shall be entitled to deduct from the portion
required to be paid to the Owner Participant of such payment of Termination
Value or Fair Market Sales Value, or such payment of the purchase price, or any
combination thereof, as the case may be, an amount sufficient to so reimburse
Lessee or to reimburse Lessee for the cost of discharging such Lessor Lien, as
the case may be. Notwithstanding anything contained in this Section 18(a) to
the contrary, any payments of Fair Market Sales Value, Termination Value,
Stipulated Loss Value, Special Termination Value or EBO Price made to the
Indenture Trustee shall be in an amount which, together with any other amounts
payable hereunder, is at least sufficient to pay in full, as of the date of
payment thereof, the amount of principal of, and any accrued and unpaid interest
on, the outstanding Loan Certificates, together with Premium, if any, thereon
and amounts due the Certificate Holders under the Trust Indenture, if any, and,
to such extent, shall not be subject to set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall not
terminate nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension,
72
<PAGE>
[Lease Agreement (1995 777 B)]
deferment or reduction of any Rent which the Lessee is obligated to pay
hereunder, nor shall the obligations hereunder of the Lessee be affected, by
reason of (A) any damage to or the destruction or loss of all or any portion of
the Airframe or any Engine from whatever cause, (B) the loss or theft of any
portion of the Airframe or any Engine, (C) the taking of the Airframe or any
Engine or any portion thereof by condemnation, confiscation, requisition or
otherwise, (D) the prohibition, limitation or restriction of the Lessee's use of
all or any part of the Airframe or any Engine, or the interference with such use
by any Person, (E) the inadequacy or incorrectness of the description of any
portion of the Airframe or any Engine or the failure of this Lease to demise to
the Lessee the Airframe or any Engine or any portion thereof, (F) the Lessee's
acquisition or ownership of all or any part of the Airframe or any Engine
otherwise than pursuant to an express provision of this Lease, (G) any defect in
compliance with specifications, condition, merchantability, design,
airworthiness, quality, durability, operation or fitness for use for any purpose
of the Airframe or any Engine or any portion thereof, (H) any defect in the
title to, or registration of or the existence of any Liens or rights of others
whatsoever with respect to, the Airframe or any Engine or any portion thereof,
(I) any insolvency, bankruptcy, reorganization or similar proceedings by or
against any Sublessee or any Person (J) any breach, default or misrepresentation
by the Lessor, any Participant or the Indenture Trustee under this Lease or any
other Operative Document or any of the documents referred to herein or therein
or (K) any invalidity or unenforceability, in whole or in part, of this Lease or
any other Operative Document or any of the documents referred to herein or
therein, or any other infirmity herein or therein, or any lack of power or
authority of any party to this Lease or any other Operative Document or any such
documents to enter into the same, or (L) any other circumstance, happening or
act whatsoever, whether or not unforeseen or similar to any of the foregoing, it
being the intention of the parties hereto that the obligations of the Lessee
shall be absolute and unconditional and shall be separate and independent
covenants and agreements and shall continue unaffected unless and until this
Lease shall have terminated in accordance with its terms upon payment by Lessee
of all sums payable by Lessee hereunder and performance by Lessee of all
obligations required to be performed by Lessee hereunder.
The Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or avoid
this lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting the Lessor or the Owner Participant or any assignee of the
Lessor the Owner Participant or any other action
73
<PAGE>
[Lease Agreement (1995 777 B)]
with respect to this Lease which may be taken in any such proceeding by any
trustee or receiver of the Lessor or the Owner Participant or of any assignee of
the Lessor or the Owner Participant or by any court or any of the foregoing
actions which may be taken by or against any of the Lessor's predecessors in
interest in the Airframe or any Engine.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, without limitation of the other rights and
remedies of Lessor hereunder, to pay to Lessor an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Lease not been terminated in whole or in part.
Except as expressly provided herein, the Lessee waives all rights now
or hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Lease or the Airframe or any Engine or any part thereof, or (y) to any
abatement, suspension, deferment, return or reduction of the Rent.
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
Renewal Options.
(1) Fixed Renewal Terms. Not less than 180 days nor more than
365 days before the end of the Basic Term or any Fixed Renewal Term, Lessee
may, so long as no Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) hereof or Section 8 hereof),
(f) or (g) Default or any Event of Default has occurred and is continuing,
deliver to Lessor an irrevocable written notice (which at the option of
Lessee made at any time prior to 90 days prior to the end of the Basic Term
or such Fixed Renewal Term may be deemed a notice to exercise the
applicable purchase option in Section 19(b)) electing to renew this Lease
for a term or terms having a duration and at a Basic Rent as determined
below (each such term being herein referred to as a "Fixed Renewal Term").
At least 180 days, before the end of the Basic Term Lessee shall, as a
condition to its exercise of any option set forth in this Section 19(a)(1),
notify Lessor of its demand for an appraisal pursuant to the appraisal
procedures of Section 19(c) hereof. The appraiser(s) so appointed shall
determine the total useful life, the remaining useful life and the future
residual value of the Aircraft on the expiration date for a Fixed Renewal
Term as may be set by reason of the maximum period therefor in accordance
with the constraints set forth in the following two sentences. The
duration of each Fixed Renewal Term shall be a period specified by
74
<PAGE>
[Lease Agreement (1995 777 B)]
Lessee before the end of the Basic Term (or the preceding Fixed Renewal
Term, as the case may be) which is not less than one year and not more than
three years (in integral multiples of six months). Notwithstanding the
foregoing, the aggregate term of all Fixed Renewal Terms shall not exceed
the lesser of (a) three years and (b) the longest period of time (i) which
would cause the Term, after giving effect to all such Fixed Renewal Terms,
to be equal to at least 80% of the then estimated useful life of the
Aircraft as determined by the appraiser(s) and (ii) at the expiration of
which the residual value of the Aircraft, as estimated by the appraiser(s),
would be at least equal to 20% of Lessor's Cost (without taking into
account inflation or deflation during the Term). The annual Basic Rent
payable during each Fixed Renewal Term shall be equal to one-half of the
average annual Basic Rent payments for the Aircraft over the Basic Term.
(2) Fair Market Renewal Term. So long as no Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) Default or any Event of
Default has occurred and is continuing, Lessee shall have the right to
renew this Lease for additional periods of at least one year commencing at
the end of the Basic Term, any Fixed Renewal Term or any prior Fair Market
Renewal Term for a Basic Rent equal to the Fair Market Rental Value of the
Aircraft for such period (each such renewal term, a "Fair Market Renewal
Term"); provided, however, each Fair Market Renewal Term shall be an
integral multiple of six months. Notwithstanding the foregoing, the
aggregate term for all Fair Market Renewal Terms shall not exceed three
years. Each such option to renew shall be exercised upon delivery by
Lessee to Lessor of irrevocable written notice of Lessee's intent to renew
the Lease at least 180 days (but not more than 365 days) prior to the
commencement of such Fair Market Renewal Term (which at the option of the
Lessee made at any time prior to 90 days prior to the anticipated
commencement of such Fair Market Renewal Term may be deemed a notice to
exercise the applicable purchase option in Section 19(b)).
(3) Waiver. If no written notice is delivered by Lessee to
Lessor pursuant to Section 19(a)(1) or (2) on or before the day specified
therefore, Lessee shall be deemed to have waived any right to renew this
Lease.
(4) Conditions Precedent, Payment of Basic Rent. At the end of
the Basic Term or any Renewal Term, if Lessee has elected to renew this
Lease as aforesaid, and provided
75
<PAGE>
[Lease Agreement (1995 777 B)]
that there shall not then have occurred and be continuing a Default or an
Event of Default and that all necessary governmental authorizations and
approvals shall have been received and that Basic Rent for the Renewal Term
has already been determined as above provided, (i) this Lease shall
continue in full force and effect during the Renewal Term, and (ii) Basic
Rent for such Renewal Term shall be payable in semi-annual installments in
advance or arrears as was the basis of the Basic Rent being paid
immediately prior to such Renewal Term, each such installment being due and
payable on each Lease Period Date occurring during the Renewal Term.
(5) Termination Value; Stipulated Loss Value. The amounts which
are payable during any Renewal Term in respect of Termination Value as used
in Section 15 and Stipulated Loss Value with respect to the Aircraft shall
be determined on the basis of the Fair Market Sales Value of the Aircraft
as of the commencement of such Renewal Term, amortized on a straight-line
basis over such Renewal Term to the projected Fair Market Sales Value of
the Aircraft as of the expiration of such Renewal Term, as such Fair Market
Sales Value in each case is determined prior to the commencement of such
Renewal Term. In determining Fair Market Sales Value for purposes of
calculating Stipulated Loss Value and Termination Value for any Renewal
Term effect shall be given to the encumbrance on the Aircraft of any Fixed
Renewal Term available or in force.
(b) Purchase Options. Lessee shall have the option, so long as no
Section 14(a), (b), (f) or (g) Default or any Event of Default exists on the
date notice of exercise may be given, (i) with respect to subsections (1) and
(2) below, upon not more than 365 days and not less than 90 days irrevocable
prior written notice to Lessor and (ii) with respect to subsections (3) and (4)
below, upon not more than 365 days and not less than 180 days irrevocable prior
written notice to Lessor (which at the option of the Lessee made at any time
prior to 90 days prior to the relevant purchase date may be deemed a notice of
the applicable renewal option pursuant to Section 19(a)(1) or 19(a)(2) as the
Lessee may designate) (each a "Purchase Option Date"), to terminate this Lease
and to purchase the Aircraft:
(1) on any Special Purchase Option Date for a purchase price
equal to the greater of (x) the Fair Market Sales Value of the Aircraft on
such date or (y) the amount determined by multiplying Lessor's Cost by the
Special Termination Value Percentage with respect to such Date (with
respect to any such Date, the "Special Termination Value");
76
<PAGE>
[Lease Agreement (1995 777 B)]
(2) on the EBO Date for a purchase price equal to the amount
determined by multiplying Lessor's Cost by the EBO Percentage payable on
the EBO Date or as otherwise provided in, and subject to the conditions set
forth in, Exhibit H hereto (the "EBO Price");
(3) on the last Business Day of the Basic Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date;
and
(4) on the last Business Day of any Renewal Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date.
Notwithstanding the foregoing but subject to the provisions of Section 8(r) of
the Participation Agreement, the purchase price on any Purchase Option Date
shall be sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of the
principal amount (and Premium, if any) of and interest on the Loan Certificates
then outstanding. Upon payment to Lessor in immediately available funds of the
full amount of the purchase price (less the principal amount of the Loan
Certificates assumed by the Lessee in accordance with Section 8(r) of the
Participation Agreement) plus all Basic Rent due on or prior to such purchase
date (unless denominated "advance" rental), all Supplemental Rent due on or
prior to such purchase date (including amounts equal to Premium, if any) and
payment of any other amounts then due hereunder (including all reasonable costs
or expenses of Lessor (including any applicable sales or transfer taxes) and the
Owner Participant in connection with such purchase), Lessor will transfer to
Lessee, without recourse or warranty (except as to the absence of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)), all of Lessor's right, title and interest
in and to the Aircraft.
(c) Valuation. At any time not earlier than 365 days prior to the
date on which Lessee may purchase an Aircraft pursuant to Section 19(b) hereof
or renew this Lease pursuant to Section 19(a) hereof, Lessee may deliver to
Lessor a revocable notice of its intent to exercise its renewal option or
purchase option. For all purposes of this Section 19, including the appraisal
referred to in this Section 19(c), in determining Fair Market Rental Value or
Fair Market Sales Value, the Aircraft shall be valued (i) as if in the condition
and otherwise in compliance with the terms of Section 5 (but subject to Section
5(e)) upon a return of the Aircraft in the United States and as if it had been
maintained at all times as required in accordance with Section 7(a)(1) and (2)
and Section 8, (ii) on the basis of
77
<PAGE>
[Lease Agreement (1995 777 B)]
the value which would obtain in an arm's-length transaction between an informed
and willing buyer or user or lessee (other than a lessee or an Affiliate of a
lessee currently in possession or a used equipment scrap dealer) under no
compulsion to buy or lease and an informed and willing seller or lessor
unaffiliated with such buyer-user or lessee and under no compulsion to sell or
lease, and (iii) in the case of such valuation for determining Fair Market
Rental Value, assuming such lessee would have substantially the same obligations
during the Fair Market Renewal Term as provided hereunder including without
limitation the obligations of Lessee to carry and maintain the insurance
required by Section 11 hereof. Upon receipt of such notice Lessor and Lessee
shall confer in good faith with a view to reaching agreement on the Fair Market
Rental Value or Fair Market Sales Value of the Aircraft. If the parties have
not so agreed by 240 days prior to the end of the Basic Term or the Renewal Term
in question, then the question shall be determined by an appraisal mutually
agreed to by two recognized independent aircraft appraisers, one of which
appraisers shall be chosen by Lessor and one by Lessee within five Business Days
after Lessor or Lessee shall have received written notice from the other party
of a demand that such an appraisal be made, which notice shall specify the
appraiser chosen by the party giving the notice or, if such appraisers cannot
agree on the amount of such appraisal within five Business Days after the end of
such five-day period, each shall render its own appraisal and shall by mutual
consent choose another appraiser within five Business Days after the end of such
five-day period. If, within such five-day period, such two appraisers fail to
appoint a third appraiser, then either Lessor or Lessee, on behalf of both, may
apply to the American Arbitration Association (or any successor organization
thereto) in Chicago, Illinois for the appointment of such third appraiser. The
decision of the third appraiser so appointed shall be given within ten Business
Days after the appointment of such third appraiser. As soon as the third
appraiser has delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations than
each of the other two determinations, then the determination of such appraiser
shall be excluded, the remaining two determinations shall be averaged and such
average shall be final and binding upon the parties hereto; otherwise the
average of all three determinations shall be final and binding upon the parties
thereto. Lessee and Lessor shall equally bear all expenses relating to such
appraisal procedure (other than an appraisal procedure related to Lessee's
purchase option under Section 19(b)(1), the costs of which Lessee shall in all
events bear), provided, that if such transaction is not consummated (other than
as the result of the fault of Lessor) Lessee shall bear all expenses relating to
such appraisal procedure.
78
<PAGE>
[Lease Agreement (1995 777 B)]
SECTION 20. Security for Lessor's Obligation to Certificate Holders.
In order to secure the indebtedness evidenced by the Loan Certificates, Lessor
has agreed in the Trust Indenture, among other things, to assign to the
Indenture Trustee this Lease and to mortgage the Aircraft in favor of the
Indenture Trustee, subject to the reservations and conditions therein set forth.
To the extent, if any, that this Lease 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 may be created through the
transfer or possession of any counterpart other than the original counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee as indenture trustee under the Trust Indenture
on the signature page thereof. Lessee hereby accepts and consents to the
assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Lessee agrees to pay directly to
the Indenture Trustee (or, after receipt by Lessee of notice from the Indenture
Trustee of the discharge of the Trust Indenture, to Lessor), all amounts of Rent
(other than Excluded Payments) due or to become due hereunder and assigned to
the Indenture Trustee and Lessee agrees that the Indenture Trustee's right to
such payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance. Notwithstanding the foregoing assignment of this
Lease, the obligations of Lessor to Lessee to perform the terms and conditions
of this Lease shall remain in full force and effect. Lessee further
acknowledges that the Trust Indenture provides that so long as the Loan
Certificates are outstanding Lessor may not consent to any amendment,
modification or waiver to this Lease without the prior consent of the Indenture
Trustee (except as provided in Section 11.06 of the Trust Indenture) and Lessee
agrees to provide to the Indenture Trustee a copy of all notices, consents,
certificates or other information provided hereunder to Lessor.
SECTION 21. Lessor's Right to Perform for Lessee. If 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, then (but in each case,
except in the case of failure to pay Rent or in the case of failure to maintain
insurance as required hereunder, no earlier than five Business Days after notice
as to the occurrence of such failure, whether or not it shall yet constitute an
Event of Default hereunder) Lessor may itself make such payment or perform or
comply with such agreement but shall not be obligated hereunder to do so, and
the amount of such payment and the amount of the reasonable expenses of 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
79
<PAGE>
[Lease Agreement (1995 777 B)]
Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor
Limited. (a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee shall, until paid to Lessee, be
invested by Lessor or, if the Trust Indenture shall not have been discharged, by
the Indenture Trustee, as the case may be, as Lessee (or in the event a Default
under Section 14(a), (b), (f) or (g) or an Event of Default has occurred and is
continuing, Lessor) may from time to time direct in writing (and in absence of a
written direction by Lessee, there shall be no obligation to invest such moneys)
in (i) obligations of, or guaranteed by, the United States Government or
agencies thereof, (ii) open market commercial paper of any corporation
incorporated under the laws of the United States of America or any State thereof
rated at least P-1 or its equivalent by Moody's Investors Service, Inc. or at
least A-1 or its equivalent by Standard & Poor's Corporation, (iii) certificates
of deposit issued by commercial banks organized under the laws of the United
States or of any political subdivision thereof having a combined capital and
surplus in excess of $200,000,000 which banks or their holding companies have a
rating of A or its equivalent by Moody's Investors Service, Inc. or Standard &
Poor's Corporation; provided, however, that the aggregate amount at any one time
so invested in certificates of deposit issued by any one bank shall not exceed
5% of such bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (iii) or any subsidiary thereof and (v) repurchase
agreements with any financial institution having combined capital and surplus of
at least $200,000,000 with any of the obligations described in clause (i)
through (iv) as collateral. There shall be promptly remitted to Lessee or its
order (but no more frequently than monthly) any gain (including interest
received) realized as a result of any such investment (net of any fees, taxes,
commissions and other expenses, if any, incurred in connection with such
investment) unless a Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g)
Default or an Event of Default shall have occurred and be continuing. If a
Default under Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g) or
an Event of Default shall have occurred and be continuing, Lessor or if the
Trust Indenture shall not have been discharged, the Indenture Trustee as
assignee of Lessor, shall hold any such gain as security for the obligations of
Lessee under this Lease and apply it against such obligations as and when due,
and once all such Defaults and Events of Default have
80
<PAGE>
[Lease Agreement (1995 777 B)]
been remedied any gain not so applied shall be remitted to Lessee. Lessee shall
be responsible for any net loss realized as a result of any such investment and
shall reimburse Lessor (or the Indenture Trustee, as the case may be) therefor
on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under the
Trust Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct or for breach of its covenants, representations and
warranties contained herein, to the extent covenanted or made in its individual
capacity.
SECTION 23. Miscellaneous. 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section and
paragraph headings in 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 and all references herein to numbered sections, unless
otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease 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 24. Successor Trustee. Lessee agrees that in the case of the
appointment of any successor Owner Trustee pursuant to the terms of the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without in any way altering the terms of this Lease or Lessee's
obligations hereunder. One such
81
<PAGE>
[Lease Agreement (1995 777 B)]
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor Owner Trustees pursuant to the
Trust Agreement, but such right may be executed repeatedly as long as this Lease
shall be in effect.
SECTION 25. Bankruptcy. Lessee hereby acknowledges that Lessor and
the Indenture Trustee are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft and that this Lease is a "lease"
within the meaning of said Section 1110, including that it is to be treated as a
lease for federal tax purposes. Lessee agrees not to take any position in
connection with any bankruptcy proceedings involving it that is inconsistent
with a lessor's rights under Section 1110 of the Bankruptcy Code or any
comparable or successor provision affording protection to lessors of aircraft.
* * *
82
<PAGE>
[Lease Agreement (1995 777 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed as of the day and year first above written.
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly
provided in Section 4 hereof, but solely as
Owner Trustee,
Lessor
By____________________________________________
Vice President
UNITED AIR LINES, INC.,
Lessee
By____________________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged on this _____ day of May, 1995./1/
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION
Indenture Trustee
By____________________________________________
Authorized Officer
- -----------------------
/1/This language contained in the original counterpart only.
83
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT A
LEASE SUPPLEMENT NO. 1 (1995 777 B)
-----------------------------------
LEASE SUPPLEMENT No. 1 (1995 777 B), dated May __, 1995, between STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement (1995 777 B), dated as of May 1, 1995,
between such Owner Trustee and the Owner Participant referred to therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and UNITED AIR LINES, INC. ("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement (1995 777 B), dated as of May 1, 1995, relating to one Boeing 777-222
aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease provides for the execution
and delivery from time to time of Lease Supplements for the purpose of leasing
the Airframe and Engines under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document./2/
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease, attached and made a part of Lease Supplement No. 1
(1995 777 B) dated May __, 1995, has been recorded by the Federal Aviation
Administration on ___________ __, 1995, as one document and assigned Conveyance
No. __________./3/
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the
following described Boeing Model 777-222 aircraft (the "Aircraft"), which
Aircraft as of the date hereof consists of the following components:
- ---------------------
/2/This language for Lease Supplement No. 1.
/3/This language for other Lease Supplements.
<PAGE>
[Lease Agreement (1995 777 B)]
(i) Airframe: U.S. Registration No. N766UA and
manufacturer's serial no. 26917; and
(ii) Engines: two (2) Pratt & Whitney Model PW4084 engines
bearing, respectively, manufacturer's serial nos. _______ and _______
(each of which engines has 750 or more rated takeoff horsepower or the
equivalent of such horsepower).
2. The Delivery Date of the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof. Except as otherwise
provided in the Lease, the Term for the Aircraft shall commence on the
Delivery Date and end on the Lease Expiry Date.
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent
for the Aircraft throughout the Term therefor in accordance with Section 3
of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in
good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or
otherwise affect any right Lessee or Lessor may have with respect to the
Aircraft against The Boeing Company, or any subcontractor or supplier of
The Boeing Company, under the Purchase Agreement or otherwise.
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, 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.
* * *
<PAGE>
[Lease Agreement (1995 777 B)]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to
be duly executed on the day and year first above written.
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee,
Lessor
By:________________________________
Title:_____________________________
UNITED AIR LINES, INC.,
Lessee
By:________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged on this _____ day of May, 1995./4/
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
Indenture Trustee
By_________________________________
Authorized Officer
- ---------------------------
/4/This language contained in the original counterpart only.
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT B
BASIC RENT AND EXCESS AMOUNT SCHEDULE
-------------------------------------
ARREARS RENT ADVANCE RENT EXCESS AMOUNT
AS A PERCENTAGE AS A PERCENTAGE AS A PERCENTAGE
DATE OF LESSOR'S COST OF LESSOR'S COST OF LESSOR'S COST
- ------ ---------------- ---------------- ----------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT B TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT C
STIPULATED LOSS VALUE SCHEDULE
------------------------------
STIPULATED LOSS VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT C TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT D
TERMINATION VALUE SCHEDULE
--------------------------
TERMINATION VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT D TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT E
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage pursuant to the Lease and any calculation of any payment to the Owner
Participant or Lessee under the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement shall be determined by the Owner Participant, computed
on the basis of the same methodology and assumptions used by the Owner
Participant in determining the Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage as of the Delivery Date except as such assumptions have been modified
pursuant to Section 3 of the Lease; provided, however, Lessee may request (A)
Capstar Partners, Inc., or any other financial advisor to Lessee to verify such
calculations but without any requirement that the Owner Participant disclose to
such advisor such methodology and assumptions and (B) if Lessee believes that
such calculations by the Owner Participant are in error then a nationally
recognized firm of accountants selected by the Owner Participant and reasonably
acceptable to Lessee (which may be the Owner Participant's independent public
accountants) shall be permitted to verify such calculations and the Owner
Participant will make available to such firm (subject to the execution by such
firm of a confidentiality agreement reasonably acceptable to the Owner
Participant) such methodology and assumptions and any changes made therein
pursuant to Section 3 of the Lease and any other information reasonably
necessary for such verification requested by such firm. In the event of a
verification under clause (B) of this Exhibit E the determination by such firm
of accountants shall be final. Lessee will pay the reasonable costs and
expenses of the verification under clause (B) of this Exhibit E; provided,
however, if as a result of such verification process the Basic Rent is adjusted
and such adjustment causes the Net Present Value of Rents to decline by 10 or
more basis points or there is a material error in the computation of the
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages or EBO Percentage in the Owner Participant's
original statement in the Owner Participant's favor, or indemnity payment is
reduced by $10,000 or more, the Owner Participant shall pay the reasonable costs
and expenses of such verification process. Such recalculated Basic Rent,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage shall be set forth in an
amendment to the Lease.
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT F
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
_______________________
* Designates "Restricted Country".
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT G
SCHEDULE OF COUNTRIES AUTHORIZED
FOR AIRCRAFT REGISTRATION
--------------------------------
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
_______________________
* Designates "Restricted Country".
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT H
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
------------------------------------------------------
Lessor's Cost: $________
Engine Cost: $_________
Commencement Date: October 19, 1995
Lease Expiry Date: October 19, 2019
Stipulated Loss Value Date: the 19th day of each calendar month
during the Interim Term, the Basic Term
and any Renewal Term
EBO Date: ______, 2012
EBO Percentage: _____%/1/
/1/ Alternatively, Lessee may elect to purchase the Aircraft in accordance
with Section 19(b)(2) of the Lease by paying the installment amounts on the
dates given below:
EBO Installment Percentages
EBO Installment (expressed as a percentage
Dates of Lessor's Cost)
--------------- ---------------------------
______, 2012 %
______, 2012 %
______, 2012 %
______, 2012 %
In the event that Lessee shall so elect and, so long as no payment or bankruptcy
Default, or Event of Default, shall be continuing, Lessee shall as of the EBO
Date purchase the Aircraft and receive title to the Aircraft and shall be
deemed, as of the EBO Date, to mortgage in favor of Lessor all of its right,
title and interest, on and after such date, in the Aircraft to secure the loan
and punctual payment of all EBO installment amounts payable under this Exhibit
H. On the EBO Date, Lessee shall execute and deliver such instruments, in due
form for filing or recording, as may be reasonably requested by the Owner
Participant, to grant, confirm and perfect the mortgage and security interest
deemed to be created by this Exhibit H and to confirm Lessee's obligations to
make the installment payments payable under this Exhibit H.
<PAGE>
[Lease Agreement (1995 777 B)]
Special Purchase Special Termination
Option Dates: Value Percentages:
---------------- -------------------
_______________ _____%
_______________ _____%
_______________ _____%
<PAGE>
[Lease Agreement (1995 777 B)]
EXHIBIT H
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
------------------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT H TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
Doc. No. 1.02
Aircraft N189UA
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED LEASE AGREEMENT
(1993 747 A)
Dated as of May 1, 1995
Between
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly
provided herein, but solely as
Owner Trustee,
Lessor
and
UNITED AIR LINES, INC.,
Lessee
----------------------------
United Air Lines, Inc.
1993 747 A Equipment Trust
One Boeing 747-422 Aircraft
----------------------------
- --------------------------------------------------------------------------------
As set forth in Section 20 hereof, Lessor has assigned to the
Indenture Trustee (as defined herein) certain of its right, title and interest
in and to this Second Amended and Restated Lease Agreement. To the extent, if
any, that this Second Amended and Restated Lease Agreement 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 may be created
through the transfer or possession of any counterpart other than the original
executed counterpart, which shall be identified as the counterpart containing
the receipt therefor executed by the Indenture Trustee on the signature page
thereof.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. Definitions............................................... 2
SECTION 2. Acceptance and Lease...................................... 20
SECTION 3. Term and Rent............................................. 20
(a) Interim Term and Basic Term................................. 20
(b) Basic Rent.................................................. 20
(c) Adjustments to Basic Rent, Excess Amount,
Stipulated Loss Values, Termination Values,
Special Termination Value Percentages and the EBO
Percentage.................................................. 20
(d) Supplemental Rent........................................... 23
(e) Payments in General......................................... 23
(f) [Intentionally Reserved for Potential Future Use]........... 24
(g) [Intentionally Reserved for Potential Future Use]........... 24
SECTION 4. Lessor's Representations and Warranties................... 24
SECTION 5. Return of the Aircraft.................................... 25
(a) Condition Upon Return....................................... 25
(b) Return of Other Engines..................................... 30
(c) Fuel and Manuals............................................ 30
(d) Storage Upon Return......................................... 31
(e) Purchase of Engine.......................................... 31
(f) Severable Parts............................................. 31
(g) Special Redelivery Provision................................ 32
SECTION 6. Liens..................................................... 32
SECTION 7. Registration, Maintenance and Operation;
Possession and Subleases; Insignia............................... 33
(a) (1) Registration and Maintenance........................... 33
(2) Operation.............................................. 34
(3) Reregistration......................................... 35
(4) Operating Certificates................................. 35
(b) Possession and Subleases.................................... 36
(c) Insignia.................................................... 42
SECTION 8. Replacement and Pooling of Parts;
Alterations, Modifications and Additions.............................. 42
(a) Replacement of Parts........................................ 42
(b) Pooling of Parts............................................ 43
(c) Alterations, Modifications and Additions.................... 43
SECTION 9. Early Termination......................................... 45
(a) [Intentionally reserved for potential future use]........... 45
(b) Termination for Obsolescence/Surplus........................ 45
(c) Sale of the Aircraft........................................ 46
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(d) Termination as to Engines................................... 48
SECTION 10. Loss, Destruction, Requisition, etc....................... 49
(a) Event of Loss with Respect to the Aircraft.................. 49
(b) Event of Loss with Respect to an Engine..................... 52
(c) Application of Payments from Governmental
Authorities for Requisition of Title, etc................... 54
(d) Requisition for Use of the Aircraft by the United
States Government or Government of Registry of the
Aircraft.................................................... 56
(e) Requisition for Use of an Engine by the United
States Government or the Government of Registry of
the Aircraft................................................ 57
(f) Application of Payments During Existence of Events
of Default.................................................. 57
SECTION 11. Insurance................................................. 57
(a) Public Liability and Property Damage Insurance.............. 57
(b) Insurance Against Loss or Damage to the Aircraft............ 58
(c) Reports, etc................................................ 60
(d) Self-Insurance.............................................. 62
(e) Additional Insurance by Lessor and Lessee................... 62
(f) Indemnification by Government in Lieu of
Insurance................................................... 62
(g) Application of Payments During Existence of
Default..................................................... 63
(h) Terms of Insurance Policies................................. 63
SECTION 12. Inspection................................................ 64
SECTION 13. Assignment................................................ 66
SECTION 14. Events of Default......................................... 66
SECTION 15. Remedies.................................................. 68
SECTION 16. Lessee's Cooperation Concerning Certain
Matters.......................................................... 72
SECTION 17. Notices................................................... 74
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc. ................ 75
SECTION 19. Renewal Options; Purchase Options; Valuation.............. 77
(a) Renewal Options............................................. 77
(1) Fixed Renewal Terms.................................... 77
(2) Fair Market Renewal Term............................... 78
(3) Waiver................................................. 78
(4) Conditions Precedent, Payment of Basic Rent............ 78
(5) Termination Value; Stipulated Loss Value............... 79
(b) Purchase Options............................................ 79
(c) Valuation................................................... 80
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 20. Security for Lessor's Obligation to Certificate
Holders.......................................................... 82
SECTION 21. Lessor's Right to Perform for Lessee...................... 82
SECTION 22. Investment of Security Funds; Liability of
Lessor Limited................................................... 83
(a) Investment of Security Funds................................ 83
(b) Liability of Lessor Limited................................. 84
SECTION 23. Miscellaneous............................................. 84
SECTION 24. Successor Trustee......................................... 84
SECTION 25. Bankruptcy................................................ 85
</TABLE>
iii
<PAGE>
EXHIBITS
EXHIBIT A Form of Lease Supplement
EXHIBIT B Basic Rent and Excess Amount Schedule
EXHIBIT C Stipulated Loss Value Schedule
EXHIBIT D Termination Value Schedule
EXHIBIT E Rent Recalculation and Indemnification Verification
EXHIBIT F Schedule of Countries Authorized for Domicile of Permitted Sublessees
EXHIBIT G Schedule of Countries Authorized for Aircraft Registration
EXHIBIT H Lessor's Cost, Engine Cost, Commencement Date, Lease Expiry Date,
Stipulated Loss Value Date, EBO Date, EBO Percentage, Special Purchase
Option Dates and Special Termination Value Percentages
<PAGE>
SECOND AMENDED AND RESTATED LEASE AGREEMENT (1993 747 A)
This SECOND AMENDED AND RESTATED LEASE AGREEMENT (1993 747 A), dated
as of May 1, 1995, between STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (as defined in
Section 1 hereof) (in such capacity, "Lessor") as successor to Wilmington Trust
Company ("Original Lessor"), and UNITED AIR LINES, INC., a corporation organized
and existing pursuant to the laws of the State of Delaware ("Lessee").
WITNESSETH:
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning provided thereto in Section 1 of this Lease;
WHEREAS, the Original Lease (as defined below) was amended and
restated pursuant to that certain First Amended and Restated Lease Agreement
(1993 747 A) dated as of April 1, 1993 (the "Original Restated Lease") between
the Original Lessor and Lessee and the Original Restated Lease has been amended
by (i) that certain First Amendment to First Amended and Restated Lease
Agreement (1993 747 A) dated April 19, 1994 ("First Amendment") between the
Original Lessor and Lessee, (ii) that certain Second Amendment to First Amended
and Restated Lease Agreement (1993 747 A) dated as of July 1, 1994 ("Second
Amendment") between the Original Lessor and Lessee, and (iii) that certain Third
Amendment to First Amended and Restated Lease Agreement (1993 747 A) dated July
22, 1994 ("Third Amendment") between the Original Lessor and Lessee (the
Original Restated Lease as amended by the First Amendment, the Second Amendment
and the Third Amendment being herein referred to as the "Restated Lease");
WHEREAS, the Original Restated Lease amended and restated that certain
Lease Agreement (1993 747 A) dated as of April 1, 1993 (the "Original Lease")
between Lessee and Original Lessor (as supplemented by Lease Supplement No. 1
(1993 747 A) dated April 20, 1993 ("Lease Supplement No. 1") between Original
Lessor and Lessee);
WHEREAS, pursuant to the Original Lease, Lessee has leased from Lessor
the Aircraft, being one (1) Boeing 747-422 aircraft which consists of the
following components: (i) Airframe: U.S. Registration No. N189UA, manufacturer's
serial no. 26878 and (ii) Engines: four (4) Pratt & Whitney model PW4056
aircraft engines bearing, respectively, manufacturer's serial numbers P727301,
P727302, P727303 and P727304;
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded by
the Federal Aviation Administration on April 21, 1993 and assigned Conveyance
No. FF08936;
WHEREAS, a counterpart of the Original Restated Lease was recorded by
the Federal Aviation Administration on May 6, 1993 and assigned Conveyance No.
VV003011; and
WHEREAS, a counterpart of the First Amendment was recorded by the
Federal Aviation Administration on June 15, 1994 and assigned Conveyance No.
HK002085;
WHEREAS, a counterpart of the Second Amendment was recorded by the
Federal Aviation Administration on August 10, 1994 and assigned Conveyance No.
FF006618;
WHEREAS, a counterpart of the Third Amendment was recorded by the
Federal Aviation Administration on August 10, 1994 and assigned Conveyance No.
FF06619; and
WHEREAS, in connection with the refinancing of the interim debt with
permanent debt as contemplated by Section 20 of the Original Participation
Agreement, Lessor and Lessee desire to amend and restate the Restated Lease in
its entirety and Lessor and Lessee desire and intend that the terms, provisions
and agreements herein set forth shall have the same force and effect as though
originally executed and delivered in the place of the Restated Lease.
SECTION 1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this Lease
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms herein defined:
"Acceptable Alternate Engine" means a Pratt & Whitney Model PW4056
engine or an engine of the same or another manufacturer of equivalent or greater
value and utility, and suitable for installation and use on the Airframe;
provided that such engine shall be of the same make, model and manufacturer as
the other three engine types installed on the Airframe and shall be an engine of
a type then being utilized by Lessee on other Boeing 747-422 aircraft operated
by Lessee and shall have been maintained, serviced, repaired and overhauled in
substantially the same manner as Lessee maintains, services, repairs and
overhauls similar engines utilized by Lessee and without in any way
discriminating against such engine.
2
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
"Actual Knowledge" means, (i) as it applies to the Owner Trustee or
Indenture Trustee, as the case may be, actual knowledge of a responsible officer
in the Trust Office, and (ii) as it applies to the Owner Participant, actual
knowledge of a Vice President or more senior officer of the Owner Participant or
other officer of the Owner Participant in each case having responsibility for
the transactions contemplated by the Operative Documents; provided that each of
the Owner Trustee, the Indenture Trustee and the Owner Participant shall be
deemed to have "Actual Knowledge" of any matter as to which it has been given
notice by any of Lessee, the Owner Participant, any Certificate Holder, the
Owner Trustee or the Indenture Trustee, such notice having been given pursuant
to and in accordance with Section 13(a) of the Participation Agreement.
"Additional Insured" means Lessor, in its individual capacity and as
owner of the Aircraft, the Indenture Trustee, the Owner Participant, Lessee in
its capacity as sublessor under any Sublease, and, so long as the Pass Through
Trustees are Certificate Holders, each Pass Through Trustee and each of their
respective Affiliates, successors and permitted assigns; and the respective
directors, officers and employees of each of the foregoing.
"Affiliate" means a Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under a common
control with, another Person, (ii) which beneficially owns or holds 10% or more
(by number of votes) of any class of voting securities of such other Person or
(iii) 10% or more (by number of votes) of the voting securities (or in the case
of a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by such other Person or a Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Aircraft" means the Airframe together with the four Engines whether
or not such Engines are installed on the Airframe or any other airframe.
"Airframe" means: (i) The Boeing Company Model 747-422 aircraft
(excluding Engines or engines from time to time installed thereon) specified by
United States Registration Number and Manufacturer's serial number in the Lease
Supplement; (ii) any and all Parts which are from time to time incorporated or
installed in or attached thereto or which have been removed therefrom, but where
title to which remains vested in Lessor in
3
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
accordance herewith; and (iii) any replacement airframe which may from time to
time be substituted pursuant to Section 10(a)(ii) hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time.
"Base Rate" means the rate of interest announced from time to time by
The First National Bank of Chicago at its principal office in Chicago, Illinois
as its "corporate base rate" (or its equivalent successor rate if the corporate
base rate is no longer used).
"Basic Rent" means, for the Basic Term, the rent payable for the
Aircraft pursuant to Section 3(b) hereof, as adjusted as provided in Section
3(c) and, for a Renewal Term, Basic Rent determined pursuant to Section 19.
"Basic Term" means the term for which the Aircraft is leased hereunder
pursuant to Section 3(a) hereof beginning on the Commencement Date and ending on
the Lease Expiry Date or such earlier date as this Lease may be terminated in
accordance with the terms hereof.
"Business Day" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in the City of
Chicago, Illinois; New York City, New York; the city and state in which the
principal place of business of the Owner Trustee is located; and, so long as any
Loan Certificate is outstanding, the city and state in which the Indenture
Trustee has its principal place of business and the city and state in which the
Indenture Trustee receives and disburses funds.
"Certificate Holder" has the meaning assigned to the term "Holder" in
the Trust Indenture.
"Certificated Air Carrier" means a Citizen of the United States
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United States Code,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo or that otherwise is certified or registered to the extent required to
fall within the purview of 11 U.S.C. Section 1110 or any analogous successor
provision of the Bankruptcy Code.
"Citizen of the United States" has the meaning given such term in
Section 40102(a)(15) of Title 49 of the United States Code.
4
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
"Civil Reserve Air Fleet Program" means the Civil Reserve Air Fleet
Program administered by the United States Government pursuant to Executive Order
No. 11490, as amended, or any substantially similar program.
"Code" means the Internal Revenue Code of 1986, as amended through the
Delivery Date.
"Commencement Date" means the date specified as such in Exhibit H
hereto.
"Commitments" means the respective commitments of the Original Loan
Participant or of the Owner Participant to finance the Owner Trustee's payment
of Lessor's Cost for the Aircraft and "Commitment" means any one of the
Commitments.
"Consent and Agreement" means the Consent and Agreement (1993 747 A),
dated April 20, 1993, executed by the Manufacturer, as the same may be amended,
modified or supplemented from time to time in accordance with the applicable
provisions thereof.
"Debt Rate" means the weighted average interest rate borne by the Loan
Certificates then outstanding.
"Default" means any event which with the giving of notice or the lapse
of time or both would become an Event of Default.
"Delivery Date" means April 20, 1993.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"EBO Date" means the date specified as such in Exhibit H hereto.
"EBO Percentage" means the percentage specified as such in Exhibit H
hereto.
"EBO Price" has the meaning set forth in Section 19(b)(2) hereof.
"Engine" means (i) each of the four Pratt & Whitney Model PW4056
engines listed by manufacturer's serial numbers in the initial Lease Supplement
and installed on the Airframe at the time of the Manufacturer's delivery to
Lessee of such Airframe, and whether or not from time to time thereafter
installed on such Airframe or any other airframe; (ii) any Acceptable Alternate
Engine which may from time to time be substituted for
5
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
any of such four engines pursuant to the terms hereof; and (iii) in either case,
any and all Parts which are from time to time incorporated or installed in or
attached to any such engine and any and all parts removed therefrom so long as
title thereto remains vested in Lessor in accordance herewith. The term
"Engines" means, as of any date of determination, all Engines then leased
hereunder.
"Engine Cost" means the amount specified as Engine Cost in Exhibit H
hereto.
"Event of Default" has the meaning specified in Section 14 hereof.
"Event of Loss" with respect to the Aircraft, Airframe or any Engine
means any of the following events with respect to such property: (i) the loss
of such property or of the use thereof due to the destruction of or damage to
such property which renders repair uneconomic or which renders such property
permanently unfit for normal use by Lessee for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or compromised
total loss; (iii) the theft or disappearance of such property, or the
confiscation, condemnation, or seizure of, or requisition of title to, or use
of, such property by any governmental or purported governmental authority (other
than a requisition for use by the United States Government or any government of
registry of the Aircraft or any agency or instrumentality thereof), which in the
case of any event referred to in this clause (iii) shall have resulted in the
loss of title or possession of such property by Lessee for a period in excess of
90 consecutive days or, if earlier, until the end of the Term; (iv) as a result
of any law, rule, regulation, order or other action by the FAA or other
governmental body of the government of registry of the Aircraft having
jurisdiction, use of such property in the normal course of the business of air
transportation shall have been prohibited for a period in excess of 180
consecutive days, unless (A) such grounding is applicable to all Boeing 747-422
aircraft registered in such country, (B) Lessee, prior to the expiration of such
180 day period, shall have undertaken and shall be diligently carrying forward,
in a manner that does not discriminate against the Aircraft, all steps which are
necessary or desirable to permit the normal use of such property by Lessee, and
(C) Lessee, within one year from the time of grounding shall have conformed at
least one such aircraft in its fleet to the requirements of any such law, rule,
regulation, order or other action and commenced regular commercial use of the
same in such jurisdiction, provided that no such grounding shall extend beyond
6
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
the expiration of the Term; (v) the requisition for use by the United States
Government or any government of registry of the Aircraft or any instrumentality
or agency thereof, which shall have occurred during the Basic Term (or the
Interim Term or any Renewal Term) and shall have, in the case of any government
of registry of the Aircraft (other than the United States Government or any
agency or instrumentality thereof) or any agency or instrumentality thereof,
continued for more than two years (or if earlier, until the end of the Term),
and in the case of the United States Government or any agency or instrumentality
thereof shall have continued for a period that extends beyond the Term and
Lessor shall not have furnished the written notice specified in Section 10(d)
hereof; (vi) the operation of or location of the Aircraft, while under
requisition for use by any government, in any area excluded from coverage by any
insurance policy in effect with respect to the Aircraft required by the terms of
Section 11, unless in the case of a requisition by the government of the United
States or any agency or instrumentality thereof, Lessee shall have obtained an
indemnity in lieu thereof from such government; and (vii) any divestiture of
title to an Engine treated as an Event of Loss pursuant to Section 7(b) hereof.
An Event of Loss with respect to the Aircraft shall be deemed to have occurred
if an Event of Loss occurs with respect to the Airframe.
"Excess Amount" for the Commencement Date means the amount determined
by multiplying Lessor's Cost by the percentage specified in Exhibit B hereto
opposite the Commencement Date (as such Exhibit B may be adjusted from time to
time as provided in Section 3(c) hereof).
"Excluded Payments" has the meaning set forth in the Trust Indenture.
"Expenses" means any and all liabilities, obligations, losses,
damages, penalties, claims (including, but not limited to, negligence, strict or
absolute liability, liability in tort and liabilities arising out of violation
of laws or regulatory requirements of any kind), actions, suits, costs, expenses
and disbursements (including reasonable legal fees and expenses and, to the
extent not required to be paid by the Owner Trustee pursuant to Section 16 of
the Participation Agreement, Transaction Expenses, and all costs and expenses
relating to amendments, supplements, waivers and consents to and under the
Operative Documents, any amounts that would be included in Premium, but
excluding internal costs and expenses such as salaries, and overhead of
whatsoever kind and nature).
7
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
"Fair Market Rental Value" means the fair market rental value
determined as provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value determined
as provided in Sections 19(a) and 19(c) hereof.
"Federal Aviation Act" means the sections of Title 49 of the United
States Code relating to aviation, as amended.
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any successor agency or agencies thereto.
"Indemnitees" means the Owner Participant, the Owner Trustee, in its
individual capacity and as trustee under the Trust Agreement, the Trust Estate,
the Trust Indenture Estate, the Indenture Trustee, in its individual capacity
and as trustee under the Trust Indenture, each Pass Through Trustee (so long as
the Pass Through Trustees are Certificate Holders), and each of their respective
Affiliates, successors, permitted assigns, directors, officers, employees,
servants and agents.
"Indenture Trustee" has the meaning set forth in the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement, the
Trust Indenture, each Pass Through Trust Agreement, each Pass Through Trust
Supplement, each Loan Certificate and each Pass Through Certificate and any
other document executed by the Indenture Trustee or the Pass Through Trustee in
connection with the transactions contemplated by the Operative Documents.
"Interim Term" means the period commencing on the Delivery Date and
ending on and including the day immediately preceding the Commencement Date,
unless earlier terminated in accordance with the provisions hereof.
"Lease Agreement", "this Lease Agreement", "this Lease", "this
Agreement", "herein", "hereof", "hereunder", "hereby", or other like words mean
this Second Amended and Restated Lease Agreement as originally executed or as
modified, amended or supplemented in accordance with the applicable provisions
hereof and the terms of the Trust Indenture, including, without limitation,
supplementation hereof by any Lease Supplement entered into in accordance with
the applicable provisions hereof and the terms of the Trust Indenture.
8
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
"Lease Expiry Date" means the date specified as such in Exhibit H.
"Lease Period" means each of the consecutive semi-annual periods
throughout the Basic Term and any Renewal Term ending on a Lease Period Date,
the first such period commencing on and including the Commencement Date.
"Lease Period Date" means April 19, 1994 and each succeeding semi-
annual anniversary thereof to and including the last such date in the Term.
"Lease Supplement" means Lease Supplement No. 1 and each other Lease
Supplement, substantially in the form of Exhibit A hereto, to be entered into
between Lessor and Lessee on the Delivery Date for the purpose of leasing the
Aircraft under and pursuant to the terms of this Lease Agreement, and any
subsequent Lease Supplement entered into in accordance with the terms hereof and
the terms of the Trust Indenture.
"Lessee Documents" means the Participation Agreement, the Lease, any
Lease Supplement, the Purchase Agreement, the Owner Trustee's Purchase
Agreement, the Owner Trustee's FAA Bill of Sale, the Owner Trustee's Bill of
Sale, the Tax Indemnity Agreement, each Pass Through Trust Agreement, each Pass
Through Trust Agreement Supplement and any other document executed by Lessee in
connection with the transactions contemplated by the Operative Documents.
"Lessor Liens" means any Lien on, or disposition of title to, the
Aircraft or the Trust Estate arising as a result of (i) claims against Lessor,
State Street Bank and Trust Company, in its individual capacity, or the Owner
Participant not related to the transactions contemplated by the Operative
Documents, (ii) any act or omission of the Owner Participant, Lessor, or State
Street Bank and Trust Company, in its individual capacity, which is not related
to the transactions contemplated by the Operative Documents or is in violation
of any of the terms of the Operative Documents, (iii) claims against the Owner
Participant, Lessor, or State Street Bank and Trust Company, in its individual
capacity, with respect to Taxes or Expenses against which Lessee is not required
to indemnify the Owner Participant, Lessor or State Street Bank and Trust
Company, in its individual capacity or (iv) claims against Lessor or the Owner
Participant arising out of any transfer by Lessor or the Owner Participant of
all or any portion of the respective interests of Lessor or the Owner
Participant in the Aircraft, the Trust Estate or the Operative Documents (other
than a transfer of possession of the Aircraft by Lessor pursuant to this
Agreement, a transfer pursuant to the Trust Indenture
9
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
(other than a transfer pursuant to Article 8 of the Trust Indenture not
attributable to a Lease Event of Default) or a transfer pursuant to Section 7,
8, 9, 10 or 19 hereof, pursuant to Section 17 of the Participation Agreement or
pursuant to the exercise of the remedies set forth in Section 15 hereof);
provided, however, that any Lien which is attributable solely to State Street
Bank and Trust Company or the Owner Participant and would otherwise constitute a
Lessor Lien hereunder shall not constitute a Lessor Lien hereunder so long as
(1) the existence of such Lien poses no material risk of the sale, forfeiture or
loss of the Airframe or any Engine or any interest therein, (2) the existence of
such Lien does not interfere in any way with the use or operation of the
Aircraft by Lessee (or any Sublessee), (3) the existence of such Lien does not
affect the priority or perfection of, or otherwise jeopardize, the Lien of the
Trust Indenture, (4) State Street Bank and Trust Company or the Owner
Participant, as the case may be, is diligently contesting such Lien by
appropriate proceeding and (5) the existence of such Lien does not result in
actual interruption in the payment of Rent assigned to the Indenture Trustee for
the benefit of the Certificate Holders.
"Lessor's Cost" for the Aircraft means the amount specified as
Lessor's Cost in Exhibit H hereto; provided, however, Lessor's Cost shall be
reduced by Engine Cost for each Engine for which Lessee has paid Stipulated Loss
Value pursuant to the terms of Section 10(b) hereof and has otherwise paid all
other amounts due and payable under said Section 10(b).
"Lien" means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest.
"Loan Certificate" has the meaning assigned to the term "Certificate"
in the Trust Indenture.
"Loss Payment Date" has the meaning set forth in Section 10(a) hereof.
"Manufacturer" means The Boeing Company, a Delaware corporation, and
its subsidiaries, successors and assigns.
"Manufacturer Documents" means the Purchase Agreement, the Consent and
Agreement and any other document executed by the Manufacturer in connection with
the transactions contemplated by the Operative Documents.
"Net Economic Return" means the Owner Participant's net after-tax book
yield, aggregate after-tax cash flow and, with respect to any adjustments
required to maintain the Owner
10
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Participant's Net Economic Return, periodic FASB 13 earnings plus or minus 5%
for any annual period, utilizing the multiple investment sinking fund method of
analysis, computed on the basis of the same methodology and assumptions as were
utilized by the Owner Participant in determining Basic Rent, Stipulated Loss
Value percentages, Special Termination Value Percentages, EBO Percentage and
Termination Value percentages as of the Delivery Date, as such assumptions may
be revised from time to time for events which have been the basis for
adjustments to Rent pursuant to Section 3(c) hereof, provided that under no
circumstances shall there be a reduction in Owner Participant's [1993] FASB 13
earnings.
"Net Present Value of Rents" means the net present value, as of the
Delivery Date, of Basic Rent set forth in Exhibit B hereto, discounted at a rate
per Lease Period equal to (a) 11% per annum divided by (b) the number of Lease
Periods per year.
"Operative Documents" means the Lease (including any Lease
Supplement); the Participation Agreement; the Tax Indemnity Agreement; the Trust
Agreement; any Trust Supplement; the Purchase Agreement; the Owner Trustee's
Bill of Sale; the Owner Trustee's FAA Bill of Sale; the Owner Trustee's Purchase
Agreement; an acceptance certificate covering the Aircraft in the form agreed to
by the Participants and Lessee (the "Acceptance Certificate"); the Trust
Indenture; the Loan Certificates outstanding at the time of reference; the
Redemption and Refinancing Agreement; and the Consent and Agreement.
"Original Amount", with respect to a Loan Certificate, means at any
time prior to the Commencement Date, the Original Issue Price (as defined in the
Trust Indenture) of such Loan Certificate, or, at any time on or after the
Commencement Date, the stated original principal amount of such Loan
Certificate, and with respect to all Loan Certificates means, at any time prior
to the Commencement Date, the aggregate Original Issue Prices for such Loan
Certificates or, at any time on or after the Commencement Date, the aggregate
stated original principal amounts of such Loan Certificates.
"Original Participation Agreement" means that certain Participation
Agreement (1993 747 A) dated as of April 1, 1993 among Lessee, the Owner
Participant, Wilmington Trust Company, not in its individual capacity except as
expressly provided therein (the "Original Owner Trustee"), State Street Bank and
Trust Company of Connecticut, National Association, as Indenture Trustee (the
"Original Indenture Trustee") and The Chase Manhattan Bank, N.A., as an Original
Loan Participant, as amended
11
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
by (i) that certain First Amendment to Participation Agreement (1993 747 A)
dated as of December 1, 1993 among Lessee, the Owner Participant, the Original
Owner Trustee, the Original Indenture Trustee and The Chase Manhattan Bank.
N.A., Berliner Handels Und Frankfurter Bank and NBD Bank, N.A., as Original Loan
Participants (collectively, the "Original Loan Participants"), as further
amended by and (ii) that certain Second Amendment to Participation Agreement
(1993 747 A) dated as of July 1, 1994 among Lessee, the Owner Participant, the
Original Owner Trustee, the Original Indenture Trustee and The Mitsubishi Trust
and Banking Corporation, New York Branch (the "Successor Original Loan
Participant").
"Owner Participant" means the Person executing the Participation
Agreement as the Owner Participant and any Person to which such Person transfers
all or any portion of its right, title and interest in and to the Trust
Agreement, the Trust Estate and the Participation Agreement, to the extent
permitted thereby.
"Owner Participant Documents" means the Participation Agreement, the
Trust Agreement, the Tax Indemnity Agreement and any other document executed by
the Owner Participant in connection with the transactions contemplated by the
Operative Documents.
"Owner Trustee" means the Person executing the Participation Agreement
as Owner Trustee and any Person appointed as successor Owner Trustee in each
case not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, except as otherwise expressly stated.
"Owner Trustee Documents" means the Participation Agreement, the Trust
Agreement, this Lease, any Lease Supplement, the Owner Trustee's Purchase
Agreement, the Trust Indenture, any Trust Supplement, the Loan Certificates and
any other document executed by the Owner Trustee in connection with the
transactions contemplated by the Operative Documents.
"Owner Trustee's Bill of Sale" means a bill of sale for the Aircraft,
dated the Delivery Date, executed by Lessee in favor of Lessor in form and
substance satisfactory to Lessor.
"Owner Trustee's FAA Bill of Sale" means a bill of sale for the
Aircraft on AC Form 8050-2 or such other form as may be approved by the FAA on
the Delivery Date executed by Lessee in favor of Lessor in form and substance
satisfactory to Lessor.
12
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
"Owner Trustee's Purchase Agreement" means the Owner Trustee's
Purchase Agreement and Assignment (1993 747 A), dated as of April 1, 1993,
between Lessee and the Owner Trustee, as the same may be amended, modified or
supplemented from time to time in accordance with the applicable provisions
thereof and the terms of the Trust Indenture.
"Participants" means and includes the Pass Through Trustees and the
Owner Participant.
"Participation Agreement" means that certain First Amended and
Restated Participation Agreement (1993 747 A), dated as of the date hereof,
among Lessee, the Indenture Trustee, the Owner Participant, the Pass Through
Trustees and the Owner Trustee, as such Participation Agreement may be amended
or supplemented from time to time pursuant to the applicable provisions thereof.
"Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than (i)
complete Engines or engines and (ii) any appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
which Lessee is entitled to use pursuant to a lease, license or similar
arrangement with a third party (other than Lessor hereunder), in each case not
necessary to the operation or navigation of the Aircraft or to maintain its
airworthiness certification), which are from time to time incorporated or
installed in or attached to an Airframe or any Engine or which have been removed
therefrom, but where title to which remains vested in Lessor in accordance with
Section 8 hereof.
"Pass Through Certificates" has the meaning set forth in the Trust
Indenture.
"Pass Through Trust Agreements" means the Pass Through Trust Agreement
dated as of February 1, 1992, as amended and restated as of May 1, 1995, in each
case between the Lessee and State Street Bank and Trust Company of Connecticut,
National Association, as supplemented by each of the two Pass Through Trust
Supplements, in each case between the Lessee and the Pass Through Trustee, and
as the same may be further modified, amended or supplemented pursuant to the
applicable provisions thereof and the Participation Agreement.
"Pass Through Trustee" shall mean First Security Bank of Utah,
National Association, a national banking association, in its capacity as Trustee
under each Pass Through Trust Agreement,
13
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
and each other Person which may from time to time be acting as successor trustee
under any such Pass Through Trust Agreement.
"Pass Through Trust Supplement" means each of the two separate Trust
Supplements Nos. 1995-A1 and 1995-A2, in each case dated as of May __, 1995
between Lessee and the Pass Through Trustee.
"Past Due Rate" means (i) with respect to the portion of any payment
of Rent that may be required by the Trust Indenture to be paid by the Indenture
Trustee to any Certificate Holder, the "Past Due Rate" as defined in the Trust
Indenture and (ii) with respect to the remaining portion of any payment of Rent
(and the entire amount of any payment of Rent after the satisfaction and
discharge of the Trust Indenture), a fluctuating rate per annum equal to 2% over
the Debt Rate.
"Permitted Lien" means any Lien referred to in clauses (i) through
(vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled in a country
listed in Exhibit F hereto as in effect from time to time.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Premium" has the meaning assigned to the term in Section 6.01(b) of
the Trust Indenture.
"Prepaid Rent" has the meaning set forth in Section 3(g) hereof.
"Purchase Agreement" means the agreement between Lessee and the
Manufacturer relating to the purchase by Lessee of the Aircraft, as originally
executed or as modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the Aircraft.
"Purchase Option Date" has the meaning set forth in Section 19 hereof.
"Redemption and Refinancing Agreement" means that certain Redemption
and Refinancing Agreement (1993 747 A) dated as of May 1, 1995 by and among
Lessee, the Owner Participant, The Mitsubishi Trust and Banking Corporation, New
York Branch, the Owner Trustee, the Indenture Trustee and each Pass Through
14
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Trustee, as the same may be modified, amended or supplemented from time to time
in accordance with the applicable provisions thereof.
"Redemption Date" has the meaning set forth in the Trust Indenture.
"Reimbursement Amount" has the meaning set forth in Section 3(g)
hereof.
"Renewal Term" means the Fair Market Renewal Term or a Fixed Renewal
Term as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Replacement Airframe" means any airframe substituted for an airframe
in accordance with Sections 10(a) of the Lease.
"Replacement Engine" means any engine substituted for an Engine in
accordance with Sections 9(d), 10(a) or 10(b) of the Lease.
"Restricted Country" has the meaning set forth on Exhibits F and G
hereto.
"Restricted Period" means the period ending on the last open day of
the calendar year in which there occurs the seventh anniversary of the Delivery
Date.
"Special Purchase Option Dates" means each of the dates specified as
such on Exhibit H hereto.
"Special Termination Value", with respect to any Special Purchase
Option Date, has the meaning set forth in Section 19(b)(1) hereof.
"Special Termination Value Percentage" means, with respect to any
Special Purchase Option Date, the percentage set forth opposite such Date on
Exhibit H hereto.
"Stipulated Loss Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term, means the amount
determined by multiplying Lessor's Cost for the Aircraft by the percentage
specified in Exhibit C hereto opposite the Stipulated Loss Value Date with
respect to which the amount of Stipulated Loss Value is determined (as such
Exhibit C may be adjusted from time to time as provided in Section 3(c) hereof
and
15
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
in Section 8 of the Tax Indemnity Agreement). "Stipulated Loss Value" with
respect to the Aircraft, as of any date during any Renewal Term, shall be the
amount determined as provided in Section 19 hereof. To the extent that an event
giving rise to an obligation to pay any Stipulated Loss Value occurs (with
respect to the Airframe or either Engine), and the actual date on which the loss
of tax benefits resulting from such event occurs shall be earlier or later than
the date assumed in calculating the United States Federal income tax
consequences reflected in the applicable Stipulated Loss Value, such Stipulated
Loss Value shall be appropriately adjusted upwards or downwards to reflect the
actual date of such loss of tax benefits, but shall be otherwise based on the
original assumptions used in determining such Stipulated Loss Value.
"Stipulated Loss Value Date" has the meaning specified therefore in
Exhibit H hereto.
"Sublease" means any sublease permitted by the terms of Section
7(b)(viii) hereof.
"Sublessee" means any Person for so long, but only so long, as such
Person is in possession of the Airframe and or any Engine pursuant to the terms
of a Sublease which is then in effect pursuant to Section 7(b)(viii) hereof.
"Subsidiary" means, with respect to any Person that is a corporation,
any other corporation a majority of the voting securities of which are owned by
such person, whether directly or indirectly.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay to Lessor or
others hereunder or under any of the other Operative Documents, including
payments of Stipulated Loss Value and Termination Value and amounts calculated
by reference thereto, an amount equal to the Premium, if any, payable in
accordance with Section 3(d) hereof and indemnity payments. The parties
acknowledge that Supplemental Rent is a general category and, accordingly, agree
that any provision of any Operative Document which calls for the payment of
Supplemental Rent and also calls for the payment of specific items which are
includable in Supplemental Rent is not to be interpreted as requiring any double
payment.
"Tax Indemnity Agreement" means that certain Tax Indemnity Agreement
(1993 747 A), dated as of April 1, 1993, as amended and restated as of May 1,
1995, between the Owner Participant and Lessee, as originally executed or as
modified,
16
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
amended or supplemented pursuant to the applicable provisions thereof.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value added,
property (tangible and intangible), excise and stamp taxes), licenses, levies,
imposts, duties, recording charges or fees, charges, assessments, or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest thereon (each, individually, a "Tax").
"Term" means the Interim Term, Basic Term and, if actually entered
into, any Renewal Term.
"Termination Date" has the meaning set forth in Section 9(b) hereof.
"Termination Value" with respect to the Aircraft as of any date
through and including the last day of the Basic Term means the amount determined
by multiplying Lessor's Cost for the Aircraft by the percentage specified in
Exhibit D hereto opposite the Termination Date with respect to which the amount
of Termination Value is determined (as such Exhibit D may be adjusted from time
to time as provided in Section 3(c) hereof and in Section 8 of the Tax Indemnity
Agreement). To the extent that an event giving rise to an obligation to pay any
Termination Value occurs, and the actual date on which the loss of tax benefits
resulting from such event occurs shall be earlier or later than the date assumed
in calculating the United States Federal income tax consequences reflected in
the applicable Termination Value, such Termination Value shall be appropriately
adjusted upwards or downwards to reflect the actual date of such loss of tax
benefits, but shall be otherwise based on the original assumptions used in
determining such Termination Value.
"Transaction Expenses" means (A) with respect to the closing on the
Delivery Date (i) the reasonable and actual fees, expenses and disbursements of
(1) Day, Berry & Howard, special counsel for the Original Indenture Trustee, (2)
Richards, Layton & Finger, counsel for the Original Owner Trustee, (3) Crowe &
Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, (4) White & Case,
special counsel for the Original Loan Participant, (5) Vedder, Price, Kaufman &
Kammholz, special counsel for Lessee, and (6) Dewey Ballantine, special counsel
for the Owner Participant, (ii) all fees, taxes and other charges payable in
connection with the recording or filing of instruments and financing statements,
(iii) the initial fee and reasonable
17
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
and actual disbursements of the Original Owner Trustee under the Trust
Agreement, (iv) the initial fee and reasonable and actual disbursements of the
Indenture Trustee under the Trust Indenture, (v) the fee of Aeroeconomics, Inc.
(or of such other appraiser as shall be selected by the Owner Participant) with
respect to the appraisal of the Aircraft required on or before the Delivery Date
pursuant to Section 4(a) of the Participation Agreement, (vi) the fees,
commissions and expenses of Capstar Partners, Inc., (vii) the reasonable out-of-
pocket expenses of the Original Loan Participant, (viii) the reasonable out-of-
pocket expenses of the Owner Participant relating to the transactions
contemplated by the Participation Agreement including, without limitation, the
expenses related to the organization of the foreign sales corporation, up to an
aggregate of $25,000 (but excluding from Transaction Expenses airfare charges
incurred for travel on an airline other than United Air Lines, unless such
travel is necessitated by the foreign sales corporation structure to the extent
that United Air Lines does not offer regularly scheduled flights directly from
New York to such foreign location where negotiations with respect to the
transactions will be conducted for purposes of the foreign sales corporation
nature of the transactions) plus airfare charges incurred for travel on United
Air Lines, and (ix) the initial fees, if any, of the Original Loan Participant
and the Succesor Original Loan Participant, and (B) with respect to the
subsequent placement of the permanent debt pursuant to the Redemption and
Refinancing Agreement (i) the reasonable and actual fees, expenses and
disbursements of (1) Ray, Quinney & Nebeker, special counsel for the Indenture
Trustee and the Pass Through Trustee, (2) Bingham, Dana & Gould, counsel for the
Owner Trustee, (3) Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, (4) Shearman & Sterling, special counsel for the Underwriters (to the
extent not payable by the Underwriters), (5) Vedder, Price, Kaufman & Kammholz,
special counsel for Lessee, and (6) Dewey Ballantine, special counsel for the
Owner Participant, (ii) all fees, taxes and other charges payable in connection
with the recording or filing of instruments and financing statements, (iii) the
initial fee and reasonable and actual disbursements of the Owner Trustee under
the Trust Agreement, (iv) the initial fee and reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v) the fees,
commissions and expenses of Capstar Partners, Inc., (vi) the reasonable out-of-
pocket expenses of the Owner Participant relating to the transactions
contemplated by the Redemption and Refinancing Agreement, (vii) the placement or
underwriting fees, commissions and expenses, if any, in placing the permanent
debt pursuant to the Redemption and Refinancing Agreement and all costs and
expenses associated with the public offering pursuant thereto and the actual
expenses of each Pass
18
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Through Trustee under its respective Pass Through Trust Agreement and (viii)
printing and distribution costs.
"Trust Agreement" means that certain First Amended and Restated Trust
Agreement (1993 747 A), dated as of the date hereof, between the Owner
Participant and State Street Bank and Trust Company, in its individual capacity,
as originally executed or as modified, amended or supplemented in accordance
with the applicable provisions thereof and the terms of the Trust Indenture,
including, without limitation, any Trust Supplement entered into pursuant to the
applicable provisions thereof.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Second Amended and Restated Trust
Indenture and Mortgage (1993 747 A), dated as of the date hereof, between Lessor
and the Indenture Trustee, as originally executed or as modified, amended or
supplemented in accordance with the provisions thereof and the terms of the
Participation Agreement, including, without limitation, any Trust Supplement
entered into pursuant to the applicable provisions thereof.
"Trust Indenture Estate" has the meaning assigned to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning set forth in the Trust Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and the
Trust Indenture, substantially in the form of Exhibit A to the Trust Agreement.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to Section 401 of the Federal
Aviation Act, and as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations under such Act, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"Underwriters" has the meaning specified therefor in Section ______ of
the Participation Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which such Airframe and Engines or
19
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
engines (i) shall be operated solely by regular employees of Lessee possessing
all current certificates and licenses that would be required under the Federal
Aviation Act (or if the Aircraft is not registered in the United States, all
certificates and licenses required by the laws of the jurisdiction of registry)
for the performance by such employees of similar functions within the United
States of America (or such jurisdiction of registry) (it is understood that
cabin attendants need not be employees of Lessee) and (ii) shall be maintained
by Lessee in accordance with its normal maintenance practices.
SECTION 2. Acceptance and Lease. Lessor hereby agrees to accept from
the Lessee the transfer of title to and simultaneously to lease to Lessee
hereunder, and Lessee hereby agrees to lease on the Delivery Date from Lessor
hereunder, the Aircraft as evidenced by the execution by Lessor and Lessee of a
Lease Supplement leasing the Aircraft hereunder. Lessee agrees that Lessor will
authorize one or more employees of Lessee, designated by Lessee in writing, as
the authorized representative or representatives of Lessor to accept delivery of
the Aircraft. Lessee hereby agrees that in the event delivery of the Aircraft
shall be accepted by an employee or employees of Lessee pursuant to such
authorization by Lessor, such acceptance of delivery by such employee or
employees on behalf of Lessor shall, without further act, irrevocably constitute
acceptance by Lessee of the Aircraft for all purposes of this Lease.
SECTION 3. Term and Rent. (a) Interim Term and Basic Term. The
Interim Term shall commence on the Delivery Date and end on and include the day
immediately preceding the Commencement Date unless earlier terminated pursuant
to the provisions hereof. The Basic Term shall commence on the Commencement
Date and end on the Lease Expiry Date or such earlier date as this Lease may be
terminated in accordance with the provisions hereof.
(b) Basic Rent. Lessee shall pay Basic Rent in Dollars with respect
to each Lease Period during the Basic Term on each Lease Period Date during the
Basic Term, in the respective amounts for each Lease Period Date determined in
accordance with Exhibit B hereto.
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss Values,
Termination Values, Special Termination Value Percentages and the EBO
Percentage.
(i) In the event that (A) Transaction Expenses paid by Lessor are
determined to be other than __% of Lessor's Cost, (B) there shall be an
optional redemption or a refinancing or a refunding of the Loan
Certificates in
20
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
accordance with Section 17 of the Participation Agreement, (C)
[Intentionally Omitted], or (D) there is an optimization in accordance with
Section 18 of the Participation Agreement; then in each case the Basic Rent
and Excess Amount set forth in Exhibit B, the Stipulated Loss Value
percentages set forth in Exhibit C, the Termination Value percentages set
forth in Exhibit D, and the EBO Percentage and the Special Termination
Value Percentages set forth in Exhibit H shall be adjusted (upwards or
downwards as the case may be) using the same methods and assumptions (as
modified on account of the occurrence of any of the events referred to in
clauses (A)-(D)) used to calculate the Basic Rent and Excess Amount, the
Stipulated Loss Value percentages, the Termination Value percentages and
the EBO Percentage and the Special Termination Value Percentages set forth
in Exhibits B, C, D and H, respectively, in each case in compliance with
clauses (iv) and (v) of this paragraph (c) and in order to: (1) maintain
the Owner Participant's Net Economic Return and (2) minimize the Net
Present Value of Rents to Lessee to the extent possible consistent with
clause (1) hereof; provided, however, in no event will the EBO Price be
adjusted below the greatest of (i) the Termination Value for the Aircraft
as of the EBO Date, (ii) __% of Lessor's Cost (i.e., the fair market value
of the Aircraft as of the EBO Date as the same was determined on the
Delivery Date) and (iii) __% multiplied by the present value as of the EBO
Date of (x) the remaining Basic Rent plus (y) __% of Lessor's Cost (i.e.,
the fair market value of the Aircraft as of the end of the Term as the same
was determined on the Delivery Date) (if the computation described in this
clause (iii) was done on the Delivery Date with all the Exhibits hereto on
the Delivery Date, such present value would equal the EBO Percentage a the
same was determined on the Delivery Date) (the present value calculation
described in this clause (iii) shall utilize a semi-annual discount rate
that on a compound basis is equal to 13.5% per annum).
(ii) [Intentionally reserved for potential future use.]
(iii) Any recalculation of Basic Rent and Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, EBO
Percentage and Special Termination Value Percentages pursuant to this
Section 3(c) (or pursuant to the definition of Stipulated Loss Value or
Termination Value) shall be determined by the Owner Participant and shall
be subject to the verification procedures set forth in Exhibit E hereto.
Such recalculated Basic Rent and Excess
21
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Amount, Stipulated Loss Value percentages, Termination Value percentages,
EBO Percentage and Special Termination Value Percentages shall be set forth
in an amendment hereto.
(iv) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Basic Rent
payable hereunder, whether or not adjusted in accordance with this Section
3(c), together with the amount of Excess Amount and Supplemental Rent, if
any, in respect of the date on which such installment is payable, and each
payment of Termination Value, Stipulated Loss Value, EBO Price and Special
Termination Value whether or not adjusted in accordance with this Section
3(c) or Section 8 of the Tax Indemnity Agreement, and all other amounts
(excluding Excluded Payments payable simultaneously by Lessee pursuant to
this Lease), in each case, on the date on which such payment is due, shall
be in an amount at least sufficient to pay in full, and shall be available
to be applied by Lessor in payment on account of, any payments then
required to be made on account of the principal amount (and Premium, if
any) of and interest on the Loan Certificates then outstanding. It is
agreed that no installment of Basic Rent or payment of Excess Amount,
Termination Value, Stipulated Loss Value, Special Termination Value or EBO
Price, shall be increased or adjusted by reason of (A) any attachment or
diversion of Rent on account of (x) Lessor Liens (including for this
purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) or (y) any other Lien on or against the Trust
Estate, any part thereof or the Operative Documents arising as a result of
claims against the Indenture Trustee or a Certificate Holder, not related
to the transactions contemplated by the Operative Documents, (B) any
modification of the payment terms of the Loan Certificates made without the
prior written consent of Lessee, or (C) the acceleration of any Loan
Certificate due to the occurrence of an "Event of Default" (as defined in
the Trust Indenture) which does not constitute an Event of Default
hereunder.
(v) All adjustments to Basic Rent under this Section 3(c) shall
be consistent with the requirements of Sections 4.02(5), 4.07(1) and (2)
and Section 4.08(1) of Rev. Proc. 75-28 (provided that the requirements of
Section 4.08(1) shall apply on a prospective basis), as modified and in
effect on the Delivery Date, and shall not cause the Lease to be a
"disqualified leaseback or long-term agreement" within the meaning of
Section 467 of the Code as then in effect and any final, temporary or
proposed
22
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
regulations thereunder or any administrative or judicial interpretation
thereof in effect on the date of such adjustment (a "Section 467
Agreement") (it being understood that any such adjustment shall not be
treated as causing the Lease to be a Section 467 Agreement to the extent
the Lease would have been a Section 467 Agreement if no such adjustment to
Basic Rent had occurred).
(d) Supplemental Rent. Lessee shall pay (or cause to be paid)
promptly to Lessor, or to whomsoever shall be entitled thereto, any and all
Supplemental Rent constituting Stipulated Loss Value, Termination Value, EBO
Price and Special Termination Values as the same shall become due and owing and
all other amounts of Supplemental Rent within five Business Days after demand or
on such date, or within such other relevant period, as may be provided in any
Operative Document, and in the event of any failure on the part of Lessee to pay
any Supplemental Rent when due, Lessor shall have all rights, powers and
remedies provided for herein or in any other Operative Document or by law or
equity or otherwise in the case of nonpayment of Basic Rent. Lessee shall also
pay on behalf of Lessor as Supplemental Rent an amount equal to any amount
payable by Lessor as Premium as and when any such Premium shall be due and
payable; provided, however, that Lessee shall have no obligation to pay on
behalf of Lessor any Premium payable under Section 6.01 or 6.02 of the Trust
Indenture due to the occurrence of an "Event of Default" (as defined in the
Trust Indenture) which does not constitute an Event of Default hereunder.
Lessee also will pay to Lessor, or on behalf of Lessor to whomsoever shall be
entitled thereto, on demand, as Supplemental Rent, to the extent permitted by
applicable law, interest at the Past Due Rate with respect to any part of any
installment of Basic Rent not paid prior to 11:00 a.m., New York City time, on
the date when due for any period for which the same shall be overdue and on any
payment of Supplemental Rent not paid prior to 11:00 a.m., New York City time,
on the date when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent other than Excluded
Payments payable to Lessor shall be made directly by Lessee by wire transfer of
immediately available funds prior to 11:00 a.m., New York time, on the date of
payment in Dollars, to Lessor at its office at 225 Franklin Street, Boston,
Massachusetts 02110, Attention: _________________________ (or such other office
of Lessor in the continental United States or such other account as Lessor shall
direct in a notice to Lessee at least 10 Business Days prior to the date such
payment of Rent is due); provided, that so long as the Trust Indenture shall not
have been fully discharged, Lessor hereby directs and Lessee
23
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
agrees, that all Basic Rent shall be paid directly to the Indenture Trustee at
the times and in funds specified in this Section 3(e) at the offices of the
Indenture Trustee at Two International Place, Boston, MA 02110, Attention:
Corporate Trust Department (or such other office of Indenture Trustee in the
continental United States or such other account as Indenture Trustee shall
direct in a notice to Lessee at least 10 Business Days prior to the date such
payment of Basic Rent is due). Excluded Payments shall be paid in Dollars in
immediately available funds to the Person to whom payable at the address of such
Person specified in Schedule I of the Participation Agreement.
Notwithstanding anything to the contrary contained herein, if any date
on which a payment of Rent becomes due and payable is not a Business Day then
such payment shall be made on the next succeeding Business Day and no interest
shall accrue on the amount of such payment, if such payment is made on such next
succeeding Business Day.
(f) [Intentionally Reserved for Potential Future Use].
(g) [Intentionally Reserved for Potential Future Use].
SECTION 4. Lessor's Representations and Warranties. LESSOR LEASES
AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES AND AGREES
THAT AS BETWEEN LESSOR, ANY PARTICIPANT, THE INDENTURE TRUSTEE, AND LESSEE (A)
THE AIRFRAME AND EACH ENGINE IS OF SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED THAT THE AIRFRAME
AND EACH ENGINE IS SUITABLE FOR ITS PURPOSES, (C) NEITHER LESSOR NOR OWNER
PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, AND (D)
NEITHER LESSOR, IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE, THE INDENTURE
TRUSTEE NOR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE
MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, VALUE, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR
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 STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY
PART THEREOF, except as set forth in Sections 8(f)(vi) and 8(p)(ii) of the
Participation Agreement as to Lessor Liens and except that State Street Bank and
Trust Company, in its individual capacity, (i) represents and warrants that on
the Delivery Date, Lessor shall have received
24
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
whatever title to the Aircraft was conveyed to it by Lessee, (ii) represents and
warrants that on the Delivery Date the Aircraft shall be free of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) attributable to it in its individual
capacity, (iii) covenants that it will not, through its own actions or
inactions, in such capacity, interfere in Lessee's or any Sublessee's quiet
enjoyment, use, operation or possession of the Aircraft unless this Lease shall
have been declared in default pursuant to Section 15 hereof, (iv) agrees that it
will not directly or indirectly create, incur, assume or suffer to exist any
Lessor Lien attributable to it in its individual capacity on or with respect to
the Airframe or any Engine or any portion of the Trust Estate and (v) represents
and warrants that it is a Citizen of the United States and agrees that if at any
time it shall cease to be a Citizen of the United States, it will promptly
resign as Owner Trustee (if and so long as such citizenship is necessary under
the Federal Aviation Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on the Owner Participant, the Certificate Holders or Lessee), effective upon the
appointment of a successor Owner Trustee in accordance with the provisions of
the Trust Agreement. None of the provisions of this Section 4 or any other
provision of this Agreement shall be deemed to amend, modify or otherwise affect
the representations, warranties or other obligations (express or implied) of the
Manufacturer, any subcontractor or supplier of the Manufacturer with respect to
the Airframe, Engines, or any Parts, or to release the Manufacturer, or any such
subcontractor or supplier from any such representation, warranty or obligation.
Unless a Section 14(a), 14(b), 14(f) or 14(g) Default or any Event of Default
shall have occurred and be continuing, Lessor agrees to make available to Lessee
such rights as Lessor may have under any warranty with respect to the Aircraft
made by the Manufacturer or any of its subcontractors or suppliers and any other
claims against the Manufacturer or any such subcontractor or supplier with
respect to the Aircraft, all pursuant to and in accordance with the terms of the
Owner Trustee's Purchase Agreement.
SECTION 5. Return of the Aircraft. (a) Condition Upon Return.
Unless purchased by Lessee pursuant to Section 19(b) hereof, upon the
termination of this Lease at the end of the Basic Term or any Renewal Term or
pursuant to Section 9(b) or 15 hereof, Lessee will at its expense return the
Aircraft to Lessor at Lessee's maintenance base located at San Francisco
International Airport (or any principal maintenance base established by Lessee
in the continental United States subsequent to the date hereof), provided that
upon the request of the Lessor
25
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
given to Lessee at least ten (10) days prior to the date of such return, Lessee
shall return the Airframe to Lessor at a location on Lessee's route system in
the continental United States selected by Lessor, provided that such location is
served on a normal basis by Boeing Model 747-422 aircraft operated by Lessee,
and Lessor shall reimburse Lessee on a net after-tax basis for Lessee's out-of-
pocket Expenses (including for this purpose salary costs for Lessee's personnel)
resulting from Lessee's return of the Aircraft to such alternate return location
to the extent such out-of-pocket Expenses exceed the out-of-pocket Expenses
(including, for this purpose, salary costs for Lessee's personnel) Lessee would
have incurred in returning the Aircraft to its principal maintenance base at San
Francisco International Airport, provided, further, however, that if Lessor
shall have made the request for storage pursuant to Section 5(d) hereof, Lessee
shall at its expense return the Aircraft at the site of storage. At the time of
such return, (A) Lessee will, at its own cost and expense, unless otherwise
requested by Lessor to retain the existing registration of the Aircraft, cause
the Aircraft, if it is not then so registered, to be registered under the laws
of the United States with the FAA in the name of Lessor or its designee,
provided that Lessee shall be relieved of its obligations under this sentence if
such registration is prohibited by reason of the failure of Lessor, the Owner
Participant or Lessor's designee to be eligible on such date to own an aircraft
registered with the Federal Aviation Administration, and (B) subject to Section
5(e) hereof, the Airframe will be fully equipped with the Engines (or Acceptable
Alternate Engines) installed thereon. Also, at the time of such return, Lessor
shall have good title to such Airframe and Engines or Acceptable Alternate
Engines, and such Airframe and Engines or Acceptable Alternate Engines (i) shall
be certified (or, if not then registered under the Federal Aviation Act by
reason of the proviso to clause (A) in the preceding sentence or because Lessor
has so requested that the Aircraft not be so registered, shall hold a valid
certificate of airworthiness issued by the country of registry and be eligible
for certification by the FAA) as an airworthy aircraft by the Federal Aviation
Administration, (ii) shall be free and clear of all Liens (other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and rights of third parties under
pooling, interchange, overhaul, repair or other similar agreements or
arrangements, (iii) shall be in a regular passenger configuration, and in as
good a condition as when delivered by Lessee to Lessor, ordinary wear and tear
excepted and otherwise in the condition required to be maintained under the
Lease and under Lessee's FAA-approved maintenance plan (notwithstanding any
Sublease theretofore in effect) and shall be in compliance with all mandatory
environmental, noise, air
26
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
pollution and other standards prescribed by the federal government of the United
States and applicable to the Aircraft including, without limitation, standards
relating to corrosion and structural integrity and all other applicable
manufacturer's mandatory service bulletins (except for standards, laws,
regulations, directives and bulletins that permit compliance at a later time and
would not, in the normal course of Lessee's maintenance plan, be complied with
by the date of return without discriminating on the basis of the status of the
Aircraft as a leased aircraft), (iv) in the event that Lessee shall not then be
using a continuous maintenance program with respect to the Airframe immediately
prior to such return but instead shall have been using a block overhaul program
with respect to the Airframe, then (A) such block overhaul program shall have
been approved by the government of registry of the Aircraft and (B) the Airframe
shall have remaining until the next scheduled block overhaul at least 25% of the
allowable hours between block overhauls permitted under the block overhaul
program then used by Lessee, (v) in the event that Lessee during the period of
operation of the Aircraft immediately prior to such return shall not have been
using an on-condition maintenance program with respect to the Engines (or
Acceptable Alternate Engines), Lessee agrees that the average number of hours or
cycles of operation (whichever shall be applicable under the maintenance program
then in use with respect to such Engines (or Acceptable Alternate Engines)) on
such Engines (or Acceptable Alternate Engines) remaining until the next
scheduled engine heavy maintenance shall be at least 25% of the hours or cycles
(whichever shall be applicable) between engine heavy maintenance allowed under
the maintenance program then in use with respect to such Engines (or Acceptable
Alternate Engines), (vi) shall have all Lessee's and any Sublessee's exterior
marking removed or painted over with areas thereof refinished to match adjacent
areas, and (vii) shall be in a state of cleanliness suitable under Lessee's
normal service standards for operation in Lessee's revenue passenger service and
in all such cases the Aircraft shall not have been discriminated against whether
by reason of its leased status or otherwise in maintenance, use, operation or in
any other manner whatsoever.
In addition, the following conditions shall be complied with at the
time of the return of the Aircraft: (i) Lessee shall deliver to Lessor any "no
cost" modification kits designated for the Aircraft that Lessee has in its
possession and that have not been incorporated at the time of the return of the
Aircraft, (ii) Lessor may purchase from Lessee at Lessee's cost any service
bulletin kits purchased or manufactured by Lessee for the Aircraft (provided
that Lessee shall not be obligated to sell to Lessor any service bulletin kit
manufactured by Lessee to the
27
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
extent Lessee, in its reasonable judgment, considers the same proprietary) and
(iii) without limiting the obligations of the Lessee set forth in the preceding
paragraph, in the event the FAA shall issue any directive which requires
termination thereof prior to the return date, then such directive shall be
terminated prior to the return date, and if Lessee shall have not been required
to terminate such directive in the normal course of its operations without
discriminating against the Aircraft by reason of its leased status or otherwise
prior to the return of the Aircraft but such directive must be terminated on or
before six months following such return, then Lessee shall, at the sole cost and
expense of Lessor, comply with such directive but only if (x) at least 540 days
prior to the return of the Aircraft Lessee receives from Lessor a written
request to comply with such directive at Lessor's sole cost and expense
(determined on the basis of what a third party would charge for comparable
services) and (y) after receipt by Lessee of such request, the Aircraft is
subject to a maintenance check of the type at which such modification is made,
in accordance with Lessee's general maintenance program, and Lessee has, or can
obtain using commercial reasonable efforts taking into account the 540 day prior
notice received by Lessee, the personnel, parts, facilities and other resources
available to accomplish the modification and the modification can be made
without materially disrupting the operations of Lessee's maintenance facility or
Lessee's operations.
For purposes of this Section 5(a), any maintenance program used by
Lessee for airframes (including the Airframe) substantially similar to the
maintenance program described in the excerpts from "United Air Lines 747
Maintenance Program" furnished to Lessor and the Owner Participant prior to the
Delivery Date (a copy of which was attached to the certificate of the Assistant
Secretary of the Lessee delivered pursuant to Section 4(a)(vii)(6) of the
Original Participation Agreement) shall be considered a continuous maintenance
program (and not a block maintenance program) and any engine maintenance program
used by Lessee for engines (including the Engines) substantially similar to the
maintenance program described in ["United Air Lines 747 Maintenance Program"]
shall be considered an on-condition maintenance program.
In the event that the provisions of the preceding paragraph are
inapplicable and upon a return of the Aircraft pursuant to this Section 5,
Lessee and Lessor cannot agree as to whether Lessee, during the period of
operation of the Aircraft immediately prior to such return, shall have been
using a continuous maintenance program or a block overhaul program with respect
to the Airframe (including, without limitation, a dispute
28
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
as to whether Lessee's program is substantially similar to the program described
in the excerpts to the "United Air Lines 747 Maintenance Program" furnished to
Lessor as set forth in the preceding paragraph), then Lessee and Lessor shall
mutually appoint an independent third party, satisfactory to both Lessee and
Lessor, who shall make such a determination, which determination shall be
conclusive and final. Lessee will provide, on a confidential basis, such
independent third party with the maintenance program and records applicable to
the Aircraft necessary to make such determination. The fee of such third party
shall be paid equally by Lessor and Lessee.
If clause (iv) of the first paragraph of this Section 5(a) shall be
applicable but the Airframe does not meet the conditions specified in said
clause (iv), Lessee shall pay or cause to be paid to Lessor, concurrently with
the return thereof, a Dollar amount computed by multiplying (i) the fair market
cost of obtaining an airframe block overhaul of the type referred to in such
clause (iv) at a location in the United States that has been approved by the FAA
for such work by (ii) a fraction of which (x) the numerator shall be the excess
of 25% of the hours of operation allowable between such block overhauls over the
actual number of hours of operation remaining on the Airframe to the next such
block overhaul and (y) the denominator shall be the number of hours of operation
allowable between such block overhauls in accordance with such block overhaul
program.
If clause (v) of the first paragraph of this Section 5(a) shall be
applicable but the Engines (or Acceptable Alternate Engines) do not meet the
conditions specified in said clause (v), Lessee shall pay or cause to be paid to
Lessor, concurrently with the return thereof, a Dollar amount computed by
multiplying (i) the fair market cost of obtaining the scheduled engine heavy
maintenance under the maintenance program then used by Lessee for engines of the
same model as the Engines (or Acceptable Alternate Engines) at a location in the
United States that has been approved by the FAA for such work by (ii) a fraction
which (x) the numerator shall be the excess of 25% of the hours or cycles
(whichever is applicable) of operation of one Engine between engine heavy
maintenance allowable under the maintenance program then in use with respect to
such Engines (or Acceptable Alternate Engines) over the actual average number of
hours or cycles of operation of such Engines (or Acceptable Alternate Engines)
remaining until the next such scheduled engine heavy maintenance and (y) the
denominator shall be the number of hours or cycles allowable between such
scheduled engine heavy maintenance.
During the last six months of the Term (unless Lessee shall have
irrevocably elected to purchase the Aircraft or renew
29
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
this Lease in accordance with the terms of this Lease), with reasonable notice,
Lessee will cooperate, and cause any Sublessee to cooperate, at Lessor's sole
cost, in all reasonable respects with the efforts of Lessor to sell or lease the
Aircraft, including, without limitation, permitting prospective purchasers or
lessees to inspect the Aircraft, any maintenance records relating to the
Aircraft then required to be retained by the FAA or by the comparable government
agency of the country in which the Aircraft is registered, all in accordance
with Section 12 hereof, provided that any such cooperation shall not interfere
with the normal operation or maintenance of the Aircraft by, or the business of,
Lessee or any Sublessee.
(b) Return of Other Engines. In the event that an Acceptable
Alternate Engine shall be delivered with the returned Airframe as set forth in
paragraph (a) of this Section 5, Lessee, concurrently with such delivery, will,
at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full
warranty (as to title) bill of sale with respect to each such Acceptable
Alternate Engine, in form and substance reasonably satisfactory to Lessor
(together with an opinion of counsel (which may be Lessee's General Counsel) to
the effect that such full warranty bill of sale has been duly authorized and
delivered and is enforceable in accordance with its terms and that each such
Acceptable Alternate Engine is free and clear of all Liens other than Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for the
proviso to the definition of Lessor Liens)) and will, to the extent applicable,
comply with the provisions of Section 9(d) as if Lessee had irrevocably elected,
in accordance with Section 9(d) hereof, to terminate the Lease with respect to
the Engine in replacement for which such Acceptable Alternate Engine is being
delivered and Lessor will provide a bill of sale, at Lessee's expense,
evidencing the transfer, without recourse or warranty (except as to the absence
of Lessor Liens (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens)) by Lessor to Lessee or its
designee of all of Lessor's right, title and interest in and to any Engine not
installed on the Airframe at the time of the return of the Airframe.
(c) Fuel and Manuals. Upon the return of the Airframe upon any
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessee shall invoice Lessor, and Lessor shall pay to Lessee the amount of
Lessee's cost for any fuel or oil contained in the fuel or oil tanks on the
Airframe, and (ii) Lessee shall deliver or cause to be delivered to Lessor all
logs, manuals and data and inspection, modification and overhaul records in the
English language (or an English translation of the same), (A) required to be
maintained with
30
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
respect to the Airframe, the Engines or any part thereof in accordance with
Section 7(a) hereof, (B) created since the Airframe's or Engine's or Acceptable
Alternate Engine's (whichever is applicable) last heavy maintenance visit and
(C) required to lawfully operate the Aircraft in the United States under a
United States Certificate of Airworthiness without performing additional
maintenance.
(d) Storage Upon Return. If, at any time at least 30 days prior to
the end of the Basic Term or any Renewal Term or pursuant to Section 9(c) or
Section 15, Lessee receives from Lessor a written request for storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with storage facilities for the Aircraft (at Lessor's risk and
at Lessor's cost for insurance, maintenance and Lessee's reasonable out-of-
pocket expenses other than storage fees) for a period not exceeding forty-five
(45) days (and upon prior written notice from Lessor to Lessee given at least 10
days prior to the end of such 45 day period, at Lessor's risk and at Lessor's
cost for insurance, maintenance and Lessee's reasonable out-of-pocket expenses
including storage fees, for an additional period not exceeding 45 days)
commencing on the date of such termination, at a location in the forty-eight
contiguous states of the United States selected by Lessee and used as a location
for the storage of aircraft. Lessee shall, at Lessor's written request,
maintain insurance (if available) for the Aircraft during such period and shall
be reimbursed by Lessor for the premiums thereon.
(e) Purchase of Engine. In the event that Lessee shall have paid the
Stipulated Loss Value for any Engine pursuant to Section 10(b) hereof and all
other amounts due and owing under said Section 10(b), then, notwithstanding
anything contained in this Section 5, Lessee shall, subject to the proviso
below, be under no obligation to return any engine installed on the Airframe in
replacement for such Engine to Lessor upon the termination of this Lease;
provided, however, that in such event Lessor shall have the right upon
termination of this Lease (unless Lessee shall have exercised any of its options
to purchase the Aircraft pursuant to Section 19), at its sole option, to
purchase from Lessee an engine or engines suitable for use on the Airframe and
compatible with the other Engine (if any) or the other engine purchased under
this Section 5(e) for such engine's then Fair Market Sales Value and any such
engine shall be installed at no cost to Lessor on the Airframe on the return
thereof.
(f) Severable Parts. At any time after Lessee has advised Lessor that
it has determined not to renew this Lease or
31
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
purchase the Aircraft, or the Aircraft is otherwise to be returned to Lessor,
Lessee shall, at Lessor's request, advise Lessor of the nature and condition of
all severable Parts owned by Lessee which have been used by Lessee during the
prior six months and which Lessee has or intends to remove from the Aircraft as
permitted by Section 8 hereof. Lessor may, at its option, upon 30 days written
notice to Lessee, purchase any or all of such Parts from Lessee upon the
expiration of the Term at their then fair market value.
(g) Special Redelivery Provision. Not less than 30 days prior to (A)
the date of redelivery of the Aircraft by Lessee to Lessor in accordance with
this Section 5, (B) the date of redelivery to Lessor or a purchaser pursuant to
Section 9(c) or Section 15 hereof, or (C) a purchase of the Aircraft by Lessee
pursuant to Section 19(b), Lessor may provide Lessee with a proposal regarding
the arranging of delivery of the Aircraft so as to enable Lessor to realize
"foreign trade income" (as defined in Section 923(b) of the Code or any
successor provision thereto) from the sale or re-lease of the Aircraft, and
Lessee shall (i) arrange delivery at Lessor's cost (unless the delivery site is
as provided in Section 5(a) hereof) either inside or outside the United States,
as specified in Lessor's proposal, and (ii) otherwise comply with such proposal
to the extent Lessee can do so without incurring any cost, expense or liability
not indemnified against by Lessor in a manner in form and substance reasonably
satisfactory to Lessee.
SECTION 6. Liens. Lessee will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Aircraft,
title thereto or any interest therein or in this Lease, except (i) the
respective rights of Lessor as owner of the Aircraft and Lessee as herein
provided (including any Sublease permitted pursuant to Section 7(b)), the Lien
of the Trust Indenture, and any other rights existing pursuant to the Operative
Documents, (ii) Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens), (iii) Liens
for Taxes of Lessee (or any Sublessee) either not yet due or being contested in
good faith by appropriate proceeding so long as such proceedings do not involve
any material risk of the sale, forfeiture or loss of the Airframe or any Engine
or any interest thereon, (iv) materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of Lessee's or any
Sublessee's business securing obligations that are not overdue for a period of
more than 30 days or are being contested in good faith by appropriate
proceedings so long as during such 30 day period there is not, or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
32
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
the Airframe or any Engine or any interest therein, (v) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless there exists a
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein or unless the judgment secured shall not, within 45 days
after the entry thereof, have been discharged, vacated, reversed or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within 45 days after the expiration of such stay, and (vi) any other
Lien with respect to which Lessee (or any Sublessee) shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to
Lessor. Lessee will promptly, at its own expense, take (or cause to be taken)
such actions as may be necessary duly to discharge any such Lien not excepted
above if the same shall arise at any time.
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia. (a) (1) Registration and Maintenance. Lessee, at its
own cost and expense, shall (or shall cause any Sublessee to): (i) upon
delivery of the Aircraft, cause the Aircraft to be duly registered in the name
of Lessor, and, subject to subparagraph (3) of this Section 7(a), to remain duly
registered in the name of Lessor under the Federal Aviation Act (except to the
extent that such registration cannot be effected because of Lessor's or the
Owner Participant's failure to comply with the citizenship requirements for
registration of aircraft under such Act), provided that Lessor and the Owner
Participant shall execute and deliver all such documents as Lessee (or any
Sublessee) may reasonably request for the purpose of effecting and continuing
such registration, and Lessee shall cause the Trust Indenture to be duly
recorded and maintained of record as a first mortgage on the Aircraft; (ii)
maintain, service, repair, and overhaul (or cause to be maintained, serviced,
repaired, and overhauled) the Aircraft (and any engine which is not an Engine
but which is installed on the Aircraft) (x) so as (p) at all times to keep the
Aircraft in as good an operating condition as when delivered by Manufacturer to
Lessee, ordinary wear and tear excepted, and (q) to keep the Aircraft in such
condition as may be necessary to enable the airworthiness certification for the
Aircraft to be maintained in good standing at all times (other than during
temporary periods of storage in accordance with applicable regulations) under
(I) the Federal Aviation Act, except when all of Lessee's Boeing Model 747-422
aircraft (powered by engines of the same type as those with which the Airframe
shall be equipped at the time of such grounding) registered in the United States
have been grounded by the FAA unless such grounding was caused by the failure of
Lessee to maintain, service, repair or overhaul the Aircraft in accordance with
this Lease, or (II) the applicable
33
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
laws of any other jurisdiction in which the Aircraft may then be registered from
time to time, except when all of Lessee's Boeing Model 747-422 aircraft (powered
by engines of the same type as those with which the Airframe shall be equipped
at the time of such grounding) registered in such jurisdiction have been
grounded by the aeronautical authority of such jurisdiction unless such
grounding was caused by the failure of Lessee to maintain, service, repair or
overhaul the Aircraft in accordance with this Lease and (y) in substantially the
same manner as Lessee (or any Sublessee) maintains, services, repairs or
overhauls similar aircraft operated by Lessee (or such Sublessee) in similar
circumstances and without in any way discriminating against the Aircraft,
whether by reason of its leased status or otherwise, including, without
limitation, in regard to the termination of airworthiness directives; or such
other manner as shall have been approved in writing by the Owner Participant;
(iii) maintain or cause to be maintained in the English language (or with
appropriate English translation) all records, logs and other materials required
to be maintained in respect of the Aircraft by the FAA or the applicable
regulatory agency or body of any other jurisdiction in which the Aircraft may
then be registered (which records, logs and other materials, as between Lessor
and Lessee and all parties claiming through Lessee, shall be the property of
Lessor but shall be maintained by Lessee during the Term of this Lease and shall
become the property of Lessee upon Lessee's purchase of the Aircraft pursuant to
the terms of this Lease or upon the occurrence of an Event of Loss and Lessee's
compliance with Section 10); and (iv) promptly furnish or cause to be furnished
to Lessor or the Owner Participant such information as may be reasonably
required to enable Lessor or the Owner Participant to file any reports required
to be filed by Lessor or the Owner Participant with any governmental authority
because of Lessor's ownership of the Aircraft.
(2) Operation. Lessee will not (or permit any Sublessee to) maintain,
use, service, repair, overhaul or operate the Aircraft in violation of any law
or any rule, regulation, treaty, order or certificate of any government or
governmental authority (domestic or foreign) having jurisdiction, or in
violation of any airworthiness certificate, license or registration relating to
the Aircraft issued by any such authority, except that, after Lessee shall have
provided Lessor and, so long as the Lien of the Trust Indenture shall not have
been released, the Indenture Trustee with a certificate of its President, any
Vice President, the Treasurer or any Assistant Treasurer stating all relevant
facts pertaining thereto, Lessee or any Sublessee may contest in good faith the
validity or application of any such law, rule, regulation, order,
34
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
certificate, license, registration or violation in any reasonable manner which
does not jeopardize the right, title and interest of the Lessor or the Owner
Participant in and to the Airframe and/or the Engines or otherwise materially
adversely affect Lessor, the Indenture Trustee or the Owner Participant but only
so long as such proceedings do not involve any risk of criminal liability or any
unindemnified material risk of civil liability to Lessor or the Owner
Participant for which the Lessee is not then willing to indemnify Lessor or the
Owner Participant in a manner reasonably satisfactory to such Person. If the
indemnities or insurance specified in Section 11(f), or some combination thereof
in amounts equal to amounts required by Section 11(f), have not been obtained,
Lessee will not operate the Aircraft, or permit any Sublessee to operate the
Aircraft, in or to any area excluded from coverage by any insurance required to
be maintained by the terms of Section 11, provided, however, that the failure of
Lessee to comply with the provisions of this sentence shall not give rise to an
Event of Default hereunder where such failure is attributable to a hijacking,
medical emergency, equipment malfunction, weather conditions, navigational error
or other isolated extraordinary event beyond the control of Lessee and Lessee is
taking all reasonable steps to remedy such failure as soon as is reasonably
practicable.
(3) Reregistration. At any time after the Restricted Period, Lessor
shall, at the request and sole expense of Lessee, cooperate with Lessee and take
all actions required to change the country of registration of the Aircraft in
compliance with and subject to the terms and conditions of Section 8(e) of the
Participation Agreement.
(4) Operating Certificates. Lessor hereby authorizes Lessee, at
Lessee's sole cost, expense and risk, to act as its agent for the purpose (but
only for the purpose) of obtaining any required replacement operating
certificates from the FAA; provided, however, that in the event that Lessee
shall have received from Lessor written notice that an Event of Default shall
have occurred and be continuing, this authority shall not apply for a period
from the date of receipt of such notice to such time as such Event of Default
shall have been cured by Lessee or waived by Lessor. This authority includes
(without expanding in any way the nature of the limited authority granted
pursuant to the first sentence of this Section 7(a)(4)), but is not limited to,
obtaining registration certificates, airworthiness certificates, certificates of
sanitary construction and ferry permits. In particular, this authority includes
the ability to make use of Exemption No. 5318 issued by the FAA. This authority
will allow duly authorized personnel of Lessee to sign any application forms
required in the process of obtaining
35
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
such operating certificates, and this authority will also allow such personnel,
where necessary and appropriate, to sign certificates as the attorney-in-fact
for Lessor. Lessee hereby agrees that it will promptly notify Lessor of any
action that it has taken in accordance with this Section 7(a)(4) as agent for
the Lessor. Nothing in this Section 7(a)(4) shall permit the Lessee to change
the country of registry of the Aircraft except as provided in Section 7(a)(3)
above.
(b) Possession and Subleases. Lessee will not, without the prior
written consent of Lessor, sublease or otherwise in any manner deliver, transfer
or relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe; provided that,
so long as no Section 14(a), (b), (f) or (g) Default or, in the case of
paragraph (viii) of this Section 7(b), no Section 14(d) (solely with respect to
Lessee's obligations under Section 7(a) or (b)(viii) hereof or Section 8 hereof)
Default, or any Event of Default shall have occurred and be continuing at the
time of such sublease, delivery, transfer or relinquishment of possession or
installation, and so long as the action to be taken shall not deprive the
Indenture Trustee of the Lien of the Trust Indenture on the Airframe or any
Engine and Lessee and any Sublessee shall continue to comply with the provisions
of Sections 7(a) and 11, Lessee may, without the prior written consent of
Lessor:
(i) subject the Airframe and the Engines or engines then
installed thereon to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by Lessee (or any Sublessee) in the ordinary
course of its business and, in the case of the Airframe, (x) with a U.S.
Air Carrier not in bankruptcy or a Permitted Sublessee or (y) any other air
carrier approved by Lessor; provided, that (A) no such agreement or
arrangement contemplates or requires the transfer of title to the Airframe,
and (B) if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, Lessee shall be deemed to have irrevocably
elected, in accordance with Section 9(d) hereof, to terminate the Lease
with respect to such Engine on the Business Day next following the 44th day
following such divestiture and Lessee shall (or shall cause any Sublessee
to) comply with Section 9(d) hereof in respect thereof;
(ii) deliver possession of the Airframe or any Engine to the
manufacturer thereof or to any other Person for testing, service, repair,
maintenance or overhaul work
36
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
on the Airframe or Engine or any Part of any thereof or for alterations or
modifications in or additions to such Airframe or Engine to the extent
required or permitted by the terms of Section 8(c) hereof;
(iii) install an Engine on an airframe owned by Lessee (or any
Sublessee) which airframe is free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of third
parties under interchange agreements which would be permitted under clause
(i) above, provided that Lessor's title to such Engine shall not be
divested as a result thereof and (C) mortgage Liens or other security
interests, provided, that (as regards this clause (C)), such mortgage Liens
or other security interests effectively provide that such Engine shall not
become subject to the lien of such mortgage or security interest,
notwithstanding the installation thereof on such airframe;
(iv) install an Engine on an airframe leased to Lessee (or any
Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement, provided that (x) such
airframe is free and clear of all Liens, except: (A) the rights of the
parties to the lease or conditional sale or other security agreement
covering such airframe, or their assignees, and (B) Liens of the type
permitted by subparagraph (iii) of this paragraph (b) and (y) such lease,
conditional sale or other security agreement effectively provides that such
Engine shall not become subject to the lien of such lease, conditional sale
or other security agreement, notwithstanding the installation thereof on
such airframe;
(v) install an Engine on an airframe owned by Lessee (or any
Sublessee), leased to Lessee (or any Sublessee) or purchased by Lessee (or
any Sublessee) subject to a conditional sale or other security agreement
under circumstances where neither subparagraph (iii) nor subparagraph (iv)
of this paragraph (b) is applicable, provided that in the event of such
installation, Lessee shall be deemed to have irrevocably elected, in
accordance with Section 9(d) hereof, to terminate the Lease with respect to
such Engine on the Business Day next following the 44th day following such
installation and Lessee shall (or shall cause any Sublessee to) comply with
Section 9(d) hereof in respect thereof, Lessor not intending hereby to
37
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
waive any right or interest it may have to or in such Engine under
applicable law until compliance by Lessee with such Section 9(d);
(vi) transfer (or permit any Sublessee to transfer) possession of
the Airframe or any Engine to the United States of America or any
instrumentality or agency thereof pursuant to the Civil Reserve Air Fleet
Program for a period, including all permissible renewal periods (so long as
such renewal options have been irrevocably exercised by Lessee), that does
not extend beyond the end of the Term so long as Lessee (or any Sublessee)
shall promptly notify Lessor (x) upon transferring possession of the
Airframe or any Engine to the United States of America or any agency or
instrumentality thereof pursuant to the Civil Reserve Air Fleet Program and
(y) of the name and the address of the Contracting Office Representative
for the Military Airlift Command of the United States Air Force to whom
notice must be given pursuant to Section 15 hereof;
(vii) transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency thereof pursuant
to a contract, a copy of which shall be provided to Lessor provided that
the term of such contract, including all permissible renewal periods (so
long as such renewal options have been irrevocably exercised by Lessee),
shall not continue beyond the end of the Term; or
(viii) So long as the Sublessee is not subject to a proceeding or
final order under applicable bankruptcy, insolvency or reorganization laws
on the date the Sublease is entered into, Lessee may, at any time, enter
into a sublease with (1) a U.S. Air Carrier, (2) after the Restricted
Period any Permitted Sublessee, provided that in the event such Permitted
Sublessee is domiciled in a country listed on Exhibit F hereto and
designated therein as a "Restricted Country" such Sublessee shall be deemed
a Permitted Sublessee only if its country of domicile at the time of such
subleasing imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central aviation
authority of any of Canada, France, Germany, Japan or the United Kingdom,
or (3) after the Restricted Period any other Person approved in writing by
the Owner Participant, which approval shall not be unreasonably withheld if
in regard to this subclause (3) (x) the proposed sublessee's country of
domicile imposes maintenance standards not materially less stringent than
those of the FAA or the central aviation authority of any of
38
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Canada, France, Japan, Germany, or the United Kingdom and (y) Lessor, Owner
Participant and the Indenture Trustee receive an opinion of counsel
reasonably acceptable to Lessor, in its individual capacity, and Owner
Participant that the terms of the sublease and other Operative Documents
will be valid in the country where Sublessee is domiciled; that no
Participant is required to register to do business in the Sublessee's
country of domicile; that there is no tort liability for owners not in
possession that is more extensive than under United States law or any state
law (it being understood that if such opinion cannot be given in a form
reasonably satisfactory to the Owner Participant such opinion will be
waived if insurance reasonably satisfactory to the Owner Participant and
the Lessor, in its individual capacity, is provided at Lessee's expense to
cover such risk); that fair compensation in a currency freely convertible
into Dollars is mandated if there is a requisition of use or title of the
Aircraft by the country in which the Sublessee is domiciled (it being
understood that if such opinion cannot be given in a form reasonably
satisfactory to the Owner Participant such opinion will be waived if
insurance reasonably satisfactory to the Owner Participant, is provided at
Lessee's expense to cover such risk); that there exist no possessory rights
in favor of the Sublessee which upon Lessee's bankruptcy or other Default
hereunder (assuming the Sublessee is not then bankrupt) would prevent the
return of the Aircraft in accordance with the terms hereof or inhibit the
Lessor's rights therein; and as to such other matters as Lessor, in its
individual capacity, and the Owner Participant may reasonably request,
provided, however, (A) that no sublease, including all permissible renewal
periods, shall extend beyond the Basic Term or any Renewal Term then in
effect, unless Lessee shall have irrevocably committed to purchase the
Aircraft or renew the Lease in accordance with the terms thereof at the end
of the Basic Term or Renewal Term, as the case may be, to a date beyond the
latest permissible expiration date of such sublease, (B) that, on the date
of such sublease, the United States and the country in which sublessee is
domiciled and principally located maintain diplomatic relations, (C) that
on or prior to entering into such sublease, Lessee shall provide to the
Lessor and, so long as the Lien of the Trust Indenture shall not have been
released, the Indenture Trustee assurances reasonably satisfactory to
Lessor, in its individual capacity, and Owner Participant to the effect
that the provisions of Section 11 hereof have been complied with after
giving effect to such sublease and (D) that, in the case of a sublease to a
sublessee described in (3) above, if the country of domicile of the
proposed sublessee
39
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
at the time of such subleasing has not unqualifiedly ratified the Geneva
Convention for International Recognition of Rights in Aircraft, the Lessee
shall provide Lessor to the Lessor and, so long as the Lien of the Trust
Indenture shall not have been released, the Indenture Trustee an opinion of
counsel, which counsel and opinion shall be reasonably satisfactory to the
Owner Participant, to the effect that the country in which such sublessee
has its principal office and domicile would give effect to (i) the title of
Lessor in and to the Aircraft, (ii) the registry of the Aircraft in the
name of Lessor (or Lessee or Sublessee, as "lessee" or "sublessee" as
appropriate) and (iii) the priority and validity of the Lien of the Trust
Indenture.
The rights of any Sublessee or other transferee (other than a
transferee where the transfer is of an Engine which is deemed a termination
under Section 9(d)) shall be subject and subordinate to, all the terms of the
Lease (and any Sublease shall expressly state that it is so subject and
subordinate), including, without limitation, the covenants contained in Section
7(a) hereof, the inspection rights contained in Section 12 hereof and Lessor's
(and, so long as the Trust Indenture is in effect, the Indenture Trustee's (as
Lessor's assignee)) rights to repossess the Aircraft and to void any Sublease
upon such repossession, and Lessee shall remain primarily liable for the
performance of all of the terms of the Lease, and the terms of any such Sublease
shall not permit any Sublessee to take any action not permitted to be taken by
Lessee in the Lease with respect to the Aircraft. No pooling agreement,
Sublease or other relinquishment of possession of the Airframe or any Engine
shall in any way discharge or diminish any of Lessee's obligations to Lessor
under this Lease or constitute a waiver of Lessor's rights or remedies
hereunder. Lessor agrees, for the benefit of Lessee (and any Sublessee) and for
the benefit of any mortgagee or other holder of a security interest in any
engine owned by Lessee (or any Sublessee), any lessor of any engine other than
an Engine leased to Lessee (or any Sublessee) and any conditional vendor of any
engine other than an Engine purchased by Lessee (or any Sublessee) subject to a
conditional sale agreement or any other security agreement, that no interest
shall be created under the Lease in any engine so owned, leased or purchased and
that neither Lessor nor its successors or assigns will acquire or claim, as
against Lessee (or any Sublessee) or any such mortgagee, lessor or conditional
vendor or other holder of a security interest or any successor or assignee of
any thereof, any right, title or interest in such engine as the result of such
engine being installed on the Airframe; provided, however, that such agreement
of Lessor shall not be for the benefit of any lessor or secured party of an
airframe leased to
40
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Lessee (or any Sublessee) or purchased by Lessee (or any Sublessee) subject to a
conditional sale or other security agreement or for the benefit of any mortgagee
or any other holder of a security interest in an airframe owned by Lessee (or
any Sublessee), on which airframe Lessee (or any Sublessee) then proposes to
install an Engine, unless such lessor, conditional vendor, other secured party
or mortgagee has expressly agreed (which agreement may be contained in such
lease, conditional sale or other security agreement or mortgage) that neither it
nor its successors or assigns will acquire, as against Lessor, any right title
or interest in an Engine as a result of such Engine being installed on such
airframe. Lessee shall provide the Owner Participant and the Indenture Trustee
(A) written notice (which notice shall be given (i) no later than thirty (30)
days prior to entering into any Sublease with a term of more than one (1) year
or (ii) at any time prior to (to the extent that the giving of prior notice is
reasonably possible) or promptly after entering into any Sublease with a term of
one (1) year or less) of any Sublease and (B) a copy of any Sublease which has a
term of more than one (1) year.
Lessee shall assign any Sublease to Lessor as security for its
obligations hereunder pursuant to an assignment instrument reasonably
satisfactory to Lessor; provided, however, that any such assignment instrument
shall provide that the assignment of the Sublease shall only be effective,
without any further action, immediately upon the occurrence of a Section 14(a),
14(b), 14(f) or 14(g) Default or any Event of Default (and such effectiveness
shall terminate upon the curing or waiver of the aforesaid Defaults or Events of
Default). In addition, any Sublease entered into by Lessee shall provide that
all payments due under such Sublease shall be paid by the Sublessee to Lessor
during the continuance of a Section 14(a), 14(b), 14(f) or 14(g) Default or an
Event of Default.
In the event that during the term of a Sublease the Aircraft shall
have been maintained under a block-overhaul program, Lessee shall at its option
either (i) cause the Aircraft to be returned to the Lessee by the Sublessee no
later than three months prior to the end of the Term and Lessee shall upon such
return incorporate the Aircraft into Lessee's continuous maintenance program for
aircraft of the same make and model and in active commercial service or (ii)
upon return of the Aircraft to Lessor pursuant to Section 5(a), Lessee shall
comply with those return conditions set forth in such Section 5(a) applicable in
the event Lessee had adopted a block-overhaul program.
Any Wet Lease or similar arrangement under which Lessee maintains
operational control of the Aircraft shall not
41
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
constitute a delivery, transfer or relinquishment of possession for purposes of
this section. Lessor acknowledges that any consolidation or merger of Lessee or
conveyance, transfer or lease of all or substantially all of Lessee's assets
permitted by the Operative Documents shall not be prohibited by this Section.
No Sublease permitted pursuant to this Section shall permit any
further sub-subleasing of the Aircraft.
(c) Insignia. On or prior to the Delivery Date, or as soon thereafter
as practicable, Lessee agrees to affix and maintain (or cause to be affixed and
maintained) in the cockpit of the Airframe adjacent to the registration
certificate therein and on each Engine a nameplate bearing the inscription:
Leased From
State Street Bank and Trust Company, not in its individual capacity
but solely as Owner Trustee, Owner and Lessor
and, for so long as the Airframe and each Engine shall be subject to the Lien of
the Trust Indenture, bearing the following additional inscription:
Mortgaged To
First Security Bank of Utah, National Association, as Indenture
Trustee
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Lessor or successor Indenture Trustee, in each case as
permitted under the Operative Documents).
Except as above provided, Lessee will not allow the name of any
person, association or corporation to be placed on the Airframe or on any Engine
as a designation that might be interpreted as a claim of ownership; provided,
that nothing herein contained shall prohibit Lessee (or any Sublessee) from
placing its customary colors and insignia on the Airframe or any Engine.
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions.
(a) Replacement of Parts. Lessee, at its own cost and expense, will
promptly replace or cause to be replaced all Parts which may from time to time
become worn out, lost, stolen,
42
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever, except as otherwise provided in Section
8(c). All replacement Parts shall be owned by Lessee free and clear of all
Liens (except Permitted Liens, pooling arrangements permitted by Section 8(b)
hereof and replacement Parts temporarily installed on an emergency basis) and
shall be in as good operating condition as, and shall have a value and utility
substantially equal to, the Parts replaced assuming such replaced Parts were in
the condition and repair required to be maintained by the terms hereof. All
Parts at any time removed from the Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts shall
be replaced by Parts which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming incorporated or installed
in or attached to the Airframe or any Engine, without further act (subject only
to Permitted Liens and any pooling arrangement permitted by Section 8(b) hereof
and except replacement Parts temporarily installed on an emergency basis), (i)
title shall vest in and such replacement Part shall become the property of
Lessor and shall become subject to this Lease and be deemed a Part for all
purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Airframe or such Engine and (ii) the replaced
Part shall no longer be the property of Lessor and shall no longer be deemed a
Part hereunder.
(b) Pooling of Parts. Any Part removed from the Airframe or any
Engine as provided in Section 8(a) hereof may be subjected by Lessee (or any
Sublessee) to a pooling arrangement of the type which is permitted by Section
7(b)(i) hereof; provided, that the Part replacing such removed Part shall be
incorporated or installed in or attached to such Airframe or Engine in
accordance with Section 8(a) 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 an Engine in accordance with such
Sections may be owned by any third party subject to such a pooling arrangement,
provided, that Lessee (or any Sublessee), at its expense, as promptly thereafter
as practicable, and in any event within 90 days, either (i) causes such
replacement Part to become the property of Lessor free and clear of all Liens
other than Permitted Liens or (ii) replaces such replacement Part with a further
replacement Part owned by Lessee (or any Sublessee) which shall become the
property of Lessor, free and clear of all Liens other than Permitted Liens.
(c) Alterations, Modifications and Additions. Lessee, at its own
expense, will make (or cause to be made) such
43
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
alterations and modifications in and additions to the Airframe and Engines as
may be required from time to time to be made during the Term so as to comply
with any law, rule, regulation or order of any regulatory agency or body of any
jurisdiction in which the Aircraft may then be registered; provided, however,
that, after Lessee shall have provided Lessor and, so long as the Lien of the
Trust Indenture shall not have been released, the Indenture Trustee, with a
certificate of its President, any Vice President, the Treasurer or any Assistant
Treasurer stating all relevant facts pertaining thereto, Lessee or any Sublessee
may, in good faith, and by appropriate proceedings contest the validity or
application of any such law, rule, regulation or order in any reasonable manner
which does not jeopardize the right, title and interest of the Lessor or the
Owner Participant in and to the Airframe and/or the Engines, or otherwise
materially adversely affect Lessor, the Owner Participant or the Indenture
Trustee but only so long as such proceedings do not involve any risk of criminal
liability or any unindemnified material risk of civil liability to Lessor or the
Owner Participant for which the Lessee is not then willing to indemnify Lessor
or the Owner Participant in a manner reasonably satisfactory to such Person. In
addition, Lessee (or any Sublessee), at its own expense, may from time to time
make such alterations and modifications in and additions to the Airframe or any
Engine as Lessee (or any Sublessee) may deem desirable in the proper conduct of
its business, including removal of Parts which Lessee (or any Sublessee) deems
to be obsolete or no longer suitable or appropriate for use on the Airframe or
such Engine (such parts, "Obsolete Parts"); provided that no such alteration,
modification, removal or addition impairs the condition or airworthiness of the
Airframe or such Engine, or decreases the value or the utility (or, in regard to
the Airframe, remaining useful life) of the Airframe or such Engine below the
value or utility (or, in regard to the Airframe, remaining useful life) thereof
immediately prior to such alteration, modification, removal or addition assuming
the Airframe or such Engine was then in the condition required to be maintained
by the terms of this Lease. In addition, the value (but not the utility,
condition, airworthiness or, in the case of the Airframe, remaining economic
useful life) of the Airframe or any Engine may be reduced by the value, if any,
of Obsolete Parts which shall have been removed so long as the aggregate
original cost of all Obsolete Parts which shall have been removed and not
replaced shall not exceed $900,000. All Parts incorporated or installed in or
attached or added to the Airframe or an Engine as the result of such alteration,
modification or addition (except those parts which Lessee has leased from others
and which may be removed by Lessee pursuant to the next sentence) (the
"Additional Parts") shall, without further act, become the property of, and
title to such
44
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Parts shall vest in, Lessor. Notwithstanding the foregoing sentence, Lessee (or
any Sublessee), subject to Lessor's rights under Section 5(f) hereof, may, at
its own expense, at any time during the Term, so long as no Default under
Section 14(a), (b), (d) (solely with respect to Lessee's obligations under
Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g) or an Event of
Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that such Additional Part (i) is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to such Airframe or any Engine at the time of
delivery thereof hereunder or any Part in replacement of or substitution for any
such Part, (ii) is not required to be incorporated or installed in or attached
or added to the Airframe or any Engine pursuant to the terms of Section 7 hereof
or the first sentence of this paragraph (c) and (iii) can be removed from the
Airframe or such Engine without impairing the condition or airworthiness or
diminishing the value or utility (or, in regard to the Airframe, remaining
useful life) of the Airframe or such Engine which the Airframe or such Engine
would have had at such time had such alteration, modification or addition not
occurred. Upon the removal thereof as provided above, such Additional Part
shall no longer be deemed the property of Lessor or part of the Airframe or
Engine from which it was removed. Any Additional Part not removed as above
provided prior to the return of the Airframe or Engine to Lessor hereunder shall
remain the property of Lessor.
SECTION 9. Early Termination.
(a) [Intentionally reserved for potential future use].
(b) Termination for Obsolescence/Surplus. So long as no Section
14(a), (b), (d) (solely with respect to Lessee's obligations under Section 7(a)
or (b)(viii) or Section 8 hereof), (f) or (g) Default or any Event of Default
shall have occurred and be continuing, Lessee shall have the right to terminate
this Lease on the third Business Day prior to any Lease Period Date occurring on
or after the Restricted Period if Lessee shall have made a good faith
determination, which shall be evidenced by a certificate of any financial
officer of Lessee, who is the Treasurer or more senior officer, that the
Aircraft is surplus to Lessee's requirements or economically obsolete to Lessee.
Lessee shall give to Lessor and Indenture Trustee at least one hundred
and eighty (180) days revocable (except as provided below) advance written
notice of Lessee's intention to so terminate this Lease (any such notice, a
"Termination Notice") specifying (i) the date on which Lessee intends to
terminate this
45
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Lease in accordance with this Section 9(b) (such specified date, a "Termination
Date") and (ii) that Lessee has determined that the Aircraft is surplus to its
requirements or economically obsolete to Lessee. Lessee shall exercise this
option by arranging for the sale of the Aircraft pursuant to Section 9(c),
provided, however, that Lessee may not withdraw its notice if Lessor has elected
to retain the Aircraft pursuant to Section 9(c) or if the highest bid obtained
by Lessee pursuant to Section 9(c) is greater than the then applicable
Termination Value; provided, further, that if no sale of the Aircraft shall have
occurred on or prior to the Termination Date and if Lessor shall not have
elected to retain the Aircraft, Lessee's Termination Notice shall be deemed
withdrawn. The Termination Notice shall become irrevocable twenty-five (25)
days prior to the Termination Date.
(c) Sale of the Aircraft. In the event that Lessee shall have
proposed to terminate this Lease under Section 9(b), then during the period
commencing with the date of the Termination Notice until the proposed
Termination Date Lessee, as non-exclusive agent for Lessor and at no expense to
Lessor, shall use reasonable efforts to obtain bids in Dollars for the purchase
of the Aircraft and, in the event it receives any bid, Lessee shall, within five
Business Days after receipt thereof and at least ten Business Days prior to the
proposed Termination Date, advise Lessor in writing of the amount and terms of
such bid, and the name and address of the party or parties (who shall not be
Lessee or any Affiliate of Lessee or any person with whom Lessee or any such
Affiliate has an arrangement or understanding regarding the future use of the
Aircraft by Lessee or any such Affiliate but who may be the Owner Participant,
any Affiliate thereof or any person contacted by the Owner Participant)
submitting such bid. After Lessee shall have advised Lessor of all bids
received, the Owner Participant, any Affiliate thereof or any Person contacted
by the Owner Participant may submit a further bid or bids to Lessee not later
than five Business Days prior to the Termination Date proposed by Lessee (unless
Lessee shall have revoked the Termination Notice specifying such proposed
Termination Date). Subject to the next succeeding sentence, on or before the
Termination Date, subject to the release of all mortgage and security interests
with respect to the Aircraft under the Trust Indenture: (1) Lessee shall
deliver the Aircraft, or cause the Aircraft to be delivered to the highest
bidder as determined below, in the same manner and in the same condition and
otherwise in accordance with all the terms of this Lease as if delivery were
made to Lessor pursuant to Section 5, and Lessee shall duly transfer to Lessor
title to any engine installed on the Airframe and not owned by Lessor, all in
accordance with the terms of Section 5 (but subject to the
46
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
provisions of Section 5(e) hereof), (2) Lessor shall comply with the terms of
the Trust Indenture and shall, without recourse or warranty (except as to the
absence of Lessor Liens (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens)), subject to prior
or concurrent payment by Lessee of all amounts due under clause (3) of this
sentence, sell the Aircraft for cash in Dollars to the entity, if any, which
shall have submitted the highest bona fide bid (evaluated on a net cash basis)
therefor, the total selling price realized at such sale to be retained by
Lessor, and (3) Lessee shall simultaneously pay or cause to be paid to Lessor in
the manner provided in Section 3(e), (A) if the proceeds of the sale of the
Aircraft so sold, net of reasonable out-of-pocket costs and expenses incurred by
Lessor and the Owner Participant in connection therewith, including, without
limitation, applicable sales or transfer taxes and legal fees, are less than the
Termination Value for the Aircraft computed as of the Redemption Date, the
difference in Dollars, (B) all unpaid Basic Rent due on or prior to the
applicable Redemption Date (other than Basic Rent payable in advance on the
Redemption Date, if any) and all unpaid Supplemental Rent with respect to the
Aircraft due on or prior to such Redemption Date, and (C) Premium, if any, due
on the Loan Certificates and upon receiving all such payments referred to in
clauses (2) and (3) above Lessor simultaneously will transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens)), all of Lessor's right, title and interest in and
to any Engines constituting part of the Aircraft which were not sold with the
Aircraft. Notwithstanding the preceding sentence, Lessor may, if Lessee has not
already revoked the Termination Notice, elect to retain title to the Aircraft.
If Lessor so elects, Lessor shall give to Lessee written notice of such election
at least ten Business Days prior to the Termination Date accompanied by an
irrevocable undertaking by the Owner Participant to make available to Lessor for
payment to the Indenture Trustee on the Termination Date the amount required to
pay in full the unpaid Original Amount of the Loan Certificates outstanding on
the applicable Redemption Date together with all other amounts due on such
Redemption Date thereunder less amounts to be paid by Lessee as a result of the
payment thereof as set forth in the second following sentence. Upon receipt of
notice of such an election by Lessor and the accompanying undertaking by the
Owner Participant, Lessee shall cease its efforts to obtain bids as provided
above and shall reject all bids theretofore or thereafter received. On the
Termination Date, Lessor shall (subject to the payment by Lessee of all Rent due
on or prior to the Redemption Date as set forth below) pay in full the unpaid
Original Amount of the Loan
47
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Certificates outstanding on the Redemption Date, plus interest accrued to, or to
accrue thereon to but excluding the applicable Redemption Date, together with
all other amounts due thereunder less any amounts to be paid by Lessee as a
result of the payment thereof and, provided that the Loan Certificates are paid
as aforesaid, Lessee shall deliver the Airframe and Engines or engines to Lessor
in accordance with Section 5 and shall pay all Basic Rent due on or prior to the
Redemption Date (other than Basic Rent payable in advance on the Redemption
Date, if any) and all unpaid Supplemental Rent due on or prior to such
Redemption Date, and Premium, if any, on the Loan Certificates. If no sale
shall have occurred on the Termination Date for any reason (including, without
limitation, by reason of Lessee's revocation of its Termination Notice) or
Lessor has not, after making its election referred to above, made the payment
contemplated by the preceding sentence and thereby caused this Lease to
terminate, this Lease shall continue in full force and effect as to the
Aircraft, Lessee shall be entitled to keep any deposits or other advances
received from the proposed purchaser(s) of the Aircraft (without in any way
limiting any other rights or remedies against such proposed purchaser(s)
available to Lessor or Lessee), Lessee shall pay the reasonable out-of-pocket
costs and expenses, including legal fees, incurred by the Owner Participant,
Indenture Trustee and Lessor (unless such failure to terminate this Lease is a
consequence of the failure of Lessor or the Owner Participant without due cause
to make, or cause to be made, the payment referred to in the immediately
preceding sentence), if any, in connection with preparation for such sale and
Lessee may give one or more additional Termination Notices, provided no more
than three such notices may be given during the Term and only one such notice
may be given during any 365 day period (not counting, in either case, any
Termination Notice for a Termination Date on which this Lease does not terminate
as a consequence of the failure of Lessor or the Owner Participant without due
cause to make or cause to be made the payment referred to in the immediately
preceding sentence). In the event of any such sale or such retention of the
Aircraft by Lessor and upon compliance by Lessee with the provisions of this
paragraph, the obligation of Lessee to pay Basic Rent or any other amounts
hereunder shall cease to accrue. Upon payment of all amounts that may then be
due hereunder, this Lease shall terminate. Lessor may, but shall be under no
duty to, solicit bids, inquire into the efforts of Lessee to obtain bids or
otherwise take any action in connection with any such sale other than to
transfer (in accordance with the foregoing provisions) to the purchaser named in
the highest bid certified by Lessee to Lessor all of Lessor's right, title and
interest in the Aircraft, against receipt of the payments provided herein.
48
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
(d) Termination as to Engines. Upon compliance with the terms of the
Tax Indemnity Agreement, Lessee shall have the right at its option at any time
during the Term, on at least 30 days' prior written notice, to terminate this
Lease with respect to any Engine. In such event, and prior to the date of such
termination, Lessee shall replace such Engine hereunder by complying with the
terms of Section 10(b) to the same extent as if an Event of Loss had occurred
with respect to such Engine (provided that Lessee shall have no right to pay
Stipulated Loss Value with respect to such Engine), and Lessor shall transfer
title to the replaced Engine as provided in Section 5(b). No termination of
this Lease with respect to any Engine as contemplated by this Section 9(d) shall
result in any reduction of Basic Rent.
SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of Loss
with Respect to the Aircraft. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and the Engines and/or engines then
installed thereon, Lessee shall (1) forthwith (and in any event, within fifteen
days after such occurrence) give Lessor written notice of such Event of Loss and
(2) within 60 days after such occurrence, give Lessor written notice of its
election to perform one of the following options (it being understood that the
failure to give such notice shall be deemed to be an election of the option set
forth in clause (i) below):
(i) Not later than the earlier of (x) the Business Day next
succeeding the 100th day following the occurrence of such Event of Loss or
(y) the third Business Day following receipt by the loss payee of the
insurance proceeds in respect to such Event of Loss (but not earlier than
the first Business Day next succeeding the 65th day following the
occurrence of such Event of Loss) (the applicable day being the "Loss
Payment Date"), Lessee shall, to the extent not paid to Lessor or Indenture
Trustee, as the case may be, as insurance proceeds, pay or cause to be paid
to Lessor as specified in Section 3(e) hereof, (A) the Stipulated Loss
Value of the Aircraft computed as of the Stipulated Loss Value Date
occurring on or immediately following the date of such Event of Loss, plus
(B) if such Stipulated Loss Value Date is a Lease Period Date, Basic Rent
due on such Lease Period Date (excluding Basic Rent payable in advance on
such Lease Period Date), plus (C) unpaid Supplemental Rent with respect to
the Aircraft due on or prior to the date of payment, plus (D) interest on
such Stipulated Loss Value at the Debt Rate from and including such
Stipulated Loss Value Date to, but not including, the date of any advance
payment in respect of Stipulated Loss
49
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Value as provided below, and thereafter on the unpaid balance of such
Stipulated Loss Value from and including the date of such advance payment
to, but excluding, the date such Stipulated Loss Value is paid in full;
provided, however, that if a Lease Period Date shall occur after the
Stipulated Loss Value Date with respect to which Stipulated Loss Value is
determined but prior to the date of such payment of the sum of the amounts
specified in clauses (A), (B), (C) and (D) above or if Basic Rent is
payable in advance on the Stipulated Loss Value Date, Lessee shall pay on
such Lease Period Date an amount equal to the Basic Rent that would have
been due on such Lease Period Date if such Event of Loss had not occurred,
which amount shall be credited as an advance against the amounts payable
pursuant to clauses (A), (B), (C) and (D) above, or
(ii) Not later than the Business Day next succeeding the 100th day
following the occurrence of such Event of Loss, Lessee shall, provided that
no Section 14(a), (b), (f) or (g) Default or any Event of Default shall
have occurred and be continuing, substitute an aircraft or an airframe or
an airframe and one or more engines, as the case may be in accordance with
the terms hereof, provided that if Lessee shall have elected to make a
substitution under this clause (ii) and shall fail for any reason to make
such substitution in accordance with the terms hereof, Lessee shall make
the payments required by clause (i) above as and when due thereunder.
At such time as Lessor shall have received the sum of the amounts
specified in clauses (A), (B), (C) and (D) of subparagraph (i) above, together
with all other amounts that then may be due hereunder (including, without
limitation, all Basic Rent due on or before the date of such payment (other than
Basic Rent payable in advance, if any, on such date)), under the Participation
Agreement and under the Tax Indemnity Agreement, (1) the obligation of Lessee to
pay the installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue, (2) this Lease
shall terminate, (3) Lessor will comply with the terms of the Trust Indenture
and transfer to or at the direction of Lessee, without recourse or warranty
(except as to the absence of Lessor Liens (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens)),
all Lessor's right, title and interest in and to the Airframe and the Engines
"as-is, where-is" and furnish to or at the direction of Lessee, at Lessee's
expense, a bill of sale in form and substance reasonably satisfactory to Lessee
(or any Sublessee), evidencing such transfer, and (4) Lessee will be subrogated
to all claims of
50
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Lessor if any against third parties (other than Lessor's or the Owner
Participant's insurers under policies independently maintained at its own cost
and expense in accordance with Section 11(e) hereof), but only to the extent the
same relate to physical damage to or loss of the Airframe and any Engines which
were subject to such Event of Loss.
In the event Lessee shall elect to substitute an aircraft (or an
airframe or an airframe and one or more engines, as the case may be) Lessee
shall (A) convey or cause to be conveyed to Lessor an aircraft (or an airframe
or an airframe and an engine which, together with the Engines or Engine
constituting a part of the Aircraft but not installed thereon at the time of
such Event of Loss, constitute the Aircraft) free and clear of all Liens (other
than Permitted Liens) and having at least the fair market value, utility and
remaining useful life and being in as good an operating condition as, the
Aircraft subject to such Event of Loss assuming that the Aircraft had been
maintained in accordance with this Lease; provided that any aircraft or airframe
so substituted hereunder shall be of the same make and model or improved model
as those initially leased hereunder and any engine substituted hereunder shall
be an Acceptable Alternate Engine and (B) prior to or at the time of any such
substitution, Lessee (or any Sublessee), at its own expense, will (1) furnish
Lessor with a full warranty bill of sale and a FAA bill of sale, in form and
substance reasonably satisfactory to the Owner Participant, evidencing such
transfer of title, (2) cause a Lease Supplement and a Trust Supplement to be
duly executed by Lessee and filed for recording pursuant to the Federal Aviation
Act, or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in order
to perfect the security interests therein created by or pursuant to the Trust
Indenture (and, with regard to precautionary filings, this Lease), (3) furnish
the Owner Participant with such evidence of Lessor's title to such replacement
aircraft and of compliance with the insurance provisions of Section 11 with
respect to such substituted property as Lessor, in its individual capacity, and
the Owner Participant may reasonably request, (4) provide Owner Participant an
opinion of outside tax counsel, which opinion and counsel shall be satisfactory
to Owner Participant, to the effect that such substitution will not result in
any adverse tax consequences (including under Section 861 of the Code as then in
effect) to Lessor and/or the Owner Participant (it being understood that if such
opinion cannot be given Lessee may indemnify Owner Participant for such adverse
tax consequences in lieu of such opinion in a manner satisfactory in form and
51
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
substance to the Owner Participant), (5) provide Lessor, Owner Participant and
the Indenture Trustee an opinion of counsel, which counsel and opinion shall be
reasonably acceptable to Lessor, in its individual capacity, and the Owner
Participant, to the effect that Lessor and the Indenture Trustee (as assignee of
all right, title and interest of Lessor under the Lease) shall be entitled to
the benefits and protections of Section 1110 of the Bankruptcy Code with respect
to the aircraft substituted hereunder, (6) provide an opinion of counsel to
Lessor and the Indenture Trustee, which opinion and counsel shall be reasonably
acceptable to the Lessor, in its individual capacity, and the Owner Participant,
to the effect that title to such replacement aircraft has been duly conveyed to
Lessor free and clear of all Liens except Permitted Liens and that such
replacement aircraft is duly subjected to the Lien of the Trust Indenture and
(7) provide Lessor, Owner Participant and Indenture Trustee all the
documentation required (or, following the termination of the Trust Indenture,
all the documentation that prior to such termination would have been required)
to be provided by it pursuant to Section 5.01(b) of the Trust Indenture, and
Lessor simultaneously will comply with the terms of the Trust Indenture and
transfer to or at the direction of Lessee, without recourse or warranty (except
as to the absence of Lessor Liens (including for this purpose Liens that would
be Lessor Liens but for the proviso to the definition of Lessor Liens)), all of
Lessor's right, title and interest, if any, in and to the Aircraft or the
Airframe and one or more Engines, as the case may be, "as-is, where-is" with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee, at Lessee's expense, a bill of sale in form and substance reasonably
satisfactory to Lessee, evidencing such transfer. Lessee will be subrogated to
all claims of Lessor, if any, against third parties (other than Lessor's or the
Owner Participant's insurers under policies independently maintained at their
own cost and expense in accordance with Section 11(e) hereof) but only to the
extent the same relate to physical damage to or loss of the Airframe and any
Engine which were subject to such Event of Loss. For all purposes hereof, the
property so substituted shall after such transfer be deemed part of the property
leased hereunder and shall be deemed an "Aircraft," "Airframe" and "Engine," as
the case may be, as defined herein. No Event of Loss with respect to the
Airframe or the Airframe and the Engines or engines then installed thereon for
which substitution has been elected pursuant to Section 10(a)(ii) hereof shall
result in any reduction in Basic Rent.
(b) Event of Loss with Respect to an Engine. Upon the occurrence of
an Event of Loss with respect to an Engine under circumstances in which there
has not occurred an Event of Loss
52
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
with respect to the Airframe, Lessee shall forthwith (and in any event, within
fifteen days after such occurrence) give Lessor written notice thereof and
shall, within forty-five (45) days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the Engine with
respect to which such Event of Loss occurred, title to an Acceptable Alternate
Engine free and clear of all Liens (other than Permitted Liens, which engine may
upon its transfer to Lessor become subject to any and all Permitted Liens) and
having a value and utility at least equal to, and being in as good an operating
condition as and having been maintained in the same manner as, the Engine
subject to such Event of Loss (assuming that such Engine had been maintained in
accordance with this Lease); provided, however, upon written notice to Lessee
given within 20 days after Lessor has received notice of such Event of Loss, the
Lessor may require Lessee to pay with respect to the Engine subject to such
Event of Loss within 45 days after the occurrence of such Event of Loss
(provided that in no event shall such payment be required to be made prior to
the Commencement Date) an amount equal to (A) Engine Cost multiplied by the
percentage specified in Exhibit C hereto opposite the Stipulated Loss Value Date
occurring on or immediately following the date of such Event of Loss, plus (B)
interest on the amount determined pursuant to clause (A) above at the Debt Rate
from and including such Stipulated Loss Value Date to, but excluding, the date
such amount is paid in full; and provided, further, if Lessee pays such
Stipulated Loss Value and interest, then, subject to Section 5(e), Lessee shall
only be obligated to return the Aircraft to Lessor with any Engine attached
thereto with respect to which Lessee has not paid Stipulated Loss Value pursuant
to this Section 10(b) at any time that Lessee is required to return the Aircraft
to Lessor pursuant to the terms hereof; provided further, however, that, in lieu
of paying such Stipulated Loss Value and interest, Lessee may replace the Engine
in accordance with this Section 10(b) if Lessee provides to the Owner
Participant either: (x) an opinion of outside tax counsel, which opinion and
counsel shall be satisfactory to the Owner Participant, to the effect that such
substitution will not result in any adverse tax consequences to the Owner
Participant, or (y) an indemnity, satisfactory in form and substance to the
Owner Participant, for any adverse tax consequences resulting from such
substitution. Prior to or at the time of any such conveyance, Lessee, at its
own expense, will (i) furnish Lessor with a warranty (as to title) bill of sale,
in form and substance reasonably satisfactory to Lessor, with respect to such
replacement engine, (ii) cause a Lease Supplement and Trust Supplement to be
duly executed by Lessee and to be filed for recording pursuant to the Federal
Aviation Act, or the applicable laws, rules and regulations of any other
jurisdiction in which
53
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
the Airframe may then be registered, and cause a financing statement or
statements or other requisite documents of a similar nature (including
precautionary filings) to be filed in such place or places as necessary in order
to perfect the security interests therein created by or pursuant to the Trust
Indenture (and, with regard to precautionary filings, this Lease), (iii) furnish
Lessor with such evidence of Lessor's title to such Acceptable Alternate Engine
and of compliance with the insurance provisions of Section 11 hereof with
respect to such replacement engine as Lessor, in its individual capacity, or the
Owner Participant may reasonably request, (iv) provide Lessor and the Indenture
Trustee an opinion of Lessee's counsel which counsel and opinion shall be
reasonably satisfactory to Lessor, in its individual capacity, or the Owner
Participant to the effect that title to such Acceptable Alternate Engine has
been duly conveyed to Lessor free and clear of all Liens except Permitted Liens
and that such Acceptable Alternate Engine is duly subjected to the Lien of the
Trust Indenture, and (v) provide Lessor, Owner Participant and Indenture Trustee
all the documentation required (or, following the termination of the Trust
Indenture, all the documentation that prior to such termination would have been
required) to be provided by it pursuant to Section 5.01(b) of the Trust
Indenture, and Lessor will comply with the terms of the Trust Indenture and
transfer to or at the direction of Lessee without recourse or warranty (except
as to absence of Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)) all of
Lessor's right, title and interest, if any, in and to (1) the Engine with
respect to which such Event of Loss occurred and furnish to or at the direction
of Lessee, and at Lessee's expense, a bill of sale in form and substance
reasonably satisfactory to Lessee, evidencing such transfer and (2) all claims,
if any, against third parties (other than Lessor's or the Owner Participant's
insurers under policies independently maintained at their own cost and expense
in accordance with Section 11(e) hereof), for damage to or loss of the Engine
subject to such Event of Loss, and such Engine shall thereupon cease to be an
Engine leased hereunder. For all purposes hereof, each such replacement engine
shall, after such conveyance, be deemed part of the property leased hereunder,
and shall be deemed an "Engine." Except to the extent Lessor's Cost is reduced
pursuant to the definition thereof, no Event of Loss with respect to an Engine
under the circumstances contemplated by the terms of this paragraph (b) shall
result in any reduction in Basic Rent.
(c) Application of Payments from Governmental Authorities for
Requisition of Title, etc. Any payments (other than insurance proceeds the
application of which is provided for in Section 11) received at any time by
Lessor or by Lessee from
54
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
any governmental authority or other Person with respect to an Event of Loss,
other than a requisition for use by the United States Government or other
government of registry of the Aircraft or any instrumentality or agency of any
thereof not constituting an Event of Loss, will be applied as follows:
(i) if payments are received with respect to the Airframe (or the
Airframe and any Engine or engines then installed thereon), (A) unless the
same are replaced pursuant to the last paragraph of Section 10(a), after
reimbursement of Lessor (as provided in Section 7.01 of the Trust
Agreement) and the Owner Participant for reasonable costs and expenses, so
much of such payments remaining as shall not exceed the Stipulated Loss
Value and the other amounts payable under Section 10(a) hereof required to
be paid by Lessee pursuant to Section 10(a), shall be applied in reduction
of Lessee's obligation to pay Stipulated Loss Value and the other amounts
payable under Section 10(a) hereof, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of Stipulated Loss Value and such other amounts, and following the
foregoing application, the balance, if any, of such payments shall be
distributed between Lessee and Lessor as their respective interests may
appear; or (B) if such property is replaced pursuant to the last paragraph
of Section 10(a), such payments shall be paid over to or retained by,
Lessee; provided, that Lessee shall have fully performed or, concurrently
therewith, will fully perform the terms of the last paragraph of Section
10(a) with respect to the Event of Loss for which such payments are made;
and
(ii) if such payments are received with respect to an Engine under
circumstances contemplated by Section 10(b) hereof, (A) unless the same is
replaced pursuant to the terms of Section 10(b), after reimbursement of
Lessor (as provided for in Section 7.01 of the Trust Agreement) and the
Owner Participant for reasonable costs and expenses, so much of such
payments remaining as shall not exceed the amounts payable under Section
10(b) hereof by Lessee, shall be applied in reduction of Lessee's
obligation to pay the same, if not already paid by Lessee, or if already
paid by Lessee, shall be applied to reimburse Lessee for its payment of
such amounts and following the foregoing application, the balance, if any,
shall be paid to Lessee; or (B) if such property is replaced pursuant to
Section 10(b), such payments shall be paid over to, or retained by, Lessee,
provided that Lessee shall have fully performed, or concurrently therewith
will perform, the terms of Section
55
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
10(b) with respect to the Event of Loss for which such payments are made.
(d) Requisition for Use of the Aircraft by the United States
Government or Government of Registry of the Aircraft. In the event of the
requisition for use of the Airframe and the Engines or engines installed on the
Airframe during the Term by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any thereof,
Lessee shall promptly notify Lessor of such requisition, and all of Lessee's
obligations under this Lease Agreement with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred (unless
deemed prior to the end of the Term an Event of Loss in which case the foregoing
provisions of this Section 10 shall be applicable). If Lessee shall fail to
return the Aircraft (i) on or before the end of the Term, in the case of a
requisition by the United States government or any agency or instrumentality
thereof or (ii) within the earlier of the end of the Term or two years after
such requisition in the case of a requisition for use by the government of
registry of the Aircraft or any agency or instrumentality thereof (other than
the United States government or any agency or instrumentality thereof), such
failure shall constitute an Event of Loss which shall be deemed to have occurred
in the case of clause (i) on the last day of the Term, and in the case of clause
(ii), on the earlier of the last day of the Term or the expiration of such two-
year period, provided, however, that Lessor may notify Lessee in writing on or
before the twentieth day prior to the last day of the Term that, in the event
Lessee shall fail by reason of such requisition to return the Airframe and such
Engines or engines on or before the end of the Term, such failure shall not be
deemed an Event of Loss. Upon the giving of such notice and such failure to
return by the end of the Term, Lessee shall be relieved of all of its
obligations pursuant to the provisions of Section 5 (but not under any other
Section), except that if any engine not owned by Lessor shall then be installed
on the Airframe, Lessee will, at no cost to Lessor, furnish, or cause to be
furnished, to Lessor a full warranty (as to title) bill of sale with respect to
each such engine, in form and substance reasonably satisfactory to Lessor, in
its individual capacity, and the Owner Participant (together with an opinion of
counsel (which may be Lessee's General Counsel) to the effect that such full
warranty bill of sale has been duly authorized and delivered and is enforceable
in accordance with its terms and that such engines are free and clear of Liens
other than Lessor Liens (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens), against receipt
from Lessor, at Lessee's expense, of a bill of sale evidencing the transfer,
without recourse or warranty (except as
56
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
to the absence of Lessor Liens (including for this purpose Liens that would be
Lessor Liens but for the proviso to the definition of Lessor Liens)), by Lessor
to Lessee or its designee of all of Lessor's right, title and interest in and to
any Engine constituting part of the Aircraft but not then installed on the
Airframe. All payments received by Lessor or Lessee from such government for
the use of such Airframe and Engines or engines during the Term shall be paid
over to, or retained by, Lessee (or, if directed by Lessee, any Sublessee); and
all payments received by Lessor or Lessee from such government for the use of
such Airframe and Engines or engines after the end of the Term shall be paid
over to, or retained by, Lessor unless Lessee shall have exercised its purchase
option hereunder, or there is a deemed Event of Loss hereunder, in which case
such payments shall be made to Lessee.
(e) Requisition for Use of an Engine by the United States Government
or the Government of Registry of the Aircraft. In the event of the requisition
for use of an Engine during the Term by the United States Government or any
other government of registry of the Aircraft or any agency or instrumentality of
any thereof (other than in the circumstances contemplated by subsection (d))
which shall have continued for more than 180 days or, if earlier, until the end
of the Term, Lessee shall replace (or cause any Sublessee to replace) such
Engine hereunder and Lessor and Lessee (or Sublessee as the case may be) shall
comply with the terms of Section 10(b) to the same extent as if an Event of Loss
had occurred with respect to such Engine. Upon compliance with Section 10(b)
hereof, any payments received by Lessor or Lessee from such government with
respect to such requisition shall be paid over to, or retained by Lessee.
(f) Application of Payments During Existence of Events of Default.
Any amount referred to in this Section 10 which is payable to or retainable by
Lessee (or any Sublessee) shall not be paid to or retained by Lessee (or any
Sublessee) if at the time of such payment or retention a Default or an Event of
Default shall have occurred and be continuing, but shall be held by or paid over
to Lessor as security for the obligations of Lessee (or such Sublessee) under
this Lease and applied against Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to Lessee to the extent not previously
applied in accordance with the preceding sentence.
SECTION 11. Insurance. (a) Public Liability and Property Damage
Insurance. (1) Except as provided in clause (2) of this Section 11(a), and
subject to self-insurance to the extent permitted by Section 11(d) hereof,
Lessee will carry or
57
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
cause to be carried with respect to the Aircraft at its or any Sublessee's
expense (i) comprehensive airline liability (including, without limitation,
passenger, contractual, bodily injury, and property damage liability) insurance
(exclusive of manufacturer's product liability insurance) and (ii) cargo
liability insurance, (A) in an amount not less than the greater of (x) the
amounts of comprehensive airline liability insurance from time to time
applicable to aircraft owned or leased, and operated by Lessee of the same type
as the Aircraft and (y) $500,000,000 per occurrence, (B) of the type and
covering the same risks as from time to time are applicable to aircraft owned or
leased, and operated by Lessee of the same type as the Aircraft, and (C) which
is maintained in effect with insurers of recognized reputation and
responsibility; provided, however, that Lessee need not maintain cargo liability
insurance, or may maintain such insurance in an amount less than $500,000,000
per occurrence, as long as the amount of cargo liability insurance, if any,
maintained with respect to the Aircraft is the same as the cargo liability
insurance, if any, maintained for other Boeing Model 747-422 aircraft owned or
leased, and operated by Lessee.
(2) During any period that the Airframe or an Engine, as the case may
be, is on the ground and not in operation, Lessee may carry or cause to be
carried as to such non-operating property, in lieu of the insurance required by
clause (1) above, and subject to the self-insurance to the extent permitted by
Section 11(d) hereof, insurance by insurers of recognized reputation and
responsibility otherwise conforming with the provisions of clause (1) except
that (A) the amounts of coverage shall not be required to exceed the amounts of
comprehensive airline liability insurance from time to time applicable to
property owned or leased by Lessee of the same type as such non-operating
property and which is on the ground and not in operation; and (B) the scope of
the risks covered and the type of insurance shall be the same as from time to
time shall be applicable to property owned or leased by Lessee of the same type
as such non-operating property and which is on the ground and not in operation.
(b) Insurance Against Loss or Damage to the Aircraft. (1) Except as
provided in clause (2) of this Section 11(b), and subject to the provisions of
Section 11(d) hereof permitting self-insurance, Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense, with insurers of
recognized reputation and responsibility, all-risk aircraft hull insurance
covering the Aircraft and fire and extended coverage and all-risk aircraft hull
insurance covering Engines and Parts while temporarily removed from the Aircraft
and not replaced by
58
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
similar components (including, without limitation, aircraft war risk and
governmental confiscation and expropriation (other than by the government of
registry of the Aircraft) and hijacking insurance, if and to the extent the same
is maintained by Lessee (or any Sublessee) with respect to other aircraft owned
or leased, and operated by Lessee (or such Sublessee) on the same routes);
provided, that such insurance shall at all times while the Aircraft is subject
to this Lease be for an amount (taking into account self-insurance to the extent
permitted by Section 11(d) hereof) not less than the Stipulated Loss Value for
the Aircraft; and provided further, that subject to compliance with Section
11(d) hereof, such all-risk property damage insurance covering Engines and Parts
while temporarily removed from the Airframe or an airframe of (in the case of
Parts) an Engine need be obtained only to the extent available at reasonable
cost (as reasonably determined by Lessee). In the case of a loss with respect
to an engine (other than an Engine) installed on the Airframe in circumstances
which do not constitute an Event of Loss with respect to the Airframe, Lessor
shall promptly remit any payment made to it of any insurance proceeds in respect
of such loss to Lessee or any other third party that is entitled to receive such
proceeds.
Except during a period when a Section 14(a), (b), (f) or (g) Default
or an Event of Default has occurred and is continuing, all losses will be
adjusted by Lessee with the insurers giving due regard to Lessor's interest. As
between Lessor and Lessee, it is agreed that all proceeds of insurance
maintained in compliance with the preceding paragraph and received as the result
of the occurrence of an Event of Loss will be applied as follows:
(x) if such payments are received with respect to the Airframe
(or the Airframe and the Engines installed thereon), (i) unless such
property is replaced pursuant to the last paragraph of Section 10(a)
hereof, so much of such payments remaining, after reimbursement of Lessor
(as provided in Section 7.01 of the Trust Agreement) and the Owner
Participant for reasonable costs and expenses, as shall not exceed the
Stipulated Loss Value and the other amounts payable under Section 10(a)
hereof required to be paid by Lessee pursuant to Section 10(a) hereof shall
be applied in reduction of Lessee's obligation to pay such Stipulated Loss
Value and the other amounts payable under Section 10(a) hereof, if not
already paid by Lessee, or, if already paid by Lessee, shall be applied to
reimburse Lessee for its payment of such Stipulated Loss Value and the
other amounts payable under Section 10(a) hereof, and the balance, if any,
of such payments remaining thereafter will be paid
59
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
over to, or retained by, Lessee (or if directed by Lessee, any Sublessee);
or (ii) if such property is replaced pursuant to the last paragraph of
Section 10(a) hereof, such payments shall be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed or, concurrently therewith, will fully perform
the terms of the last paragraph of Section 10(a) hereof with respect to the
Event of Loss for which such payments are made; and
(y) if such payments are received with respect to an Engine under
the circumstances contemplated by Section 10(b) hereof, so much of such
payments remaining after reimbursement of Lessor and the Owner Participant
for reasonable costs and expenses shall be paid over to, or retained by,
Lessee (or if directed by Lessee, any Sublessee), provided that Lessee
shall have fully performed or, concurrently therewith, will fully perform
the terms of Section 10(b) hereof with respect to the Event of Loss for
which such payments are made.
(2) During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by clause (1) above, and subject to the self-insurance to the extent
permitted by Section 11(d) hereof, insurance otherwise conforming with the
provisions of said clause (1) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
leased by Lessee of the same type as the Aircraft similarly on the ground and
not in operation, provided that, subject to the self-insurance to the extent
permitted by Section 11(d) hereof, Lessee shall maintain insurance against risk
of loss or damage to the Aircraft in an amount at least equal to the Stipulated
Loss Value of the Aircraft during such period that the Aircraft is on the ground
and not in operation.
(c) Reports, etc. Lessee will furnish, or cause to be furnished, to
Lessor, the Indenture Trustee, the Owner Participant and, so long as the Pass
Through Trustees are the Certificate Holders, each Pass Through Trustee, on or
before the Delivery Date, and each annual anniversary of the Delivery Date
during the Term, a report, signed by Rollins Hudig Hall of Illinois, Inc. or any
other independent firm of insurance brokers reasonably acceptable to Lessor
which brokers may be in the regular employ of Lessee (the "Insurance Brokers"),
describing in reasonable detail the hull and liability insurance (and property
insurance for detached engines and parts) then carried and maintained with
respect to the Aircraft and stating the opinion
60
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
of such firm that (a) such insurance complies with the terms hereof and (b) that
such insurance together with any self-insurance permitted hereby provides
coverage that are in substantially similar forms, are of such types and have
limits within the range of limits as are customarily carried by U.S. carriers;
provided, however, that the opinion set forth in clause (b) shall not be
required if the Insurance Broker then generally does not provide such an opinion
or will provide such an opinion for material additional cost; and provided
further that all information contained in the foregoing report shall not be made
available by Lessor, the Indenture Trustee, the Pass Through Trustees or the
Owner Participant to anyone except (A) to prospective and permitted transferees
of Lessor's, the Owner Participant's, any Pass Through Trustee's or the
Indenture Trustee's interest or their respective counsel, independent certified
public accountants, independent insurance brokers or other agents, who agree to
hold such information confidential, (B) to Lessor's, Owner Participant's, any
Pass Through Trustee's or the Indenture Trustee's counsel or independent
certified public accountants, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, or (D) as may be necessary for purposes of protecting the interest
of any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) or (D) above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons to whom such disclosures are hereby
permitted. Lessee will cause such Insurance Broker to agree to advise Lessor,
the Indenture Trustee, the Owner Participant and, so long as the Pass Through
Trustees are the Certificate Holders, each Pass Through Trustee in writing of
any act or omission on the part of Lessee of which it has knowledge and which
might invalidate or render unenforceable, in whole or in part, any insurance on
the Aircraft and to advise such Persons in writing at least 30 days (7 days in
the case of war risk and allied perils coverage) prior to the cancellation or
material adverse change of any insurance maintained pursuant to this Section 11,
provided that if the notice period specified above is not reasonably obtainable,
the Insurance Broker shall provide for as long a period of prior notice as shall
then be reasonably obtainable. In addition, Lessee will also cause such
Insurance Broker to deliver to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, each Pass Through Trustee, on or prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of insurance,
a new certificate of insurance, substantially in the same form as delivered by
Lessee to such
61
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
parties on the Delivery Date except for the changes in the report or the
coverage consistent with the terms hereof. In the event that Lessee or any
Sublessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, the Indenture Trustee or, so long as the Pass Through Trustees
are the Certificate Holders, each Pass Through Trustee may at its sole option,
but shall be under no duty to, provide such insurance and, in such event, Lessee
shall, upon demand, reimburse Lessor, the Indenture Trustee or such Pass Through
Trustee, as Supplemental Rent, for the cost thereof to Lessor, such Pass Through
Trustee or the Indenture Trustee, as the case may be; provided, however, that no
exercise by Lessor, a Pass Through Trustee or the Indenture Trustee, as the case
may be, of said option shall affect the provisions of this Lease, including the
provisions that failure by Lessee to maintain the prescribed insurance shall
constitute an Event of Default.
(d) Self-Insurance. Lessee may self-insure the risks required to be
insured against pursuant to this Section 11 under a program applicable to all
aircraft (whether owned or leased) in Lessee's fleet, but in no case shall the
aggregate amount of such self-insurance in regard to Sections 11(a) and 11(b)
hereof exceed for any calendar year, with respect to all of the aircraft
(whether owned or leased) in Lessee's fleet (including, without limitation, the
Aircraft) the lesser of (A) 50% of the highest replacement value of any single
aircraft in Lessee's fleet or (B) 1-1/2% of the average aggregate insurable
value (during the preceding calendar year) of all aircraft (including, without
limitation, the Aircraft) on which Lessee carries insurance. In addition to the
foregoing right to self-insure, Lessee (and any Sublessee) may self-insure to
the extent of any applicable mandatory minimum per aircraft (or, if applicable,
per annum or other period) hull or liability insurance deductible imposed by the
aircraft hull or liability insurer.
(e) Additional Insurance by Lessor and Lessee. Lessee (and any
Sublessee) may at its own expense carry insurance with respect to its interest
in the Aircraft in amounts in excess of that required to be maintained by this
Section 11. The Owner Participant or Lessor may carry for its own account at
its sole cost and expense insurance with respect to its interest in the
Aircraft, provided that such insurance does not prevent Lessee (or any
Sublessee) from carrying the insurance required or permitted by this Section 11
or adversely affect such insurance or materially increase the cost thereof.
(f) Indemnification by Government in Lieu of Insurance.
Notwithstanding any provisions of this Section 11 requiring insurance, Lessor
agrees to accept, in lieu of
62
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
insurance against any risk with respect to the Aircraft, indemnification from,
or insurance provided by, the United States Government or any agency or
instrumentality thereof, the obligations of which are supported by the full
faith and credit of the federal government of the United States, against such
risk in an amount which, when added to the amount of insurance against such risk
maintained by Lessee (or any Sublessee) shall be at least equal to the amount of
insurance against such risk otherwise required by this Section 11 (taking into
account self-insurance permitted by Section 11(d) hereof).
(g) Application of Payments During Existence of Default. Any amount
referred to in this Section 11 which is payable to or retainable by Lessee (or
any Sublessee) shall not be paid to or retained by Lessee (or any Sublessee) if
at the time of such payment or retention a Default or an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to Lessor as
security for the obligations of Lessee under this Lease and, if such a Default
or an Event of Default shall have occurred and be continuing, applied against
Lessee's obligations hereunder as and when due. At such time as there shall not
be continuing any such Default or Event of Default, such amount shall be paid to
Lessee to the extent not previously applied in accordance with the preceding
sentence.
(h) Terms of Insurance Policies. Any policies carried in accordance
with Sections 11(a) and 11(b) hereof covering the Aircraft, and any policies
taken out in substitution or replacement for any such policies, (A) shall name
the Additional Insureds as additional insureds, or, if appropriate, loss payees,
as their respective interests may appear (but without imposing on any such party
liability to pay premiums with respect to such insurance), (B) may provide for
self-insurance to the extent permitted in Section 11(d) hereof, (C) shall
provide that if the insurers cancel such insurance for any reason whatever, or
if the same is allowed to lapse for non-payment of premium or if any material
change is made in the insurance which adversely affects the interest of any
Additional Insured, such lapse, cancellation or change shall not be effective as
to any Additional Insured for thirty days (ten days in the case of lapse for
nonpayment of premium and seven days in the case of war risk and allied perils
coverage) after receipt by such Additional Insured of written notice by such
insurers of such lapse, cancellation or change; provided, however, that if any
notice period specified above is not reasonably obtainable, such policies shall
provide for as long a period of prior notice as shall then be reasonably
obtainable, (D) shall provide that in respect of the respective interests of
each Additional Insured in such policies the insurance shall not be invalidated
by any action or inaction of
63
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
Lessee (or any Sublessee) or any other Person and shall insure the respective
interests of the Additional Insureds, as they appear, regardless of any breach
or violation of any warranty, declaration or condition contained in such
policies by Lessee (or any Sublessee) or by any other Person, (E) shall be
primary without any right of contribution from any other insurance which is
carried by any Additional Insured, (F) shall expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in the same
manner as if there were a separate policy covering each insured, (G) shall waive
any right of the insurers to set-off or counterclaim or any other deduction,
whether by attachment or otherwise, in respect of any liability of any
Additional Insured, and (H) shall provide that (i) in the event of a loss
involving the Aircraft, Airframe, or an Engine for which proceeds are in excess
of $5,000,000 ($2,500,000 if the Aircraft is under sublease), the proceeds in
respect of such loss up to the amount of Stipulated Loss Value for the Aircraft
shall be payable to Lessor (or, so long as the Trust Indenture shall be in
effect, the Indenture Trustee), it being understood and agreed that in the case
of any payment to Lessor (or the Indenture Trustee) otherwise than in respect of
an Event of Loss, Lessor (or the Indenture Trustee) shall, upon receipt of
evidence reasonably satisfactory to it that the damages giving rise to such
payment shall have been repaired or that such payment shall then be required to
pay for repairs then being made, pay the amount of such payment, and any
interest or income earned thereon in accordance with Section 22 hereof, to
Lessee or its order, and (ii) the entire amount of any such loss for which
proceeds are $5,000,000 ($2,500,000 if the Aircraft is under sublease) or less
or the amount of any proceeds of any such loss in excess of Stipulated Loss
Value for the Aircraft shall be paid to Lessee or its order unless a Default or
an Event of Default shall have occurred and be continuing and the insurers have
been notified thereof by Lessor or the Indenture Trustee.
SECTION 12. Inspection. At reasonable times, and upon at least 10
days (or one day if a Section 14(a), 14(b), 14(d) (solely with respect to
Lessee's obligations under Section 7(a) or (b)(viii) or Section 8 hereof), 14(f)
or 14(g) Default or any Event of Default shall have occurred and be continuing)
prior written notice, the Owner Participant or the Indenture Trustee, or their
respective authorized representatives, may inspect the Aircraft (provided,
however, that such inspections by the Owner Participant and its authorized
representatives or the Indenture Trustee and its authorized representative
shall, in regard to each of the Owner Participant and the Indenture Trustee, be
limited to one inspection of the Aircraft during any consecutive twelve-month
period except during the continuance of a Default or an Event of Default when
such inspection right shall not be so
64
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
limited) and inspect and make copies of the books and records of Lessee and any
Sublessee required to be maintained by the FAA or the regulatory agency or body
of another jurisdiction in which the Aircraft is then registered relating to the
maintenance of the Aircraft (at the Owner Participant's or the Indenture
Trustee's risk and expense (unless a Section 14(a), 14(b), 14(f) or 14(g)
Default or any Event of Default shall have occurred and be continuing in which
case such inspection shall be at Lessee's expense), as the case may be) and
shall keep any information or copies obtained thereby confidential and shall not
disclose the same to any Person, except (A) to Lessor and the Pass Through
Trustees and to prospective and permitted transferees of Lessor's, the Owner
Participant's, any Pass Through Trustee's or the Indenture Trustee's interest
(and such prospective and permitted transferee's counsel, independent insurance
advisors or other agents) who agree to hold such information confidential, (B)
to Lessor's, the Owner Participant's, any Pass Through Trustee's or the
Indenture Trustee's counsel, independent insurance advisors or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, (D) as may be necessary for purposes of protecting the interest of
any such Person or for enforcement of this Lease by Lessor or the Indenture
Trustee; provided, however, that any and all disclosures permitted by clauses
(C) and (D) above shall be made only to the extent necessary to meet the
specific requirements or needs of Persons for whom such disclosures are hereby
permitted. Any such inspection of the Aircraft shall be subject to Lessee's
safety and security rules applicable at the location of the Aircraft, shall be a
visual, walk-around inspection of the interior and exterior of the Aircraft and
shall not include opening any panels, bays or the like without the express
consent of Lessee (except in connection with a heavy maintenance visit when a
panel, bay or the like is scheduled or required to be open), which consent
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation or maintenance of the
Aircraft by, or the business of, Lessee (or any Sublessee). Upon receipt by
Lessee of a written request from the Owner Participant specifying that the Owner
Participant desires to have an authorized representative observe the last
scheduled heavy maintenance visit to be performed on the Aircraft (or
substantially equivalent successor type of maintenance work) during the Term,
Lessee shall cooperate with the Owner Participant to enable the Owner
Participant's representative to observe such last scheduled heavy maintenance
visit to be performed on the Aircraft during the Term, including reasonable
advance notification to the Owner Participant of the time and place of such
scheduled heavy maintenance visit; provided that
65
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
the Owner Participant's authorized representative shall merely observe such
scheduled heavy maintenance visit, shall not interfere with or extend in any
manner the normal conduct or duration of the scheduled heavy maintenance visit,
and shall not be entitled to direct any of the work performed in connection with
such scheduled heavy maintenance visit. Neither the Owner Participant nor the
Indenture Trustee shall have any duty to make any such inspection nor shall any
of them incur any liability or obligations by reason of not making any such
inspection.
SECTION 13. Assignment. Except as otherwise provided in the
Operative Documents, Lessee will not, without the prior written consent of
Lessor, assign any of its rights hereunder. Lessor agrees that it will not
assign or convey its right, title and interest in and to this Lease or the
Aircraft except as provided in the Operative Documents. Subject to the
foregoing, the terms and provisions of this Lease shall be binding upon and
inure to the benefit of Lessor and Lessee and their respective successors and
permitted assigns.
SECTION 14. Events of Default. Each of the following events shall
constitute an Event of Default (whether any such event 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) and each such Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) Lessee shall not have made a payment of Basic Rent, Stipulated
Loss Value, Termination Value, EBO Price, Special Termination Value or Premium
within ten (10) days after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Supplemental Rent referred to in paragraph (a) of this Section 14)
after the same shall have become due and such failure shall continue for fifteen
(15) days after Lessee's receipt of written demand therefor by the party
entitled thereto (provided that any failure to pay any amount owed by Lessee
under the Tax Indemnity Agreement or any failure of Lessee to pay to Lessor or
the Owner Participant when due any Excluded Payments shall not constitute an
Event of Default unless written notice is given by the Owner Participant to
Lessee and the Indenture Trustee that such failure shall constitute an Event of
Default); or
(c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained)
66
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
insurance required to be maintained in accordance with the provisions of Section
11 hereof; or
(d) Lessee shall have failed to perform or observe (or caused to be
performed and observed) any other covenant or agreement to be performed or
observed by it under any Operative Document, and such failure shall continue
unremedied for a period of thirty days after written notice thereof by Lessor or
the Indenture Trustee; provided, however, that if Lessee shall have undertaken
to cure any such failure and, notwithstanding the reasonable diligence of Lessee
in attempting to cure such failure, such failure is not cured within said thirty
day period but is curable with future due diligence, there shall exist no Event
of Default under this Section 14 so long as Lessee is proceeding with due
diligence to cure such failure and such failure is in fact cured within 180
days); or
(e) any representation or warranty made by Lessee herein or in the
Participation Agreement or in the Redemption and Refinancing Agreement or any
document or certificate furnished by Lessee in connection herewith or therewith
or pursuant hereto or thereto (except the representations and warranties set
forth in Section 4 of the Tax Indemnity Agreement) shall prove to have been
incorrect in any material respect at the time made and shall remain material at
the time in question; provided, however, such incorrectness shall constitute a
default hereunder only if such incorrectness shall continue uncured for a period
of thirty (30) days after the receipt by Lessee of a written notice from Lessor
or the Indenture Trustee advising Lessee of the existence of such incorrectness;
or
(f) the commencement of an involuntary case or other proceeding in
respect of Lessee in an involuntary case under the federal bankruptcy laws, as
now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law in the United States or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of Lessee or for all or substantially all of
its property, or seeking the winding-up or liquidation of its affairs and the
continuation of any such case or other proceeding undismissed or unstayed for a
period of ninety (90) consecutive days or an order for relief under Chapter 11
of the Bankruptcy Code with respect to Lessee as debtor or any other order,
judgment or decree shall be entered in any proceeding by any court of competent
jurisdiction appointing, without the consent of Lessee, a receiver, trustee or
liquidator of Lessee, or for all or substantially all of its property, or
sequestering of all or substantially all of the property of Lessee and any such
order, judgment or decree or appointment or sequestration shall
67
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
be final or shall remain in force undismissed, unstayed or unvacated for a
period of ninety (90) days after the date of entry thereof; or
(g) the commencement by Lessee of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States, or the consent by Lessee to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of Lessee or for all or substantially all of its
property, or the making by Lessee of any assignment for the benefit of creditors
or Lessee shall take any corporate action to authorize any of the foregoing; or
(h) Lessee shall not be a Certificated Air Carrier;
provided, however, that, notwithstanding anything to the contrary contained in
this Section 14, any failure of Lessee to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of any event that constitutes an Event of Loss so long as Lessee is
continuing to comply with all of the terms of Section 10 hereof.
SECTION 15. Remedies. Upon the occurrence of any Event of Default
and at any time thereafter so long as any such Event of Default shall not have
been remedied, Lessor may, at its option, declare by written notice to Lessee
this Lease Agreement to be in default; and at any time thereafter, so long as
such Event of Default shall be continuing, Lessor may do one or more of the
following with respect to all or any part of the Airframe and any or all of the
Engines as 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, however, that during any period the Aircraft is
subject to the Civil Reserve Air Fleet Program in accordance with the provisions
of Section 7(b) hereof and in the possession of the United States Government or
an instrumentality or agency thereof, Lessor shall not, on account of any Event
of Default, be entitled to do any of the following in such manner as to limit
Lessee's control under this Lease (or any Sublessee's control under any
Sublease) of any Airframe or any Engines, unless at least 60 days' (or such
lesser period as may then be applicable under the Military Airlift Command
program of the United States Government) prior written notice of default
hereunder shall have been given by Lessor by registered or certified mail to
Lessee (and any Sublessee) with a copy
68
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
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) upon the written demand of Lessor and at Lessee's expense,
cause Lessee to return promptly, and Lessee shall return promptly, the
Airframe or any Engine as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with all
the provisions of, Section 5 as if such Airframe or Engine were being
returned at the end of the Term, or Lessor, at its option, may enter upon
the premises where all or any part of the Airframe or any Engine is located
and take immediate possession of and remove the same by summary proceedings
or otherwise, (and, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without liability accruing
to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such
action or otherwise;
(b) sell the Aircraft, the Airframe or any Engine at public or
private sale, as Lessor may determine, or otherwise dispose of, hold, use,
operate, lease to others or keep idle the Aircraft as Lessor, in its sole
discretion, may determine, all free and clear of any rights of Lessee,
except as hereinafter set forth in this Section 15;
(c) Lessor may hold, keep idle or lease to others the Aircraft,
the Airframe or any Engine or any Part thereof, as Lessor in its sole
discretion may determine, free and clear of any rights of Lessee and
without any duty to account to Lessee with respect thereto, except that
Lessee's obligation to pay Basic Rent with respect to the Aircraft on Lease
Period Dates subsequent to the date upon which Lessee shall have been
deprived of use of the Aircraft pursuant to this Section 15 shall be
reduced by the net proceeds, if any, received by Lessor from leasing the
Aircraft, the Airframe or any Engine to any Person other than Lessee;
(d) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (a), (b)
or (c) above with respect to the Aircraft, Lessor, by written notice to
Lessee specifying a payment date which shall be the Lease Period Date not
earlier than ten days from the date of such notice, may demand that Lessee
pay to Lessor, and Lessee shall pay Lessor, on the payment date so
specified, as liquidated
69
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
damages for loss of a bargain and not as a penalty (in lieu of the
installments of Basic Rent for the Aircraft due for Lease Periods
commencing on or after the Commencement Date or the Lease Period Date, as
the case may be, specified as the payment date in such notice), any unpaid
Basic Rent due on Lease Period Dates on or prior to the payment date so
specified plus whichever of the following amounts Lessor, in its sole
discretion, shall specify in such notice (with interest thereon at the Past
Due Rate from such specified payment date until the date of actual payment
of such amount): (i) an amount equal to the excess, if any, of the
Stipulated Loss Value for the Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice over the aggregate fair
market rental value (computed as hereafter in this Section 15 provided) of
such Aircraft for the remainder of the Term, after discounting such
aggregate fair market rental value to present value as of the Lease Period
Date specified as the payment date in such notice at an annual rate equal
to the Past Due Rate; or (ii) an amount equal to the excess, if any, of the
Stipulated Loss Value for such Aircraft, computed as of the Lease Period
Date specified as the payment date in such notice, over the fair market
sales value of such Aircraft (computed as hereafter in this Section
provided) as of the Lease Period Date specified as the payment date in such
notice;
(e) in the event Lessor pursuant to paragraph (b) above, shall
have sold the Aircraft, Lessor, in lieu of exercising its rights under
paragraph (d) above with respect to such Aircraft, may, if it shall so
elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor, on
the date of such sale, as liquidated damages for loss of a bargain and not
as a penalty, any unpaid Basic Rent with respect to the Aircraft due on or
prior to such date plus the amount of any deficiency between the net
proceeds of such sale (after deduction of all reasonable costs of sale) and
the Stipulated Loss Value of such Aircraft, computed as of the Stipulated
Loss Value date on or immediately following the date of such sale, together
with interest, if any, on the amount of such deficiency, at the Past Due
Rate, from the date of such sale to the date of actual payment of such
amount; and/or
(f) Lessor may rescind or terminate this Lease Agreement, and/or
may exercise any other right or remedy which may be available to it under
applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for breach hereof.
70
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
For the purposes of paragraph (c) above, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an arm's-
length transaction between an informed and willing lessee or purchaser, as the
case may be, under no compulsion to lease or purchase, as the case may be, and
an informed and willing lessor or seller in possession, as the case may be, in
each case based upon the actual condition and location of the Aircraft, which
value shall be determined by mutual agreement or, in the absence of mutual
written agreement, pursuant to an appraisal prepared and delivered by a
nationally recognized firm of independent aircraft appraisers nominated by
Lessor, and Lessor shall promptly notify Lessee of such nomination. Any
appraisal obtained pursuant to this Section 15 shall take into account then
prevailing market conditions for aircraft of the same type as the Aircraft. The
cost of such appraisal or appointment shall be borne by Lessee.
In addition, Lessee shall be liable, except as otherwise provided
above, without duplication of amounts payable hereunder, for any and all unpaid
Rent due hereunder before, after or during the exercise of any of the foregoing
remedies, for the payment of Premium, if any, and for all reasonable and actual
legal fees and other costs and expenses incurred by Lessor, the Indenture
Trustee, the Certificate Holders and the Owner Participant in connection with
any default or the exercise of remedies hereunder including the return of the
Airframe or any Engine in accordance with the terms of Section 5 or in placing
such Airframe or Engine in the condition and airworthiness required by such
Section.
At any sale of the Aircraft or any part thereof pursuant to this
Section 15, Lessor, the Indenture Trustee, a Certificate Holder or the Owner
Participant may bid for and purchase such property. Lessor agrees to give
Lessee at least 10 days' written notice of the date fixed for any public sale of
any Airframe or Engine or of the date on or after which will occur the execution
of any contract providing for any private sale. Except as otherwise expressly
provided above, no remedy referred to in this Section 15 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such remedies
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies. No waiver by Lessor of any Default or Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Default or Event of Default. To the extent permitted by applicable law, Lessee
hereby waives any right now or
71
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease, or otherwise use the Aircraft or Parts thereof in mitigation of Lessor's
damages as set forth in this Section 15 or which may otherwise limit or modify
any of Lessor's rights and remedies in this Section 15.
SECTION 16. Lessee's Cooperation Concerning Certain Matters. (a)
Forthwith upon the execution and delivery of each Lease Supplement and Trust
Supplement from time to time required by the terms hereof and upon the execution
and delivery of any amendment to this Lease or to the Trust Agreement or Trust
Indenture, Lessee at its expense will cause such Lease Supplement, Trust
Supplement (and, in the case of the initial Lease Supplement and Trust
Supplement, this Lease, the Trust Agreement and the Trust Indenture as well) or
amendment to be duly filed and recorded, and maintained of record, in accordance
with the applicable laws of the government of registry of the Aircraft. In
addition, Lessee at its expense will promptly and duly execute and deliver to
Lessor such further documents and take such further action as Lessor may from
time to time reasonably request in order more effectively to 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 Lessor and the Indenture
Trustee hereunder, including, without limitation, if requested by Lessor, at the
expense of Lessee, the execution and delivery of supplements or amendments
hereto, each in recordable form, subjecting to this Lease and the Trust
Indenture, any airframe or engine substituted for the Airframe or any Engine
pursuant to the terms thereof and the recording or filing of counterparts
thereof, in accordance with the laws of such jurisdictions as Lessor may from
time to time reasonably request.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the Owner
Participant and, so long as the Pass Through Trustees are the Certificate
Holders, the Pass Through Trustees:
(i) Quarterly Statements - As soon as practicable after the end
of the first, second, and third quarterly fiscal periods in each fiscal
year of Lessee, and in any event within 60 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such quarter setting forth in comparative form the amount for the end
of the corresponding period of the preceding fiscal year,
(2) consolidated statements of income and retained earnings
of Lessee for such quarterly period,
72
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
setting forth in comparative form the amount for the corresponding
period of the preceding fiscal year, and
(3) consolidated statements of cash flow of Lessee for the
portion of the fiscal year ending with said quarter, setting forth in
comparative form the amount for the corresponding period of the
preceding fiscal year;
(ii) Annual Statements - As soon as practicable after the end of
each fiscal year, and in any event within 120 days thereafter, duplicate
copies of:
(1) a consolidated balance sheet of Lessee as at the end of
such year, and
(2) consolidated statements of income and retained earnings
and of cash flow of Lessee for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year and accompanied by an auditor's report of a firm of independent
certified public accountants of recognized national standing (which report
may be adverse, qualified or disclaim an opinion);
(iii) SEC Reports - Promptly upon their becoming available, one
copy of each financial statement, report, or proxy statement sent by UAL
Corporation to its shareholders generally, and of each regular or periodic
report and any prospectus (in the form in which it becomes effective) filed
by Lessee or UAL Corporation with the Securities and Exchange Commission or
any successor agency; and
(iv) Notice of Default or Claimed Default -Immediately upon an
officer of Lessee becoming aware of the existence of a Default or an Event
of Default (or that Lessor has given notice or taken any other action with
respect to an Event of Default or a claimed default under this Lease), a
written notice specifying the nature of the Default, Event of Default, or
claimed default and any such notice given or action taken by Lessor and
what action Lessee is taking or proposes to take with respect thereto.
(c) Commencing in 1994, on or before April 30 of each year during the
Term, Lessee will deliver to Lessor and the Indenture Trustee a certificate of
Lessee, signed by the
73
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
President, a Vice President, the Chief Financial Officer or the principal
accounting officer of Lessee to the effect that the signer is familiar with or
has reviewed the relevant terms of this Lease and the signer does not have
knowledge of the existence, as of the date of such certificate, of any condition
or event which constitutes a Default or an Event of Default.
SECTION 17. Notices. All notices required under the terms and
provisions hereof shall be in writing (including telex, telecopier or similar
writing) and shall be effective (a) if given by telecopier when transmitted and
the appropriate confirmation received; provided, that any such notice is
confirmed by certified mail, (b) if given by certified mail, three Business Days
after being deposited in the mails, (c) if given by telex, upon receipt by the
party transmitting the telex of such party's callback code at the end of such
telex (receipt of confirmation in writing not being necessary to the
effectiveness of any telex) and (d) if given by other means, when received or
personally delivered, addressed:
(i) if to Lessee, at P. O. Box 66100, Chicago, Illinois 60666(or,
if given by overnight delivery service, 1200 East Algonquin Road, Elk Grove
Township, Illinois 60007) Attention: Vice President and Treasurer,
telecopier number (708) 952-7117, or to such other address or telecopier
number as Lessee shall from time to time designate in writing to Lessor;
(ii) if to Lessor, at 225 Franklin Street, Boston, Massachusetts
02110 (or, if given by overnight delivery service) Two International Place,
Boston, Massachusetts 02110) Attention: _____________________, telecopier
number (617) 664-5367 or to such other address or telecopier number as
Lessor shall from time to time designate in writing to Lessee;
(iii) if to the Indenture Trustee, the Owner Participant or any
Pass Through Trustee, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at such address or telecopier
number as the Indenture Trustee, the Owner Participant or such Pass Through
Trustee shall have furnished by notice to Lessor and to Lessee, and, until
an address is so furnished, addressed to the Indenture Trustee, the Owner
Participant or such Pass Through Trustee at its address or telecopier
number set forth in Schedule I to the Participation Agreement; and
(iv) If to a Certificate Holder which is not a Pass Through
Trustee, addressed to such Certificate Holder
74
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
at its address stated in the Loan Certificate Register maintained pursuant
to the Trust Indenture.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
(a) This Lease is a net lease, and it is intended that the Lessee
shall pay all costs and expenses of every character, whether seen or unforeseen,
ordinary or extraordinary or structural or non-structural, in connection with
the use, operation, maintenance, repair and reconstruction of the Airframe and
each Engine by the Lessee, including the costs and expenses particularly set
forth in this Lease. Except as set forth in this Section 18(a), the Rent which
Lessee is obligated to pay shall be paid without the necessity of notice or
demand and without set-off, counterclaim, abatement, suspension, deduction or
defense. If at any time that Lessee is required (a) to make a payment of
Termination Value or Fair Market Sales Value pursuant to Section 9 or Stipulated
Loss Value pursuant to Section 10, or (b) to pay the purchase price of the
Aircraft pursuant to Section 19(b), there shall exist a Lessor Lien with respect
to the Aircraft (including for this purpose Liens that would be Lessor Liens but
for the proviso to the definition of Lessor Liens) relating to the Owner
Participant (or Lessee shall have previously incurred a charge to discharge such
a Lessor Lien), then Lessee shall be entitled to deduct from the portion
required to be paid to the Owner Participant of such payment of Termination
Value or Fair Market Sales Value, or such payment of the purchase price, or any
combination thereof, as the case may be, an amount sufficient to so reimburse
Lessee or to reimburse Lessee for the cost of discharging such Lessor Lien, as
the case may be. Notwithstanding anything contained in this Section 18(a) to
the contrary, any payments of Fair Market Sales Value, Termination Value,
Stipulated Loss Value, Special Termination Value or EBO Price made to the
Indenture Trustee shall be in an amount which, together with any other amounts
payable hereunder, is at least sufficient to pay in full, as of the date of
payment thereof, the amount of principal of, and any accrued and unpaid interest
on, the outstanding Loan Certificates, together with Premium, if any, thereon
and amounts due the Certificate Holders under the Trust Indenture, if any, and,
to such extent, shall not be subject to set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall not
terminate nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated
75
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
to pay hereunder, nor shall the obligations hereunder of the Lessee be affected,
by reason of (A) any damage to or the destruction or loss of all or any portion
of the Airframe or any Engine from whatever cause, (B) the loss or theft of any
portion of the Airframe or any Engine, (C) the taking of the Airframe or any
Engine or any portion thereof by condemnation, confiscation, requisition or
otherwise, (D) the prohibition, limitation or restriction of the Lessee's use of
all or any part of the Airframe or any Engine, or the interference with such use
by any Person, (E) the inadequacy or incorrectness of the description of any
portion of the Airframe or any Engine or the failure of this Lease to demise to
the Lessee the Airframe or any Engine or any portion thereof, (F) the Lessee's
acquisition or ownership of all or any part of the Airframe or any Engine
otherwise than pursuant to an express provision of this Lease, (G) any defect in
compliance with specifications, condition, merchantability, design,
airworthiness, quality, durability, operation or fitness for use for any purpose
of the Airframe or any Engine or any portion thereof, (H) any defect in the
title to, or registration of or the existence of any Liens or rights of others
whatsoever with respect to, the Airframe or any Engine or any portion thereof,
(I) any insolvency, bankruptcy, reorganization or similar proceedings by or
against any Sublessee or any Person (J) any breach, default or misrepresentation
by the Lessor, any Participant or the Indenture Trustee under this Lease or any
other Operative Document or any of the documents referred to herein or therein
or (K) any invalidity or unenforceability, in whole or in part, of this Lease or
any other Operative Document or any of the documents referred to herein or
therein, or any other infirmity herein or therein, or any lack of power or
authority of any party to this Lease or any other Operative Document or any such
documents to enter into the same, or (L) any other circumstance, happening or
act whatsoever, whether or not unforeseen or similar to any of the foregoing, it
being the intention of the parties hereto that the obligations of the Lessee
shall be absolute and unconditional and shall be separate and independent
covenants and agreements and shall continue unaffected unless and until this
Lease shall have terminated in accordance with its terms upon payment by Lessee
of all sums payable by Lessee hereunder and performance by Lessee of all
obligations required to be performed by Lessee hereunder.
The Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or avoid
this lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting the Lessor or the Owner Participant or any assignee of the
Lessor the Owner Participant or any other action
76
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
with respect to this Lease which may be taken in any such proceeding by any
trustee or receiver of the Lessor or the Owner Participant or of any assignee of
the Lessor or the Owner Participant or by any court or any of the foregoing
actions which may be taken by or against any of the Lessor's predecessors in
interest in the Airframe or any Engine.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, without limitation of the other rights and
remedies of Lessor hereunder, to pay to Lessor an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Lease not been terminated in whole or in part.
Except as expressly provided herein, the Lessee waives all rights now
or hereafter conferred by law (x) to quit, terminate, rescind or surrender this
Lease or the Airframe or any Engine or any part thereof, or (y) to any
abatement, suspension, deferment, return or reduction of the Rent.
SECTION 19. Renewal Options; Purchase Options; Valuation.
(a) Renewal Options.
(1) Fixed Renewal Terms. Not less than 180 days nor more than
365 days before the end of the Basic Term or any Fixed Renewal Term, Lessee
may, so long as no Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) hereof or Section 8 hereof),
(f) or (g) Default or any Event of Default has occurred and is continuing,
deliver to Lessor an irrevocable written notice (which at the option of
Lessee made at any time prior to 90 days prior to the end of the Basic Term
or such Fixed Renewal Term may be deemed a notice to exercise the
applicable purchase option in Section 19(b)) electing to renew this Lease
for a term or terms having a duration and at a Basic Rent as determined
below (each such term being herein referred to as a "Fixed Renewal Term").
At least 180 days, before the end of the Basic Term Lessee shall, as a
condition to its exercise of any option set forth in this Section 19(a)(1),
notify Lessor of its demand for an appraisal pursuant to the appraisal
procedures of Section 19(c) hereof. The appraiser(s) so appointed shall
determine the total useful life, the remaining useful life and the future
residual value of the Aircraft on the expiration date for a Fixed Renewal
Term as may be set by reason of the maximum period therefor in accordance
with the constraints set forth in the following two sentences. The
duration of
77
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
each Fixed Renewal Term shall be a period specified by Lessee before the
end of the Basic Term (or the preceding Fixed Renewal Term, as the case may
be) which is not less than one year and not more than three years (in
integral multiples of six months). Notwithstanding the foregoing, the
aggregate term of all Fixed Renewal Terms shall not exceed the lesser of
(a) three years and (b) the longest period of time (i) which would cause
the Term, after giving effect to all such Fixed Renewal Terms, to be equal
to at least 80% of the then estimated useful life of the Aircraft as
determined by the appraiser(s) and (ii) at the expiration of which the
residual value of the Aircraft, as estimated by the appraiser(s), would be
at least equal to 20% of Lessor's Cost (without taking into account
inflation or deflation during the Term). The annual Basic Rent payable
during each Fixed Renewal Term shall be equal to one-half of the average
annual Basic Rent payments for the Aircraft over the Basic Term.
(2) Fair Market Renewal Term. So long as no Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or
(b)(viii) hereof or Section 8 hereof), (f) or (g) Default or any Event of
Default has occurred and is continuing, Lessee shall have the right to
renew this Lease for additional periods of at least one year commencing at
the end of the Basic Term, any Fixed Renewal Term or any prior Fair Market
Renewal Term for a Basic Rent equal to the Fair Market Rental Value of the
Aircraft for such period (each such renewal term, a "Fair Market Renewal
Term"); provided, however, each Fair Market Renewal Term shall be an
integral multiple of six months. Notwithstanding the foregoing, the
aggregate term for all Fair Market Renewal Terms shall not exceed three
years. Each such option to renew shall be exercised upon delivery by
Lessee to Lessor of irrevocable written notice of Lessee's intent to renew
the Lease at least 180 days (but not more than 365 days) prior to the
commencement of such Fair Market Renewal Term (which at the option of the
Lessee made at any time prior to 90 days prior to the anticipated
commencement of such Fair Market Renewal Term may be deemed a notice to
exercise the applicable purchase option in Section 19(b)).
(3) Waiver. If no written notice is delivered by Lessee to
Lessor pursuant to Section 19(a)(1) or (2) on or before the day specified
therefore, Lessee shall be deemed to have waived any right to renew this
Lease.
78
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
(4) Conditions Precedent, Payment of Basic Rent. At the end of
the Basic Term or any Renewal Term, if Lessee has elected to renew this
Lease as aforesaid, and provided that there shall not then have occurred
and be continuing a Default or an Event of Default and that all necessary
governmental authorizations and approvals shall have been received and that
Basic Rent for the Renewal Term has already been determined as above
provided, (i) this Lease shall continue in full force and effect during the
Renewal Term, and (ii) Basic Rent for such Renewal Term shall be payable in
semi-annual installments in advance or arrears as was the basis of the
Basic Rent being paid immediately prior to such Renewal Term, each such
installment being due and payable on each Lease Period Date occurring
during the Renewal Term.
(5) Termination Value; Stipulated Loss Value. The amounts which
are payable during any Renewal Term in respect of Termination Value as used
in Section 15 and Stipulated Loss Value with respect to the Aircraft shall
be determined on the basis of the Fair Market Sales Value of the Aircraft
as of the commencement of such Renewal Term, amortized on a straight-line
basis over such Renewal Term to the projected Fair Market Sales Value of
the Aircraft as of the expiration of such Renewal Term, as such Fair Market
Sales Value in each case is determined prior to the commencement of such
Renewal Term. In determining Fair Market Sales Value for purposes of
calculating Stipulated Loss Value and Termination Value for any Renewal
Term effect shall be given to the encumbrance on the Aircraft of any Fixed
Renewal Term available or in force.
(b) Purchase Options. Lessee shall have the option, so long as no
Section 14(a), (b), (f) or (g) Default or any Event of Default exists on the
date notice of exercise may be given, (i) with respect to subsections (1) and
(2) below, upon not more than 365 days and not less than 90 days irrevocable
prior written notice to Lessor and (ii) with respect to subsections (3) and (4)
below, upon not more than 365 days and not less than 180 days irrevocable prior
written notice to Lessor (which at the option of the Lessee made at any time
prior to 90 days prior to the relevant purchase date may be deemed a notice of
the applicable renewal option pursuant to Section 19(a)(1) or 19(a)(2) as the
Lessee may designate) (each a "Purchase Option Date"), to terminate this Lease
and to purchase the Aircraft:
(1) on any Special Purchase Option Date for a purchase price
equal to the greater of (x) the Fair Market Sales Value of the Aircraft on
such date or (y) the amount
79
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
determined by multiplying Lessor's Cost by the Special Termination Value
Percentage with respect to such Date (with respect to any such Date, the
"Special Termination Value");
(2) on the EBO Date for a purchase price equal to the amount
determined by multiplying Lessor's Cost by the EBO Percentage payable on
the EBO Date as provided in Exhibit H hereto (the "EBO Price");
(3) on the last Business Day of the Basic Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date;
and
(4) on the last Business Day of any Renewal Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft on such date.
Notwithstanding the foregoing but subject to the provisions of Section 8(r) of
the Participation Agreement, the purchase price on any Purchase Option Date
shall be sufficient, together with all other amounts payable simultaneously by
Lessee, to pay in full the payments then required to be made on account of the
principal amount (and Premium, if any) of and interest on the Loan Certificates
then outstanding. Upon payment to Lessor in immediately available funds of the
full amount of the purchase price (less the principal amount of the Loan
Certificates assumed by the Lessee in accordance with Section 8(r) of the
Participation Agreement) plus all Basic Rent due on or prior to such purchase
date (unless denominated "advance" rental), all Supplemental Rent due on or
prior to such purchase date (including amounts equal to Premium, if any) and
payment of any other amounts then due hereunder (including all reasonable costs
or expenses of Lessor (including any applicable sales or transfer taxes) and the
Owner Participant in connection with such purchase), Lessor will transfer to
Lessee, without recourse or warranty (except as to the absence of Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens)), all of Lessor's right, title and interest
in and to the Aircraft.
(c) Valuation. At any time not earlier than 365 days prior to the
date on which Lessee may purchase an Aircraft pursuant to Section 19(b) hereof
or renew this Lease pursuant to Section 19(a) hereof, Lessee may deliver to
Lessor a revocable notice of its intent to exercise its renewal option or
purchase option. For all purposes of this Section 19, including the appraisal
referred to in this Section 19(c), in determining Fair Market Rental Value or
Fair Market Sales Value, the Aircraft shall be valued (i) as if in the condition
and otherwise in
80
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
compliance with the terms of Section 5 (but subject to Section 5(e)) upon a
return of the Aircraft in the United States and as if it had been maintained at
all times as required in accordance with Section 7(a)(1) and (2) and Section 8,
(ii) on the basis of the value which would obtain in an arm's-length transaction
between an informed and willing buyer or user or lessee (other than a lessee or
an Affiliate of a lessee currently in possession or a used equipment scrap
dealer) under no compulsion to buy or lease and an informed and willing seller
or lessor unaffiliated with such buyer-user or lessee and under no compulsion to
sell or lease, and (iii) in the case of such valuation for determining Fair
Market Rental Value, assuming such lessee would have substantially the same
obligations during the Fair Market Renewal Term as provided hereunder including
without limitation the obligations of Lessee to carry and maintain the insurance
required by Section 11 hereof. Upon receipt of such notice Lessor and Lessee
shall confer in good faith with a view to reaching agreement on the Fair Market
Rental Value or Fair Market Sales Value of the Aircraft. If the parties have
not so agreed by 240 days prior to the end of the Basic Term or the Renewal Term
in question, then the question shall be determined by an appraisal mutually
agreed to by two recognized independent aircraft appraisers, one of which
appraisers shall be chosen by Lessor and one by Lessee within five Business Days
after Lessor or Lessee shall have received written notice from the other party
of a demand that such an appraisal be made, which notice shall specify the
appraiser chosen by the party giving the notice or, if such appraisers cannot
agree on the amount of such appraisal within five Business Days after the end of
such five-day period, each shall render its own appraisal and shall by mutual
consent choose another appraiser within five Business Days after the end of such
five-day period. If, within such five-day period, such two appraisers fail to
appoint a third appraiser, then either Lessor or Lessee, on behalf of both, may
apply to the American Arbitration Association (or any successor organization
thereto) in Chicago, Illinois for the appointment of such third appraiser. The
decision of the third appraiser so appointed shall be given within ten Business
Days after the appointment of such third appraiser. As soon as the third
appraiser has delivered his appraisal, that appraisal shall be compared with the
appraisals given by the other two appraisers. If the determination of one
appraiser is more disparate from the average of all three determinations than
each of the other two determinations, then the determination of such appraiser
shall be excluded, the remaining two determinations shall be averaged and such
average shall be final and binding upon the parties hereto; otherwise the
average of all three determinations shall be final and binding upon the parties
thereto. Lessee and Lessor shall equally bear all expenses relating to such
appraisal procedure (other than an
81
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
appraisal procedure related to Lessee's purchase option under Section 19(b)(1),
the costs of which Lessee shall in all events bear), provided, that if such
transaction is not consummated (other than as the result of the fault of Lessor)
Lessee shall bear all expenses relating to such appraisal procedure.
SECTION 20. Security for Lessor's Obligation to Certificate Holders.
In order to secure the indebtedness evidenced by the Loan Certificates, Lessor
has agreed in the Trust Indenture, among other things, to assign to the
Indenture Trustee this Lease and to mortgage the Aircraft in favor of the
Indenture Trustee, subject to the reservations and conditions therein set forth.
To the extent, if any, that this Lease 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 may be created through the
transfer or possession of any counterpart other than the original counterpart,
which shall be identified as the counterpart containing the receipt therefor
executed by the Indenture Trustee as indenture trustee under the Trust Indenture
on the signature page thereof. Lessee hereby accepts and consents to the
assignment of all Lessor's right, title and interest in and to this Lease
pursuant to the terms of the Trust Indenture. Lessee agrees to pay directly to
the Indenture Trustee (or, after receipt by Lessee of notice from the Indenture
Trustee of the discharge of the Trust Indenture, to Lessor), all amounts of Rent
(other than Excluded Payments) due or to become due hereunder and assigned to
the Indenture Trustee and Lessee agrees that the Indenture Trustee's right to
such payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance. Notwithstanding the foregoing assignment of this
Lease, the obligations of Lessor to Lessee to perform the terms and conditions
of this Lease shall remain in full force and effect. Lessee further
acknowledges that the Trust Indenture provides that so long as the Loan
Certificates are outstanding Lessor may not consent to any amendment,
modification or waiver to this Lease without the prior consent of the Indenture
Trustee (except as provided in Section 11.06 of the Trust Indenture) and Lessee
agrees to provide to the Indenture Trustee a copy of all notices, consents,
certificates or other information provided hereunder to Lessor.
SECTION 21. Lessor's Right to Perform for Lessee. If 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, then (but in each case,
except in the case of failure to pay Rent or in the case of failure to maintain
insurance as required hereunder, no earlier than five Business Days after notice
as to the occurrence of such failure,
82
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
whether or not it shall yet constitute an Event of Default hereunder) Lessor may
itself make such payment or perform or comply with such agreement but shall not
be obligated hereunder to do so, and the amount of such payment and the amount
of the reasonable expenses of 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 Lessee upon demand.
SECTION 22. Investment of Security Funds; Liability of Lessor Limited.
(a) Investment of Security Funds. Any moneys held by Lessor as
security hereunder for future payments to Lessee shall, until paid to Lessee, be
invested by Lessor or, if the Trust Indenture shall not have been discharged, by
the Indenture Trustee, as the case may be, as Lessee (or in the event a Default
under Section 14(a), (b), (f) or (g) or an Event of Default has occurred and is
continuing, Lessor) may from time to time direct in writing (and in absence of a
written direction by Lessee, there shall be no obligation to invest such moneys)
in (i) obligations of, or guaranteed by, the United States Government or
agencies thereof, (ii) open market commercial paper of any corporation
incorporated under the laws of the United States of America or any State thereof
rated at least P-1 or its equivalent by Moody's Investors Service, Inc. or at
least A-1 or its equivalent by Standard & Poor's Corporation, (iii) certificates
of deposit issued by commercial banks organized under the laws of the United
States or of any political subdivision thereof having a combined capital and
surplus in excess of $200,000,000 which banks or their holding companies have a
rating of A or its equivalent by Moody's Investors Service, Inc. or Standard &
Poor's Corporation; provided, however, that the aggregate amount at any one time
so invested in certificates of deposit issued by any one bank shall not exceed
5% of such bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (iii) or any subsidiary thereof and (v) repurchase
agreements with any financial institution having combined capital and surplus of
at least $200,000,000 with any of the obligations described in clause (i)
through (iv) as collateral. There shall be promptly remitted to Lessee or its
order (but no more frequently than monthly) any gain (including interest
received) realized as a result of any such investment (net of any fees, taxes,
commissions and other expenses, if any, incurred in connection with such
investment) unless a Section 14(a), (b), (d) (solely with respect to Lessee's
obligations under Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g)
Default or an Event of Default shall have occurred and be continuing. If a
Default
83
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
under Section 14(a), (b), (d) (solely with respect to Lessee's obligations under
Section 7(a) or (b)(viii) or Section 8 hereof), (f) or (g) or an Event of
Default shall have occurred and be continuing, Lessor or if the Trust Indenture
shall not have been discharged, the Indenture Trustee as assignee of Lessor,
shall hold any such gain as security for the obligations of Lessee under this
Lease and apply it against such obligations as and when due, and once all such
Defaults and Events of Default have been remedied any gain not so applied shall
be remitted to Lessee. Lessee shall be responsible for any net loss realized as
a result of any such investment and shall reimburse Lessor (or the Indenture
Trustee, as the case may be) therefor on demand.
(b) Liability of Lessor Limited. It is expressly agreed and
understood that all representations, warranties and undertakings of Lessor
hereunder shall be binding upon Lessor only in its capacity as trustee under the
Trust Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct or for breach of its covenants, representations and
warranties contained herein, to the extent covenanted or made in its individual
capacity.
SECTION 23. Miscellaneous. 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No term or provision of
this Lease may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by Lessor, Lessee and any assignee of Lessor's
rights hereunder. This Lease shall constitute an agreement of lease, and
nothing contained herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft except as a lessee only. The section and
paragraph headings in 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 and all references herein to numbered sections, unless
otherwise indicated, are to sections of this Lease. THIS LEASE HAS BEEN
DELIVERED IN THE STATE OF ILLINOIS AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease 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.
84
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
SECTION 24. Successor Trustee. Lessee agrees that in the case of the
appointment of any successor Owner Trustee pursuant to the terms of the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee, succeed to all the rights, powers and title of Lessor
hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all
purposes hereof without in any way altering the terms of this Lease or Lessee's
obligations hereunder. One such appointment and designation of a successor
Owner Trustee shall not exhaust the right to appoint and designate further
successor Owner Trustees pursuant to the Trust Agreement, but such right may be
executed repeatedly as long as this Lease shall be in effect.
SECTION 25. Bankruptcy. Lessee hereby acknowledges that Lessor and
the Indenture Trustee are entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft and that this Lease is a "lease"
within the meaning of said Section 1110, including that it is to be treated as a
lease for federal tax purposes. Lessee agrees not to take any position in
connection with any bankruptcy proceedings involving it that is inconsistent
with a lessor's rights under Section 1110 of the Bankruptcy Code or any
comparable or successor provision affording protection to lessors of aircraft.
* * *
85
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Second
Amended and Restated Lease Agreement to be duly executed as of the day and year
first above written.
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly
provided in Section 4 hereof, but solely as
Owner Trustee,
Lessor
By __________________________________
Vice President
UNITED AIR LINES, INC.,
Lessee
By __________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Second Amended and
Restated Lease Agreement is hereby acknowledged on this _____ day of May,
1995./1/
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION
Indenture Trustee
By _________________________________
Authorized Officer
- --------------------
/1/This language contained in the original counterpart only.
86
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT A
FIRST AMENDED AND RESTATED LEASE SUPPLEMENT NO. 1 (1993 747 A)
FIRST AMENDED AND RESTATED LEASE SUPPLEMENT No. 1 (1993 747 A), dated
May __, 1995, between STATE STREET BANK AND TRUST COMPANY, not in its individual
capacity, but solely as Owner Trustee under the First Amended and Restated Trust
Agreement (1993 747 A), dated as of May 1, 1995, between such Owner Trustee and
the Owner Participant referred to therein (such Owner Trustee, in its capacity
as such Owner Trustee being herein called "Lessor"), and UNITED AIR LINES, INC.
("Lessee").
Lessor and Lessee have heretofore entered into that certain Second
Amended and Restated Lease Agreement (1993 747 A), dated as of May 1, 1995,
relating to one Boeing 747-422 aircraft (herein called the "Lease" and the
defined terms therein being hereinafter used with the same meanings). The Lease
provides for the execution and delivery from time to time of Lease Supplements
for the purpose of leasing the Airframe and Engines under the Lease as and when
delivered by Lessor to Lessee in accordance with the terms thereof.
The Lease relates to the Airframe and Engines described below, and a
counterpart of the Lease is attached hereto, and made a part hereof, and this
Lease Supplement together with such attachment, is being filed for recordation
on the date hereof with the Federal Aviation Administration as one document./2/
The Lease relates to the Airframe and Engines described below, and a
counterpart of that certain Lease Agreement (1993 747 A) dated as of April 1,
1993 between Lessee and Wilmington Trust Company, as Original Lessor, attached
and made a part of Lease Supplement No. 1 (1993 747 A) dated April 20, 1993, has
been recorded by the Federal Aviation Administration on April 21, 1995, as one
document and assigned Conveyance No. FF08936./3/
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee under the Lease
and Lessee hereby accepts and leases from Lessor under the Lease the
following described Boeing Model
- -------------------
/2/This language for Lease Supplement No. 1.
/3/This language for other Lease Supplements.
87
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
747-422 aircraft (the "Aircraft"), which Aircraft as of the date hereof
consists of the following components:
(i) Airframe: U.S. Registration No. N189UA and
manufacturer's serial no. 26878; and
(ii) Engines: four (4) Pratt & Whitney Model PW4056 engines
bearing, respectively, manufacturer's serial nos. P727301, P727302,
P727303 and P727304 (each of which engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower).
2. The Delivery Date of the Aircraft was April 20, 1993. Except
as otherwise provided in the Lease, the Term for the Aircraft shall
commence on the Delivery Date and end on the Lease Expiry Date.
3. Lessee hereby confirms its agreement to pay Lessor Basic Rent
for the Aircraft throughout the Term therefor in accordance with Section 3
of the Lease.
4. Lessee hereby confirms to Lessor that Lessee has accepted the
Aircraft for all purposes hereof and of the Lease as being airworthy, in
good working order and repair and without defect or inherent vice in title,
condition, design, operation or fitness for use; provided, however, that
nothing contained herein or in the Lease shall in any way diminish or
otherwise affect any right Lessee or Lessor may have with respect to the
Aircraft against The Boeing Company, or any subcontractor or supplier of
The Boeing Company, under the Purchase Agreement or otherwise.
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, 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.
* * *
88
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
IN WITNESS WHEREOF, Lessor and Lessee have caused this First Amended and
Restated Lease Supplement to be duly executed on the day and year first above
written.
STATE STREET BANK AND TRUST
COMPANY, not in its individual
capacity, but solely as Owner
Trustee,
Lessor
By:
---------------------------------
Title:
------------------------------
UNITED AIR LINES, INC.,
Lessee
By:
---------------------------------
Vice President and Treasurer
Receipt of this original counterpart of the foregoing First Amended and
Restated Lease Supplement is hereby acknowledged on this _____ day of May,
1995./4/
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
Indenture Trustee
By
----------------------------------
Authorized Officer
- ---------------------
/4/This language contained in the original counterpart only.
A-3
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT B
BASIC RENT AND EXCESS AMOUNT SCHEDULE
-------------------------------------
<TABLE>
<CAPTION>
ARREARS RENT ADVANCE RENT EXCESS AMOUNT
AS A PERCENTAGE AS A PERCENTAGE AS A PERCENTAGE
DATE OF LESSOR'S COST OF LESSOR'S COST OF LESSOR'S COST
- ---- ---------------- ---------------- ----------------
<S> <C> <C> <C>
</TABLE>
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT B TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT C
STIPULATED LOSS VALUE SCHEDULE
------------------------------
<TABLE>
<CAPTION>
STIPULATED LOSS VALUE
DATE (as a percentage of Lessor's Cost)
- ---- ----------------------------------
<S> <C>
</TABLE>
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT C TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT D
TERMINATION VALUE SCHEDULE
--------------------------
<TABLE>
<CAPTION>
TERMINATION VALUE
DATE (as a percentage of Lessor's Cost)
- ---- ----------------------------------
<S> <C>
</TABLE>
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT D TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT E
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage pursuant to the Lease and any calculation of any payment to the Owner
Participant or Lessee under the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement shall be determined by the Owner Participant, computed
on the basis of the same methodology and assumptions used by the Owner
Participant in determining the Basic Rent, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage as of the Delivery Date except as such assumptions have been modified
pursuant to Section 3 of the Lease; provided, however, Lessee may request (A)
Capstar Partners, Inc., or any other financial advisor to Lessee to verify such
calculations but without any requirement that the Owner Participant disclose to
such advisor such methodology and assumptions and (B) if Lessee believes that
such calculations by the Owner Participant are in error then a nationally
recognized firm of accountants selected by the Owner Participant and reasonably
acceptable to Lessee (which may be the Owner Participant's independent public
accountants) shall be permitted to verify such calculations and the Owner
Participant will make available to such firm (subject to the execution by such
firm of a confidentiality agreement reasonably acceptable to the Owner
Participant) such methodology and assumptions and any changes made therein
pursuant to Section 3 of the Lease and any other information reasonably
necessary for such verification requested by such firm. In the event of a
verification under clause (B) of this Exhibit E the determination by such firm
of accountants shall be final. Lessee will pay the reasonable costs and expenses
of the verification under clause (B) of this Exhibit E; provided, however, if as
a result of such verification process the Basic Rent is adjusted and such
adjustment causes the Net Present Value of Rents to decline by 10 or more basis
points or there is a material error in the computation of the Stipulated Loss
Value percentages, Termination Value percentages, Special Termination Value
percentages or EBO Percentage in the Owner Participant's original statement in
the Owner Participant's favor, or indemnity payment is reduced by $10,000 or
more, the Owner Participant shall pay the reasonable costs and expenses of such
verification process. Such recalculated Basic Rent, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage shall be set forth in an amendment to the Lease.
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT F
<TABLE>
<CAPTION>
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
<S> <C>
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
</TABLE>
_______________________
* Designates "Restricted Country".
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT G
<TABLE>
<CAPTION>
SCHEDULE OF COUNTRIES AUTHORIZED
FOR AIRCRAFT REGISTRATION
--------------------------------
<S> <C>
Australia Luxembourg
Austria *Malaysia
Belgium Netherlands
*Brazil New Zealand
Canada Norway
Denmark *Portugal
Finland Singapore
France *South Korea
Germany *Spain
*Greece Sweden
*Iceland Switzerland
Ireland *Thailand
Italy United Kingdom
Japan *Venezuela
</TABLE>
_______________________
* Designates "Restricted Country".
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT H
<TABLE>
<CAPTION>
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
--------------------------------------------------------------
<S> <C>
Lessor's Cost: $127,500,000
Engine Cost: $ 7,000,000
Commencement Date: October 19, 1993
Lease Expiry Date: October 19, 2017
Stipulated Loss Value Date: the 19th day of each
calendar month during the
Interim Term, the Basic
Term and any Renewal Term
EBO Date: October 19, 2011
EBO Percentage: _____%
Special Purchase Special Termination
Option Dates: Value Percentages:
---------------- -------------------
_______________ _____%
_______________ _____%
_______________ _____%
</TABLE>
<PAGE>
[Second Amended and Restated
Lease Agreement (1993 747 A)]
EXHIBIT H
LESSOR'S COST, ENGINE COST, COMMENCEMENT DATE,
LEASE EXPIRY DATE, STIPULATED LOSS VALUE DATE,
EBO DATE, EBO PERCENTAGE, SPECIAL PURCHASE
OPTION DATES AND SPECIAL TERMINATION VALUE PERCENTAGES
(EBO Percentage, EBO Installment Percentages and
Special Termination Value Percentages expressed
as a percentage of Lessor's Cost)
------------------------------------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT H TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
Doc. No. 1.04
Aircraft N777UA
--------------------------------------------
TRUST AGREEMENT
(1995 777 A)
Dated as of May 1, 1995
between
[_____________],
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY,
Owner Trustee
---------------------------------------------
United Air Lines, Inc.
1995 777 A Equipment Trust
One Boeing 777-222 Aircraft
---------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS..................... 1
SECTION 1.01. Certain Definitions................................. 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST................... 2
SECTION 2.01. Authority to Execute Documents...................... 2
SECTION 2.02. Declaration of Trust................................ 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES............... 3
SECTION 3.01. Purchase of Certain Rights in the Aircraft.......... 3
SECTION 3.02. Conditions Precedent................................ 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE............ 4
SECTION 4.01. Distribution of Payments............................ 4
(a) Payments to the Indenture Trustee........................ 4
(b) Payments to Owner Trustee; Other Parties................. 5
(c) Certain Distributions to the Owner Participant........... 5
(d) Excluded Payments........................................ 5
(e) Multiple Owner Participants.............................. 5
SECTION 4.02. Method of Payments.................................. 6
ARTICLE V
DUTIES OF THE OWNER TRUSTEE............... 6
SECTION 5.01. Notice of Event of Default.......................... 6
SECTION 5.02. Action Upon Instructions............................ 7
SECTION 5.03. Indemnification..................................... 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 5.04. No Duties Except as Specified in Trust
Agreement or Instructions........................... 8
SECTION 5.05. No Action Except Under Specified Documents or
Instruction......................................... 8
ARTICLE VI
THE OWNER TRUSTEE.................... 8
SECTION 6.01. Acceptance of Trusts and Duties..................... 8
SECTION 6.02. Absence of Certain Duties........................... 9
SECTION 6.03. No Representations or Warranties as to
Certain Matters..................................... 10
SECTION 6.04. No Segregation of Monies; Interest.................. 10
SECTION 6.05. Reliance Upon Certificates, Counsel and
Agents.............................................. 10
SECTION 6.06. Not Acting in Individual Capacity................... 11
SECTION 6.07. Fees and Compensation............................... 12
SECTION 6.08. Tax Returns......................................... 12
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT.................. 13
SECTION 7.01. Owner Participant to Indemnify State Street......... 13
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST........ 15
SECTION 8.01. Transfer of Interest................................ 15
SECTION 8.02. Actions of the Owner Participants................... 15
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES............ 15
SECTION 9.01. Resignation of Owner Trustee; Appointment of
Successor........................................... 15
(a) Resignation or Removal................................... 15
(b) Execution and Delivery of Documents, etc................. 16
(c) Qualifications........................................... 16
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
(d) Merger, etc.............................................. 17
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 and Delivery
Thereof............................................. 19
(a) Supplements and Amendments............................... 19
(b) Delivery of Amendments and Supplements to Certain
Parties.................................................. 19
SECTION 10.02. Discretion as to Execution of Documents............. 19
SECTION 10.03. Distribution of Documents........................... 20
ARTICLE XI
MISCELLANEOUS...................... 20
SECTION 11.01. Termination of Trust Agreement...................... 20
SECTION 11.02. Owner Participant Has No Legal Title in
Trust Estate........................................ 21
SECTION 11.03. Assignment, Sale, etc. of Aircraft.................. 21
SECTION 11.04. Trust Agreement for Benefit of Certain
Parties Only........................................ 21
SECTION 11.05. Citizenship of the Owner Participant................ 22
SECTION 11.06. Notices............................................. 22
SECTION 11.07. Severability........................................ 22
SECTION 11.08. Waivers, etc........................................ 22
SECTION 11.09. Counterparts........................................ 23
SECTION 11.10. Binding Effect, etc................................. 23
SECTION 11.11. Headings; References................................ 23
SECTION 11.12. Governing Law....................................... 23
SECTION 11.13. Performance by the Owner Participant................ 23
</TABLE>
iii
<PAGE>
EXHIBITS
EXHIBIT A Trust Agreement and Trust Indenture and Mortgage
Supplement (1995 777 A)
iv
<PAGE>
TRUST AGREEMENT (1995 777 A)
This TRUST AGREEMENT (1995 777 A) dated as of May 1, 1995 between
[______], a Delaware corporation (the "Owner Participant"), and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts trust company (in its individual
capacity, "State Street", and otherwise not in its individual capacity but
solely as trustee hereunder with its permitted successors and assigns called the
"Owner Trustee").
W I T N E S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain 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:
"Actual Knowledge" has the meaning ascribed to such term in the Trust
Indenture.
"Excluded Payments" has the meaning ascribed to such term in the Trust
Indenture.
"Indenture Event of Default" has the meaning ascribed to such term in the
Trust Indenture.
"Lease" means that certain Lease Agreement (1995 777 A), to be dated as of
the date hereof, and to be entered into by the Owner Trustee and Lessee
concurrently with the execution and delivery of this Trust Agreement, as said
Lease Agreement may from time to time be supplemented or amended, or the terms
thereof waived or modified, to the extent permitted by, and in accordance with,
the terms of this Trust Agreement. The term "Lease" shall also include each
Lease Supplement from time to time entered into pursuant to the terms of the
Lease.
"Lease Event of Default" has the meaning which the term "Event of Default"
has in the Lease.
<PAGE>
"Owner Participant" shall mean and include (i) [______], a Delaware
corporation, as the original Owner Participant, and (ii) the successors and
assigns of [______].
"Trust Estate" means all estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Purchase
Agreement and the Owner Trustee's Purchase Agreement, the Owner Trustee's Bill
of Sale and the Owner Trustee's FAA Bill of Sale, including, without limitation,
all amounts of Basic Rent and Supplemental Rent including without limitation
insurance proceeds (other than insurance proceeds payable to or for the benefit
of the Owner Trustee, for its own account or in its individual capacity, the
Owner Participant, the Certificate Holders or the Indenture Trustee) and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Certificate
Holder, or to any of their respective directors, officers, employees, servants
and agents, pursuant to Section 7 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"Trust Indenture Estate" has the meaning ascribed to the term "Indenture
Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the Trust
Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and Trust
Indenture in substantially the form of Exhibit A to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. 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 on or before the Delivery
Date, execute and deliver the Operative Documents to which it is a party and any
other agreements, instruments or documents to which the Owner Trustee is a party
in the respective forms thereof which are delivered from time to time by the
Owner Participant to the Owner Trustee for execution and delivery and, subject
to the terms hereof, to exercise its rights (upon instructions received from
2
<PAGE>
the Owner Participant) and perform its duties under said Operative Documents 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 by the Trust Indenture and to the provisions
of the Lease and the Participation Agreement.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES
SECTION 3.01. Purchase of Certain Rights in the Aircraft. 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, on the
Delivery Date, subject to due compliance with the terms of Section 3.02 hereof:
(a) purchase the Aircraft pursuant to the Owner Trustee's Purchase
Agreement;
(b) accept from Lessee the delivery of the Owner Trustee's Bill of
Sale and the Owner Trustee's FAA Bill of Sale;
(c) execute and deliver a Lease Supplement covering the Aircraft;
(d) execute and deliver a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver the Loan Certificates in the amounts
and otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred to in
Section 4(a)(vi) of the Participation Agreement, together with all other
agreements, documents and instruments referred to in Section 4 of the
Participation Agreement to which the Owner Trustee is to be a party;
(g) effect the registration of the Aircraft in the name of the Owner
Trustee by filing or causing to be filed with the FAA: (i) the Owner
Trustee's FAA Bill of Sale; (ii) an application for registration of the
Aircraft in the
3
<PAGE>
name of the Owner Trustee (including without limitation an affidavit from
the Owner Trustee in compliance with the provisions of 14 C.F.R. (S)
47.7(c)(2)(ii)); and (iii) this Trust Agreement; and
(h) 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 deem
necessary or advisable in connection with the transactions contemplated
hereby.
SECTION 3.02. Conditions Precedent. The rights and obligations of
--------------------
the Owner Trustee to take the actions required by Section 3.01 hereof with
respect to the Aircraft shall be subject to the following conditions precedent:
(a) the Owner Participant shall have made the full amount of its Commitment set
forth in Schedule II to the Participation Agreement available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner Participant.
The Owner Participant shall, by instructing the Owner Trustee to release the
funds then held by the Owner Trustee as provided in Section 2 of the
Participation Agreement, be deemed to have found satisfactory to it, or waived,
all such conditions precedent.
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 Trust Indenture
---------------------------------
shall have been discharged pursuant to Section 10.01 thereof, all Basic Rent,
insurance proceeds and requisition or other payments of any kind included in the
Trust Estate (other than Excluded Payments and other than payments received from
the Indenture Trustee under the Trust Indenture) payable to the Owner Trustee
shall be payable directly to the Indenture Trustee (and any of the same which
are received by the Owner Trustee shall upon receipt 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 3 of the Trust
Indenture; provided, however, that any payments received by the
4
<PAGE>
Owner Trustee from (i) the Lessee with respect to the Owner Trustee's fees and
disbursements, or (ii) the Owner Participant pursuant to Article VII hereof
shall not be paid over to the Indenture Trustee but shall be retained by the
Owner Trustee and applied toward the purpose for which such payments were made.
(b) Payments to Owner Trustee; Other Parties. After the Trust
----------------------------------------
Indenture shall have been discharged pursuant to Section 10.01 thereof, any
payment of the type referred to in Section 4.01(a) hereof (other than Excluded
Payments) received by the Owner Trustee, any payments received from the
Indenture Trustee other than as specified in Section 4.01(d) hereof and any
other amount 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 reimburse the Owner
- -----
Trustee for any expenses not otherwise reimbursed as to which the Owner Trustee
is entitled to be so reimbursed pursuant to the provisions hereof shall be
retained by the Owner Trustee; second, so much of the remainder for which
------
provision as to the application thereof is contained in the Lease or any of the
other Operative Documents shall be applied and distributed in accordance with
the terms of the Lease or such other Operative Document; and third, the balance,
-----
if any, shall be paid to the Owner Participant.
(c) Certain Distributions to the Owner Participant. All amounts from
----------------------------------------------
time to time distributable by the Indenture Trustee to the Owner Participant
pursuant to the Trust Indenture shall, if paid to the Owner Trustee, be
distributed by the Owner Trustee to the Owner Participant in accordance with the
provisions of Article 3 of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by the Owner
-----------------
Trustee shall be paid by the Owner Trustee to the Person to whom such Excluded
Payments are payable under the provisions of the Participation Agreement, the
Tax Indemnity Agreement or the Lease.
(e) Multiple Owner Participants. If as a result of a transfer by an
---------------------------
Owner Participant under Section 8.01 of this Trust Agreement, there is more than
one Owner Participant hereunder, each such Owner Participant shall hold in
proportion to its respective beneficial interest in the Trust Estate, an
undivided beneficial interest in the entire Trust Estate and is entitled to
receive ratably with any other Owner Participant payments distributable by the
Owner Trustee hereunder. No Owner Participant shall have legal title to the
Aircraft or any other portion of the Trust Estate.
5
<PAGE>
SECTION 4.02. Method of Payments. The Owner Trustee shall make
------------------
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by the Owner Trustee
by 12:00 noon, New York City time), the amount to be distributed as provided in
Schedule I to the Participation Agreement or to such account or accounts of the
Owner Participant as the Owner Participant may designate from time to time 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 Lease Event of Default or Indenture Event of Default (or an
event which with the passage of time or the giving of notice or both would
constitute a Lease Event of Default or an Indenture Event of Default), the Owner
Trustee shall give to the Owner Participant and Lessee prompt telephonic or
telecopier notice thereof followed by prompt confirmation thereof by certified
mail, postage prepaid, provided that (i) in the case of an event which with the
passage of time would constitute an Indenture Event of Default referred to in
paragraph (b) of Section 8.01 of the Trust Indenture, such notice shall in no
event be furnished later than ten (10) days after the Owner Trustee shall first
have knowledge of such event and (ii) in the case of a misrepresentation by the
Owner Trustee which with the passage of time would constitute an Indenture Event
of Default referred to in paragraph (d) of Section 8.01 of the Trust Indenture,
such notice shall in no event be furnished later than ten (10) days after the
Owner Trustee shall first have knowledge of such event. The notice shall set
forth in reasonable detail the facts or circumstances known to it with respect
to such Lease Event of Default or Indenture Event of Default. Subject to the
terms of Section 5.03 hereof, the Owner Trustee shall take such action or shall
refrain from taking such action, not inconsistent with the provisions of the
Trust Indenture, with respect to such Lease Event of Default, Indenture Event of
Default or other event as the Owner Trustee shall be directed in writing by the
Owner Participant. For all purposes of this Trust Agreement, the Lease and the
other Operative Documents, in the absence of Actual Knowledge by a responsible
officer of the Trust Office of the Owner Trustee in his or her capacity as such,
the Owner Trustee shall not be deemed to have knowledge of a Lease Event of
Default, Indenture Event of Default or other event referred to in
6
<PAGE>
this Section 5.01 unless notified in writing by the Indenture Trustee, the Owner
Participant or Lessee.
SECTION 5.02. Action Upon Instructions. Subject to the terms of
------------------------
Sections 5.01 and 5.03 hereof, 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, not inconsistent with the provisions of the Lease and the
Trust Indenture, as may be specified in such instructions: (i) give such notice
or direction or exercise such right, remedy or power hereunder or take such
other actions under any of the Operative Documents 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 Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Documents 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; and (iv) subject to the rights of Lessee under the Operative
Documents, 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 net lease the Aircraft to such lessee or lessees and on
such terms as shall be designated in such instructions.
SECTION 5.03. Indemnification. The Owner Trustee shall not be
---------------
required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof 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 any
such action or refrain from taking any action, the Owner Participant agrees to
furnish such indemnity as shall be required and, in addition to the extent not
otherwise paid pursuant to the provisions of the Lease or of the Participation
Agreement, to pay the reasonable compensation of the Owner Trustee for the
services performed or to be performed by it pursuant to such direction and any
reasonable fees and disbursements of counsel or agents employed by the Owner
Trustee in connection therewith. The Owner Trustee shall not be required to
take any action under Section 5.01 or 5.02 hereof if the Owner Trustee shall
reasonably determine, or shall have been advised by counsel, that such action is
contrary
7
<PAGE>
to the terms of any of the Operative Documents to which the Owner Trustee is a
party, or is otherwise contrary to 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 to otherwise take or refrain from taking
any action under, or in connection with any of the Operative Documents to which
the Owner Trustee is a party, except as expressly required by the terms of any
of the Operative Documents to which the Owner Trustee is a party, or (to the
extent not inconsistent with the provisions of the Trust Indenture) as expressly
provided by the terms hereof or in a written instruction from the Owner
Participant received pursuant to the terms of Section 5.01 or 5.02 hereof, and
no implied duties or obligations shall be read into this Trust Agreement against
the Owner Trustee. State Street agrees that it will, in its individual capacity
and at its own cost or expense (but without any right of indemnity in respect of
any such cost or expense under Section 7.01 hereof), promptly take such action
as may be necessary to duly discharge and satisfy in full all Lessor Liens
attributable to it in its individual capacity which it is required to discharge
pursuant to Section 8(g) of the Participation Agreement and otherwise comply
with the terms of said Section binding upon it.
SECTION 5.05. No Action Except Under Specified Documents or
---------------------------------------------
Instruction. The Owner Trustee shall have no power, right 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 Documents 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 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. State Street accepts
-------------------------------
the trusts hereby created and agrees to perform the same but only upon the terms
hereof applicable to it. The Owner Trustee also agrees to receive and disburse
all monies received by it constituting part of the Trust Estate upon the terms
hereof. State Street shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or gross negligence,
(b) its failure (in its
8
<PAGE>
individual capacity) to perform its obligations under the last sentence of
Section 5.04 hereof and the first sentence of Section 5.01 hereof, (c) for its
or the Owner Trustee's failure to use ordinary care to disburse funds, (d) for
any Tax based on or measured by any fees, commissions or compensation received
by it for acting as trustee in connection with any of the transactions
contemplated by the Operative Documents and (e) for liabilities that may result
from the inaccuracy of any representation or warranty of it (or from the failure
by it to perform any covenant) in Section 6.03 hereof, in Section 4 of the Lease
or in Sections 8(b), 8(c) and 8(p) of the Participation Agreement.
SECTION 6.02. Absence of Certain Duties. Except in accordance with
-------------------------
written instructions furnished pursuant to Section 5.02 hereof and except as
provided in, and without limiting the generality of, Sections 3.01 and 5.04
hereof and the last sentence of Section 9.01(b) hereof, neither the Owner
Trustee nor State Street shall have any duty (i) to see to any recording or
filing of any Operative Document or of any supplement to any thereof or to see
to the maintenance of any such recording or filing or any other filing of
reports with the Federal Aviation Administration or other governmental agencies,
except that State Street in its individual capacity agrees to comply with the
Federal Aviation Administration reporting requirements set forth in 14 CFR
(S)47.45 and 14 CFR (S)47.51, and the Owner Trustee shall, to the extent that
information for that purpose is timely supplied by Lessee pursuant to any of the
Operative Documents, complete and timely submit (and furnish the Owner
Participant with a copy of) any and all reports relating to the Aircraft which
may from time to time be required by the Federal Aviation Administration 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, other than to forward to
the Owner Participant copies of all reports and other written information which
the Owner Trustee receives from Lessee pursuant to Section 11(c) of the Lease,
(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 Indenture Estate or the
Trust Estate, except as provided in Section 8(g) of the Participation Agreement,
or (iv) to inspect Lessee's books and records with respect to the Aircraft at
any time permitted pursuant to the Lease. Notwithstanding the foregoing, the
Owner Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other
9
<PAGE>
Operative Document to the extent that any of the same shall not state on its
face or otherwise that it has been so distributed.
SECTION 6.03. No Representations or Warranties as to Certain Matters.
------------------------------------------------------
NEITHER THE OWNER TRUSTEE NOR STATE STREET MAKES OR SHALL BE DEEMED TO HAVE MADE
(a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR
ANY PART THEREOF WHATSOEVER, except that State Street in its individual capacity
warrants that on the Delivery Date the Owner Trustee shall have received
whatever title was conveyed to it by Lessee and that the Aircraft shall during
the Term of the Lease be free of Lessor Liens attributable to State Street in
its individual capacity, or (b) any representation or warranty as to the
validity, legality or enforceability of this Trust Agreement or any Operative
Document to which the 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
by such party as a representation by State Street in its individual capacity or
by the Owner Trustee, as the case may be, and except that State Street in its
individual capacity hereby represents and warrants that this Trust Agreement has
been, and (assuming due authorization, execution and delivery by the Owner
Participant of this Trust Agreement) the Operative Documents to which it or the
Owner Trustee is a party have been (or at the time of execution and delivery of
any such instrument by it or 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 itself
or the Owner Trustee, as the case may be, and that the Trust Agreement
constitutes the legal, valid and binding obligation of State Street or the Owner
Trustee, as the case may be, enforceable against State Street or the Owner
Trustee, as the case may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies; Interest. Monies received by
----------------------------------
the Owner Trustee hereunder need not be segregated in any manner except to the
extent provided by law and the Owner Trustee, except as provided in Section 22
of the Lease, shall not be liable for any interest thereon.
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,
10
<PAGE>
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it in good faith to be genuine and
reasonably believed by it in good faith 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 or
Lessee mentioned herein or in any of the Operative Documents to which the Owner
Trustee is a party shall be sufficiently evidenced by written instruments signed
by the Chairman of the Board, the President, any Vice President or any other
duly authorized officer or representative and in the name of any such Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors or Executive Committee of Lessee,
certified by the Secretary or an Assistant Secretary of Lessee as duly adopted
and in full force and effect, as conclusive evidence that such resolution has
been duly adopted by said Board or Committee 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 for all purposes hereof
rely on a certificate signed by the Chairman of the Board, the President, any
Vice President or any other duly authorized officer or representative of Lessee,
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 trusts hereunder, the Owner
Trustee may execute any of the trusts or powers hereof and perform its powers
and duties hereunder directly or through agents or attorneys and may, at the
expense of the Trust Estate, consult with counsel, accountants and other skilled
persons to be selected and employed by it. 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, within the scope of such person's competence, of any
such counsel, accountants or other skilled persons and the Owner Trustee shall
not be liable for the negligence of any such counsel, accountant or other
skilled person appointed by it with due care hereunder.
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, the Lease, the
Participation Agreement and the Trust Indenture, all persons, other than the
Owner Participant, as provided herein, 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 except to the extent the Owner
Trustee shall expressly agree otherwise in writing.
11
<PAGE>
SECTION 6.07. Fees and Compensation. The Owner Trustee shall be
---------------------
entitled to receive compensation, reasonable as regards its responsibilities
hereunder, together with reimbursement within three (3) months of its request
for all reasonable expenses incurred or made by it in accordance with any of the
provisions of this Trust Agreement or any other Operative Document (including
the reasonable compensation and the expenses of its counsel, accountants or
other skilled persons and of all other persons not regularly in its employ). If
a Lease Event of Default or Indenture Event of Default shall occur and be
continuing or if the Lease or the Trust Indenture is declared to be in default,
the Owner Trustee shall be entitled to receive compensation, reasonable as
regards its additional responsibilities hereunder, and payment or reimbursement
for its expenses as provided above. Pursuant to Section 7(c) of the
Participation Agreement and subject to Section 16 thereof, Lessee shall be
required to pay the reasonable fees and expenses of the Owner Trustee comprising
the compensation and reimbursement of expenses to which the Owner Trustee is
entitled under this Section 6.07. Except as otherwise expressly provided in
this Trust Agreement and the other Operative Documents, neither the Owner
Participant nor the Trust Estate shall have any liability for any such fees and
expenses; provided, however, the Owner Participant shall be liable for such
additional compensation of the Owner Trustee if the same is attributable to an
Indenture Event of Default which is caused solely by the actions or inactions of
the Owner Participant; and further provided that the Owner Trustee shall have a
Lien upon the Trust Estate for any such fee not paid by Lessee as contemplated
by Section 7 of the Participation Agreement and such Lien shall entitle the
Owner Trustee to priority as to payment thereof over payment to any other Person
under this Trust Agreement but shall at all times be subordinated to the Lien of
the Trust Indenture.
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 of all monies under this Trust Agreement or any other agreement
contemplated hereby. The Owner Participant shall be responsible for causing to
be prepared and filed all income tax returns required to be filed by the Owner
Participant. The Owner Trustee shall be responsible for causing to be prepared,
at the request of the Owner Participant, all income tax returns required to be
filed with respect to the trust created hereby and shall execute and file such
returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such income tax returns. The Owner Trustee
will give to the Owner Participant, upon request, such periodic information
concerning receipts and
12
<PAGE>
disbursements by it with respect to the Trust Estate as would be helpful to the
Owner Participant in preparing its tax returns.
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify State Street. The Owner
-------------------------------------------
Participant hereby agrees, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and hereby indemnifies,
protects, saves and keeps harmless State Street in its individual capacity and
its successors, assigns, legal representatives, agents and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by State Street in its individual capacity on or
measured by any compensation received by State Street in its individual capacity
for its services hereunder), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, and including without limitation any liability of an owner, any strict
liability and any liability without fault) of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against State Street 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, but only to the extent not otherwise paid or reimbursed by such
other person) in any way relating to or arising out of this Trust Agreement or
any of the Operative Documents 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
(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 or State Street in its individual
capacity hereunder, except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or State Street in its individual
capacity in the performance or nonperformance of its duties hereunder or under
any of the other Operative Documents to which the Owner Trustee is a party or
(b) those claims resulting from the inaccuracy of any representation or warranty
of State Street in its individual capacity (or from the failure of State Street
in its individual capacity to perform any of its covenants) in Section 6.03
hereof, in Section 4 of the Lease, in Section 8(b), 8(c) or 8(p) of the
13
<PAGE>
Participation Agreement or elsewhere in any of the other Operative Documents or
(c) as may result from a breach by State Street in its individual capacity of
its covenant in the last sentence of Section 5.04 hereof or (d) in the case of
the failure to use ordinary care on the part of the Owner Trustee or State
Street in its individual capacity in the disbursement of funds or (e) those
claims arising under any circumstances or upon any terms where Lessee would not
have been required to indemnify the Owner Trustee in its individual capacity
pursuant to Section 7(b) or 7(c) of the Participation Agreement (disregarding,
for this purpose, Sections 7(b)(ii)(2) (to the extent that such disposition
referred to therein results from the Owner Trustee acting in accordance with
written instructions of the Owner Participant), 7(b)(ii)(4)(i) (to the extent
that it results from the willful misconduct or gross negligence of the Owner
Participant to the extent imposed on the Owner Trustee), 7(b)(ii)(7), 7(c)(2)
(to the extent that such failure referred to therein results from the Owner
Trustee's acting in accordance with written instructions of the Owner
Participant), 7(c)(4) (to the extent that such disposition referred to therein
results from the Owner Trustee's acting in accordance with written instructions
of the Owner Participant), 7(c)(6), 7(c)(8) and 7(c)(10) of the Participation
Agreement and disregarding, for this purpose, those claims arising or resulting
from any action taken by or inaction of the Owner Trustee in accordance with
written instructions of the Owner Participant); provided, however, that the
exception set forth in clause (a) of this Section 7.01 shall not apply to any
action taken or omission made by the Owner Trustee pursuant to and in accordance
with written directions given to the Owner Trustee by the Owner Participant.
The indemnities contained in this Section 7.01 extend to State Street only in
its individual capacity and shall not be construed as indemnities of the Trust
Indenture Estate or the Trust Estate (except to the extent, if any, that State
Street in its individual capacity has been reimbursed by the Trust Indenture
Estate or the Trust Estate for amounts covered by the indemnities contained in
this Section 7.01). The indemnities contained in this Section 7.01 shall survive
the termination of this Trust Agreement. In addition, if necessary, State Street
in its individual capacity shall be entitled to indemnification from the Trust
Estate, subject to the Lien of the Trust 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; and, to secure the
same, State Street in its individual capacity shall have a lien on the Trust
Estate, subject to the lien of the Trust Indenture, which shall be prior to any
interest therein of the Owner Participant. The payor of any indemnity under this
Article
14
<PAGE>
VII shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interest. All provisions of Section 8(l)
--------------------
of the Participation Agreement shall (with the same force and effect as if set
forth in full in this Section 8.01) be applicable to any assignment, conveyance
or other transfer by the Owner Participant of any of its right, title or
interest in and to the Participation Agreement, the Trust Estate or this Trust
Agreement. If there is more than one Owner Participant, no assignment,
conveyance or other transfer by an Owner Participant of any of its right, title
or interest in and to this Trust Agreement or the Trust Estate shall be valid
unless each other Owner Participant's prior written consent (which consent may
be withheld in the sole discretion of such other Owner Participants) is given to
such assignment, conveyance or other transfer.
SECTION 8.02. Actions of the Owner Participants. If at any time
---------------------------------
prior to the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by all
Owner Participants and whenever any direction, authorization, approval, consent,
instruction, or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon unanimous agreement of all
Owner Participants provided, however, that the termination of this Trust
Agreement pursuant to Section 11.01 hereof may be effected upon the election of
any Owner Participant.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of 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 8(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) hereof. In
addition, the Owner Participant may
15
<PAGE>
at any time remove the Owner Trustee without cause by a notice in writing
delivered to the Owner Trustee, the Certificate Holders, the Indenture Trustee
and Lessee, such removal to be effective upon the acceptance of appointment by
the successor Owner Trustee under Section 9.01(b) hereof. In the case of the
removal or resignation of the Owner Trustee, the Owner Participant may appoint a
successor Owner Trustee by an instrument signed by the Owner Participant, such
successor to be approved by Lessee unless an Event of Default shall have
occurred and be continuing (which approval shall not be unreasonably withheld).
If a successor Owner Trustee shall not have been appointed within 30 days after
such notice of resignation or removal, the Owner Trustee, the Owner Participant,
Lessee 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.
(b) Execution and Delivery of Documents, etc. Any successor Owner
----------------------------------------
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee an instrument accepting such appointment, 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 trusts 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 execute such documents as are
provided to it by such successor Owner Trustee and will take such further
actions as are requested of it by such successor Owner Trustee as are reasonably
required to cause registration of the Aircraft included in the Trust Estate to
be transferred upon the records of the Federal Aviation Administration, or other
governmental authority having jurisdiction, into the name of the successor Owner
Trustee.
(c) Qualifications. Any successor Owner Trustee, however appointed,
--------------
shall be a Citizen of the United States and shall also be a bank or trust
company organized under the laws of the United States or any state thereof
having a combined capital
16
<PAGE>
and surplus of at least $50,000,000 (or the obligations and liabilities of
which, whether now in existence or hereafter incurred, are fully and
unconditionally guaranteed by an affiliate company having a combined capital and
surplus of at least $50,000,000), if there be such an institution willing, able
and legally qualified to perform the duties of the Owner Trustee hereunder upon
reasonable or customary terms. Subject to Section 14 of the Participation
Agreement, no such successor trustee shall (i) be located in a jurisdiction
which creates adverse consequences for the Lessee (unless such circumstances
would be created by substantially all jurisdictions where major banking or trust
institutions are located) or (ii) charge fees for its services as an Owner
Trustee in excess of the then prevailing market rates for such services (unless
the Owner Participant agrees that it and not the Lessee shall be liable for such
excess).
(d) Merger, etc. Any corporation into which State Street may be
------------
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which State Street
shall be a party, or any corporation to which substantially all the corporate
trust business of State Street may be transferred, shall, subject to the terms
of Section 9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02. Co-Trustees and Separate Trustees. If at any time it
---------------------------------
shall be necessary or prudent in order to conform to any law of any jurisdiction
in which all or any part of the Trust Estate is located, or make any claim or
bring any suit with respect to the Trust Estate or the Lease, or in the event
that the Owner Trustee shall have been requested to do so by the Owner
Participant or the Owner Trustee being advised by counsel shall determine 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 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 Trustee and the Owner Participant, either to act
as co-trustee, jointly with the Owner Trustee, or to act as separate trustee
hereunder (any such co-trustee or separate trustee being herein sometimes
referred to as an "additional trustee"). In the event 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 in case a Lease Event of Default or Indenture Event of Default shall
occur and be continuing, the Owner Trustee may act under the
17
<PAGE>
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
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 Owner Trustee;
(B) Any other rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such additional trustee
jointly, except to the extent that under any 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;
(C) No power given to, or which it is provided hereby may be exercised
by, any such additional trustee shall be exercised hereunder by such
additional trustee, except jointly with, or with the consent in writing of,
the Owner Trustee;
(D) No trustee hereunder shall be personally liable by reason of any
action 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 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
18
<PAGE>
attorney-in-fact for it in such connection in such contingency; and
(F) No appointment 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 Trust Indenture or affect the interests of
the Indenture Trustee or the Certificate Holders in the Trust Indenture
Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery Thereof.
-----------------------------------------------
(a) Supplements and Amendments. This Trust Agreement may not be
--------------------------
amended, supplemented or otherwise modified except by an instrument in writing
signed by the Owner Trustee and the Owner Participant. Subject to Section 10.02
hereof and Section 10(B) of the Participation Agreement, the Owner Trustee will
execute any amendment, supplement or other modification of this Trust Agreement
or of any other Operative Documents to which the Owner Trustee is a party which
it is requested to execute by the Owner Participant except that the Owner
Trustee shall not execute any such amendment, supplement or other modification
which, by the express provisions of any of the above documents, requires the
consent of any other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain Parties. A
---------------------------------------------------------
signed copy of each amendment or supplement referred to in Section 10.01(a)
hereof shall be delivered promptly by the Owner Trustee to Lessee.
SECTION 10.02. Discretion as to Execution of Documents. Prior to
---------------------------------------
executing any document required to be executed by it pursuant to the terms of
Section 10.01 hereof, the Owner Trustee shall be entitled to receive an opinion
of its counsel to the effect that the execution of such document is authorized
hereunder. If in the opinion of the Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of the Owner Trustee
hereunder or under any other Operative Document to which the Owner Trustee is a
party, the Owner Trustee may in its discretion decline to execute such document.
19
<PAGE>
SECTION 10.03. Distribution of Documents. Promptly after the
-------------------------
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, 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. (a) This Trust
------------------------------
Agreement and the Trusts created hereby shall be of no further force or
effect upon the earliest of (i) both the final discharge of the Trust
Indenture pursuant to Section 10.01 thereof, the termination of the Lease
pursuant to its terms 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, (ii) in accordance with
Article IV hereof, provided that at such time Lessee and the Owner
Participant shall have fully complied with all of the terms of the Lease
and the Participation Agreement and (iii) twenty-one years less one day
after the death of the last survivor of all of the decedents of the
grandparents of David C. Rockefeller living on the date of the earliest
execution of this Trust Agreement by any party hereto, but if this Trust
Agreement and the Trust created hereby shall be or become authorized under
applicable law to be valid for a period commencing on the twenty-first
anniversary of the death of such last survivor (or, without limiting the
generality of the foregoing, if legislation shall become effective
providing for the validity of this Trust Agreement and the Trust created
hereby for a period in gross exceeding the period for which this Trust
Agreement and the Trust created hereby are hereinabove stated to extend and
be valid), then this Trust Agreement and the Trust created hereby shall not
terminate under this subsection (a) but shall extend to and continue in
effect, but only if such non-termination and extension shall then be valid
under applicable law, until the day proceeding such date as the same shall,
under applicable law, cease to be valid. In furtherance of the foregoing,
this Trust Agreement and the Trusts created hereby shall not be revoked,
modified or terminated except in accordance with the terms hereof and of
the Participation Agreement or with the prior written consent of the
Indenture Trustee. Upon such termination,
20
<PAGE>
all monies or other property or proceeds constituting part of the Trust
Estate shall be distributed in accordance with the terms of the Trust
Agreement.
(b) The bankruptcy, death or incapacity of the Owner Participant will
not terminate this Trust Agreement, nor entitle such person's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate,
nor otherwise effect the rights, obligations and liabilities of the parties
hereto. No creditor of the Owner Participant shall obtain legal title to
or exercise legal or equitable remedies with respect to the Trust Estate as
a result of the Owner Participant's status. No transfer, by operation of
law or otherwise, of any right, title and interest of the Owner Participant
in and to its beneficial interest in the Trust Estate shall operate to
terminate this Trust Agreement or the Trusts created hereby.
SECTION 11.02. Owner Participant Has No Legal Title in Trust Estate.
----------------------------------------------------
The Owner Participant shall 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 by the Owner Trustee made in
accordance with the express 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. 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 8(l) of the Participation Agreement incorporated
in Article VIII hereof and except as otherwise provided in Article IX and
Sections 5.01, 6.07, 10.01 and 11.01 hereof, nothing herein, whether expressed
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
21
<PAGE>
sole and exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05. Citizenship of the Owner Participant. If at any time
------------------------------------
there shall be more than one Owner Participant, then any Owner Participant who
shall cease to be a Citizen of the United States shall have no voting or similar
rights hereunder and shall have no right to direct, influence or limit the
exercise of, or to prevent the direction or influence of, or place any
limitation on the exercise of, the Owner Trustee's authority or to remove the
Owner Trustee.
SECTION 11.06. Notices. All notices, demands, instructions and other
-------
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Agreement
on the day that such writing is delivered or, if sent by registered or certified
mail, three Business Days after being deposited in the mails addressed to the
intended recipient thereof in accordance with the provisions of this Section
11.06. Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing provisions of this Section 11.06, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective telecopier numbers) as follows: (A) if to Lessee, the Owner Trustee,
the Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I to the Participation Agreement or (B) if to any Certificate
Holder, addressed to such Certificate Holder at its address as set forth in the
Loan Certificate register maintained pursuant to the Trust Indenture.
SECTION 11.07. Severability. Subject to Section 11.12 hereof, 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 11.08. 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 specific instance and
for the specific purpose given.
22
<PAGE>
SECTION 11.09. 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 11.10. 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 assigns, and the Owner Participant, its
successors and, to the extent permitted by Article VIII hereof, its assigns.
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner Participant shall bind its successors and assigns.
SECTION 11.11. 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 11.12. Governing Law. This Trust Agreement shall in all
-------------
respects be governed by, and construed in accordance with, the internal laws of
the Commonwealth of Massachusetts, including all matters of construction,
validity and performance.
SECTION 11.13. Performance by the Owner Participant. Any obligation
------------------------------------
of the Owner Trustee in its individual capacity or as Owner Trustee hereunder or
under any other Operative Document or other document contemplated herein, may be
performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
* * *
23
<PAGE>
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.
__________________________________
By:_______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY
By:_______________________________
Title:____________________________
24
<PAGE>
EXHIBIT A
---------
TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE
SUPPLEMENT (1995 777 A)
This TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1995
777 A), dated May __, 1995 (herein called the "Trust Supplement") of STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1995 777 A), dated as of May 1, 1995 (herein called the "Trust Agreement"),
between the Owner Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery
of one or more supplements thereto substantially in the form hereof, which shall
particularly describe the Aircraft (such term and other terms defined in the
Trust Indenture referred to below used herein as therein defined) included in
the property covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Mortgage (1995 777 A), dated as of
May 1, 1995 (herein called the "Trust Indenture"), between the Owner Trustee and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, as Indenture Trustee (herein
called the "Indenture Trustee"), provides for the execution and delivery of a
supplement thereto substantially in the form hereof, which shall particularly
describe the Aircraft, and shall specifically mortgage such Aircraft to the
Indenture Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement witnesseth, that, the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
<PAGE>
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
- ------------ ----- ------------ --------------
The Boeing Company 777-222 N777UA 26916
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated take-
off horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the Airframe or any other airframe, identified as
follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
- ----------------- ------ -------------
<S> <C> <C>
Pratt & Whitney PW4084 _______
Pratt & Whitney PW4084 _______
</TABLE>
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and secured
by the Trust Indenture and hereby, the Owner Trustee hereby confirms that the
Lien of the Trust Indenture over the Trust Indenture Estate includes the Lease
Supplement of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the equal and proportionate
benefit and security of the holders from time to time of the Loan Certificates
outstanding, without any preference, distinction or priority of any one Loan
Certificate over any other by reason of series, priority of time of issue, sale,
negotiation, date of maturity thereof or
A-2
<PAGE>
otherwise for any reason whatsoever, and for the uses and purposes and subject
to the terms and provisions set forth in the Trust Indenture.
This Trust Supplement shall be construed as supplemental to the Trust
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
* * *
A-3
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Supplement to be
duly executed by one of its officers, thereunto duly authorized, on the day and
year first above written.
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee,
By:__________________________________
Title:_________________________
A-4
<PAGE>
Doc. No. 1.04
Aircraft N766UA
--------------------------------------------
TRUST AGREEMENT
(1995 777 B)
Dated as of May 1, 1995
between
[_____________],
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY,
Owner Trustee
---------------------------------------------
United Air Lines, Inc.
1995 777 B Equipment Trust
One Boeing 777-222 Aircraft
---------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND TERMS...................... 1
SECTION 1.01. Certain Definitions.................................. 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST....................... 2
SECTION 2.01. Authority to Execute Documents....................... 2
SECTION 2.02. Declaration of Trust................................. 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES 3
SECTION 3.01. Purchase of Certain Rights in the Aircraft........... 3
SECTION 3.02. Conditions Precedent................................. 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE............ 4
SECTION 4.01. Distribution of Payments............................. 4
(a) Payments to the Indenture Trustee.................... 4
(b) Payments to Owner Trustee; Other Parties............. 5
(c) Certain Distributions to the Owner Participant....... 5
(d) Excluded Payments.................................... 5
(e) Multiple Owner Participants.......................... 5
SECTION 4.02. Method of Payments................................... 6
ARTICLE V
DUTIES OF THE OWNER TRUSTEE.......................... 6
SECTION 5.01. Notice of Event of Default........................... 6
SECTION 5.02. Action Upon Instructions............................. 7
SECTION 5.03. Indemnification...................................... 7
i
<PAGE>
SECTION 5.04. No Duties Except as Specified in Trust
Agreement or Instructions............................ 8
SECTION 5.05. No Action Except Under Specified Documents or
Instruction.......................................... 8
ARTICLE VI
THE OWNER TRUSTEE.................... 8
SECTION 6.01. Acceptance of Trusts and Duties...................... 8
SECTION 6.02. Absence of Certain Duties............................ 9
SECTION 6.03. No Representations or Warranties as to
Certain Matters...................................... 10
SECTION 6.04. No Segregation of Monies; Interest................... 10
SECTION 6.05. Reliance Upon Certificates, Counsel and
Agents............................................... 10
SECTION 6.06. Not Acting in Individual Capacity.................... 11
SECTION 6.07. Fees and Compensation................................ 12
SECTION 6.08. Tax Returns.......................................... 12
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT................... 13
SECTION 7.01. Owner Participant to Indemnify State Street.......... 13
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST....... 15
SECTION 8.01. Transfer of Interest................................. 15
SECTION 8.02. Actions of the Owner Participants.................... 15
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES.......... 15
SECTION 9.01. Resignation of Owner Trustee; Appointment of
Successor............................................ 15
(a) Resignation or Removal............................... 15
(b) Execution and Delivery of Documents, etc............. 16
(c) Qualifications....................................... 16
ii
<PAGE>
(d) Merger, etc......................................... 17
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 and Delivery
Thereof............................................. 19
(a) Supplements and Amendments.......................... 19
(b) Delivery of Amendments and Supplements to Certain
Parties............................................. 19
SECTION 10.02. Discretion as to Execution of Documents............. 19
SECTION 10.03. Distribution of Documents........................... 20
ARTICLE XI
MISCELLANEOUS...................... 20
SECTION 11.01. Termination of Trust Agreement...................... 20
SECTION 11.02. Owner Participant Has No Legal Title in
Trust Estate........................................ 21
SECTION 11.03. Assignment, Sale, etc. of Aircraft.................. 21
SECTION 11.04. Trust Agreement for Benefit of Certain
Parties Only........................................ 21
SECTION 11.05. Citizenship of the Owner Participant................ 22
SECTION 11.06. Notices............................................. 22
SECTION 11.07. Severability........................................ 22
SECTION 11.08. Waivers, etc........................................ 22
SECTION 11.09. Counterparts........................................ 23
SECTION 11.10. Binding Effect, etc. ............................... 23
SECTION 11.11. Headings; References................................ 23
SECTION 11.12. Governing Law....................................... 23
SECTION 11.13. Performance by the Owner Participant................ 23
iii
<PAGE>
EXHIBITS
EXHIBIT A Trust Agreement and Trust Indenture and Mortgage
Supplement (1995 777 B)
iv
<PAGE>
TRUST AGREEMENT (1995 777 B)
This TRUST AGREEMENT (1995 777 B) dated as of May 1, 1995 between
[____________], a Delaware corporation (the "Owner Participant"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company (in its individual
capacity, "State Street", and otherwise not in its individual capacity but
solely as trustee hereunder with its permitted successors and assigns called the
"Owner Trustee").
W I T N E S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain 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:
"Actual Knowledge" has the meaning ascribed to such term in the Trust
Indenture.
"Excluded Payments" has the meaning ascribed to such term in the Trust
Indenture.
"Indenture Event of Default" has the meaning ascribed to such term in the
Trust Indenture.
"Lease" means that certain Lease Agreement (1995 777 B), to be dated as of
the date hereof, and to be entered into by the Owner Trustee and Lessee
concurrently with the execution and delivery of this Trust Agreement, as said
Lease Agreement may from time to time be supplemented or amended, or the terms
thereof waived or modified, to the extent permitted by, and in accordance with,
the terms of this Trust Agreement. The term "Lease" shall also include each
Lease Supplement from time to time entered into pursuant to the terms of the
Lease.
"Lease Event of Default" has the meaning which the term "Event of Default"
has in the Lease.
"Owner Participant" shall mean and include (i) [___________], a Delaware
corporation, as the original Owner
<PAGE>
[Trust Agreement (1995 777 B)]
Participant, and (ii) the successors and assigns of [___________].
"Trust Estate" means all estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Purchase
Agreement and the Owner Trustee's Purchase Agreement, the Owner Trustee's Bill
of Sale and the Owner Trustee's FAA Bill of Sale, including, without limitation,
all amounts of Basic Rent and Supplemental Rent including without limitation
insurance proceeds (other than insurance proceeds payable to or for the benefit
of the Owner Trustee, for its own account or in its individual capacity, the
Owner Participant, the Certificate Holders or the Indenture Trustee) and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Certificate
Holder, or to any of their respective directors, officers, employees, servants
and agents, pursuant to Section 7 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"Trust Indenture Estate" has the meaning ascribed to the term "Indenture
Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the Trust
Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and Trust
Indenture in substantially the form of Exhibit A to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. 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 on or before the Delivery
Date, execute and deliver the Operative Documents to which it is a party and any
other agreements, instruments or documents to which the Owner Trustee is a party
in the respective forms thereof which are delivered from time to time by the
Owner Participant to the Owner Trustee for execution and delivery and, subject
to the terms hereof, to exercise its rights (upon instructions received from the
Owner Participant) and perform its duties under said Operative Documents in
accordance with the terms thereof.
2
<PAGE>
[Trust Agreement (1995 777 B)]
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 by the Trust Indenture and to the provisions
of the Lease and the Participation Agreement.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES
SECTION 3.01. Purchase of Certain Rights in the Aircraft. 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, on the
Delivery Date, subject to due compliance with the terms of Section 3.02 hereof:
(a) purchase the Aircraft pursuant to the Owner Trustee's Purchase
Agreement;
(b) accept from Lessee the delivery of the Owner Trustee's Bill of
Sale and the Owner Trustee's FAA Bill of Sale;
(c) execute and deliver a Lease Supplement covering the Aircraft;
(d) execute and deliver a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver the Loan Certificates in the amounts
and otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred to in
Section 4(a)(vi) of the Participation Agreement, together with all other
agreements, documents and instruments referred to in Section 4 of the
Participation Agreement to which the Owner Trustee is to be a party;
(g) effect the registration of the Aircraft in the name of the Owner
Trustee by filing or causing to be filed with the FAA: (i) the Owner
Trustee's FAA Bill of Sale; (ii) an application for registration of the
Aircraft in the name of the Owner Trustee (including without limitation an
affidavit from the Owner Trustee in compliance with the
3
<PAGE>
[Trust Agreement (1995 777 B)]
provisions of 14 C.F.R. (S) 47.7(c)(2)(ii)); and (iii) this Trust
Agreement; and
(h) 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 deem
necessary or advisable in connection with the transactions contemplated
hereby.
SECTION 3.02. Conditions Precedent. The rights and obligations of
the Owner Trustee to take the actions required by Section 3.01 hereof with
respect to the Aircraft shall be subject to the following conditions precedent:
(a) the Owner Participant shall have made the full amount of its Commitment set
forth in Schedule II to the Participation Agreement available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner Participant.
The Owner Participant shall, by instructing the Owner Trustee to release the
funds then held by the Owner Trustee as provided in Section 2 of the
Participation Agreement, be deemed to have found satisfactory to it, or waived,
all such conditions precedent.
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 Trust Indenture
shall have been discharged pursuant to Section 10.01 thereof, all Basic Rent,
insurance proceeds and requisition or other payments of any kind included in the
Trust Estate (other than Excluded Payments and other than payments received from
the Indenture Trustee under the Trust Indenture) payable to the Owner Trustee
shall be payable directly to the Indenture Trustee (and any of the same which
are received by the Owner Trustee shall upon receipt 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 3 of the Trust
Indenture; provided, however, that any payments received by the Owner Trustee
from (i) the Lessee with respect to the Owner Trustee's fees and disbursements,
or (ii) the Owner Participant
4
<PAGE>
[Trust Agreement (1995 777 B)]
pursuant to Article VII hereof shall not be paid over to the Indenture Trustee
but shall be retained by the Owner Trustee and applied toward the purpose for
which such payments were made.
(b) Payments to Owner Trustee; Other Parties. After the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof, any
payment of the type referred to in Section 4.01(a) hereof (other than Excluded
Payments) received by the Owner Trustee, any payments received from the
Indenture Trustee other than as specified in Section 4.01(d) hereof and any
other amount 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 reimburse the Owner
Trustee for any expenses not otherwise reimbursed as to which the Owner Trustee
is entitled to be so reimbursed pursuant to the provisions hereof shall be
retained by the Owner Trustee; second, so much of the remainder for which
provision as to the application thereof is contained in the Lease or any of the
other Operative Documents shall be applied and distributed in accordance with
the terms of the Lease or such other Operative Document; and third, the balance,
if any, shall be paid to the Owner Participant.
(c) Certain Distributions to the Owner Participant. All amounts from
time to time distributable by the Indenture Trustee to the Owner Participant
pursuant to the Trust Indenture shall, if paid to the Owner Trustee, be
distributed by the Owner Trustee to the Owner Participant in accordance with the
provisions of Article 3 of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by the Owner
Trustee shall be paid by the Owner Trustee to the Person to whom such Excluded
Payments are payable under the provisions of the Participation Agreement, the
Tax Indemnity Agreement or the Lease.
(e) Multiple Owner Participants. If as a result of a transfer by an
Owner Participant under Section 8.01 of this Trust Agreement, there is more than
one Owner Participant hereunder, each such Owner Participant shall hold in
proportion to its respective beneficial interest in the Trust Estate, an
undivided beneficial interest in the entire Trust Estate and is entitled to
receive ratably with any other Owner Participant payments distributable by the
Owner Trustee hereunder. No Owner Participant shall have legal title to the
Aircraft or any other portion of the Trust Estate.
5
<PAGE>
[Trust Agreement (1995 777 B)]
SECTION 4.02. Method of Payments. The Owner Trustee shall make
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by the Owner Trustee
by 12:00 noon, New York City time), the amount to be distributed as provided in
Schedule I to the Participation Agreement or to such account or accounts of the
Owner Participant as the Owner Participant may designate from time to time 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 Lease Event of Default or Indenture Event of Default (or an
event which with the passage of time or the giving of notice or both would
constitute a Lease Event of Default or an Indenture Event of Default), the Owner
Trustee shall give to the Owner Participant and Lessee prompt telephonic or
telecopier notice thereof followed by prompt confirmation thereof by certified
mail, postage prepaid, provided that (i) in the case of an event which with the
passage of time would constitute an Indenture Event of Default referred to in
paragraph (b) of Section 8.01 of the Trust Indenture, such notice shall in no
event be furnished later than ten (10) days after the Owner Trustee shall first
have knowledge of such event and (ii) in the case of a misrepresentation by the
Owner Trustee which with the passage of time would constitute an Indenture Event
of Default referred to in paragraph (d) of Section 8.01 of the Trust Indenture,
such notice shall in no event be furnished later than ten (10) days after the
Owner Trustee shall first have knowledge of such event. The notice shall set
forth in reasonable detail the facts or circumstances known to it with respect
to such Lease Event of Default or Indenture Event of Default. Subject to the
terms of Section 5.03 hereof, the Owner Trustee shall take such action or shall
refrain from taking such action, not inconsistent with the provisions of the
Trust Indenture, with respect to such Lease Event of Default, Indenture Event of
Default or other event as the Owner Trustee shall be directed in writing by the
Owner Participant. For all purposes of this Trust Agreement, the Lease and the
other Operative Documents, in the absence of Actual Knowledge by a responsible
officer of the Trust Office of the Owner Trustee in his or her capacity as such,
the Owner Trustee shall not be deemed to have knowledge of a Lease Event of
Default, Indenture Event of Default or other event referred to in
6
<PAGE>
[Trust Agreement (1995 777 B)]
this Section 5.01 unless notified in writing by the Indenture Trustee, the Owner
Participant or Lessee.
SECTION 5.02. Action Upon Instructions. Subject to the terms of
Sections 5.01 and 5.03 hereof, 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, not inconsistent with the provisions of the Lease and the
Trust Indenture, as may be specified in such instructions: (i) give such notice
or direction or exercise such right, remedy or power hereunder or take such
other actions under any of the Operative Documents 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 Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Documents 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; and (iv) subject to the rights of Lessee under the Operative
Documents, 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 net lease the Aircraft to such lessee or lessees and on
such terms as shall be designated in such instructions.
SECTION 5.03. Indemnification. The Owner Trustee shall not be
required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof 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 any
such action or refrain from taking any action, the Owner Participant agrees to
furnish such indemnity as shall be required and, in addition to the extent not
otherwise paid pursuant to the provisions of the Lease or of the Participation
Agreement, to pay the reasonable compensation of the Owner Trustee for the
services performed or to be performed by it pursuant to such direction and any
reasonable fees and disbursements of counsel or agents employed by the Owner
Trustee in connection therewith. The Owner Trustee shall not be required to
take any action under Section 5.01 or 5.02 hereof if the Owner Trustee shall
reasonably determine, or shall have been advised by counsel, that such action is
contrary
7
<PAGE>
[Trust Agreement (1995 777 B)]
to the terms of any of the Operative Documents to which the Owner Trustee is a
party, or is otherwise contrary to 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 to otherwise take or refrain from taking
any action under, or in connection with any of the Operative Documents to which
the Owner Trustee is a party, except as expressly required by the terms of any
of the Operative Documents to which the Owner Trustee is a party, or (to the
extent not inconsistent with the provisions of the Trust Indenture) as expressly
provided by the terms hereof or in a written instruction from the Owner
Participant received pursuant to the terms of Section 5.01 or 5.02 hereof, and
no implied duties or obligations shall be read into this Trust Agreement against
the Owner Trustee. State Street agrees that it will, in its individual capacity
and at its own cost or expense (but without any right of indemnity in respect of
any such cost or expense under Section 7.01 hereof), promptly take such action
as may be necessary to duly discharge and satisfy in full all Lessor Liens
attributable to it in its individual capacity which it is required to discharge
pursuant to Section 8(g) of the Participation Agreement and otherwise comply
with the terms of said Section binding upon it.
SECTION 5.05. No Action Except Under Specified Documents or
Instruction. The Owner Trustee shall have no power, right 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 Documents 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 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. State Street accepts
the trusts hereby created and agrees to perform the same but only upon the terms
hereof applicable to it. The Owner Trustee also agrees to receive and disburse
all monies received by it constituting part of the Trust Estate upon the terms
hereof. State Street shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or gross negligence,
(b) its failure (in its
8
<PAGE>
[Trust Agreement (1995 777 B)]
individual capacity) to perform its obligations under the last sentence of
Section 5.04 hereof and the first sentence of Section 5.01 hereof, (c) for its
or the Owner Trustee's failure to use ordinary care to disburse funds, (d) for
any Tax based on or measured by any fees, commissions or compensation received
by it for acting as trustee in connection with any of the transactions
contemplated by the Operative Documents and (e) for liabilities that may result
from the inaccuracy of any representation or warranty of it (or from the failure
by it to perform any covenant) in Section 6.03 hereof, in Section 4 of the Lease
or in Sections 8(b), 8(c) and 8(p) of the Participation Agreement.
SECTION 6.02. Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Section 5.02 hereof and except as
provided in, and without limiting the generality of, Sections 3.01 and 5.04
hereof and the last sentence of Section 9.01(b) hereof, neither the Owner
Trustee nor State Street shall have any duty (i) to see to any recording or
filing of any Operative Document or of any supplement to any thereof or to see
to the maintenance of any such recording or filing or any other filing of
reports with the Federal Aviation Administration or other governmental agencies,
except that State Street in its individual capacity agrees to comply with the
Federal Aviation Administration reporting requirements set forth in 14 CFR
(S)47.45 and 14 CFR (S)47.51, and the Owner Trustee shall, to the extent that
information for that purpose is timely supplied by Lessee pursuant to any of the
Operative Documents, complete and timely submit (and furnish the Owner
Participant with a copy of) any and all reports relating to the Aircraft which
may from time to time be required by the Federal Aviation Administration 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, other than to forward to
the Owner Participant copies of all reports and other written information which
the Owner Trustee receives from Lessee pursuant to Section 11(c) of the Lease,
(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 Indenture Estate or the
Trust Estate, except as provided in Section 8(g) of the Participation Agreement,
or (iv) to inspect Lessee's books and records with respect to the Aircraft at
any time permitted pursuant to the Lease. Notwithstanding the foregoing, the
Owner Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other
9
<PAGE>
[Trust Agreement (1995 777 B)]
Operative Document to the extent that any of the same shall not state on its
face or otherwise that it has been so distributed.
SECTION 6.03. No Representations or Warranties as to Certain Matters.
NEITHER THE OWNER TRUSTEE NOR STATE STREET MAKES OR SHALL BE DEEMED TO HAVE MADE
(a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR
ANY PART THEREOF WHATSOEVER, except that State Street in its individual capacity
warrants that on the Delivery Date the Owner Trustee shall have received
whatever title was conveyed to it by Lessee and that the Aircraft shall during
the Term of the Lease be free of Lessor Liens attributable to State Street in
its individual capacity, or (b) any representation or warranty as to the
validity, legality or enforceability of this Trust Agreement or any Operative
Document to which the 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
by such party as a representation by State Street in its individual capacity or
by the Owner Trustee, as the case may be, and except that State Street in its
individual capacity hereby represents and warrants that this Trust Agreement has
been, and (assuming due authorization, execution and delivery by the Owner
Participant of this Trust Agreement) the Operative Documents to which it or the
Owner Trustee is a party have been (or at the time of execution and delivery of
any such instrument by it or 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 itself
or the Owner Trustee, as the case may be, and that the Trust Agreement
constitutes the legal, valid and binding obligation of State Street or the Owner
Trustee, as the case may be, enforceable against State Street or the Owner
Trustee, as the case may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies; Interest. Monies received by
the Owner Trustee hereunder need not be segregated in any manner except to the
extent provided by law and the Owner Trustee, except as provided in Section 22
of the Lease, shall not be liable for any interest thereon.
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,
10
<PAGE>
[Trust Agreement (1995 777 B)]
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it in good faith to be genuine and
reasonably believed by it in good faith 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 or
Lessee mentioned herein or in any of the Operative Documents to which the Owner
Trustee is a party shall be sufficiently evidenced by written instruments signed
by the Chairman of the Board, the President, any Vice President or any other
duly authorized officer or representative and in the name of any such Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors or Executive Committee of Lessee,
certified by the Secretary or an Assistant Secretary of Lessee as duly adopted
and in full force and effect, as conclusive evidence that such resolution has
been duly adopted by said Board or Committee 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 for all purposes hereof
rely on a certificate signed by the Chairman of the Board, the President, any
Vice President or any other duly authorized officer or representative of Lessee,
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 trusts hereunder, the Owner
Trustee may execute any of the trusts or powers hereof and perform its powers
and duties hereunder directly or through agents or attorneys and may, at the
expense of the Trust Estate, consult with counsel, accountants and other skilled
persons to be selected and employed by it. 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, within the scope of such person's competence, of any
such counsel, accountants or other skilled persons and the Owner Trustee shall
not be liable for the negligence of any such counsel, accountant or other
skilled person appointed by it with due care hereunder.
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, the Lease, the
Participation Agreement and the Trust Indenture, all persons, other than the
Owner Participant, as provided herein, 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 except to the extent the Owner
Trustee shall expressly agree otherwise in writing.
11
<PAGE>
[Trust Agreement (1995 777 B)]
SECTION 6.07. Fees and Compensation. The Owner Trustee shall be
entitled to receive compensation, reasonable as regards its responsibilities
hereunder, together with reimbursement within three (3) months of its request
for all reasonable expenses incurred or made by it in accordance with any of the
provisions of this Trust Agreement or any other Operative Document (including
the reasonable compensation and the expenses of its counsel, accountants or
other skilled persons and of all other persons not regularly in its employ). If
a Lease Event of Default or Indenture Event of Default shall occur and be
continuing or if the Lease or the Trust Indenture is declared to be in default,
the Owner Trustee shall be entitled to receive compensation, reasonable as
regards its additional responsibilities hereunder, and payment or reimbursement
for its expenses as provided above. Pursuant to Section 7(c) of the
Participation Agreement and subject to Section 16 thereof, Lessee shall be
required to pay the reasonable fees and expenses of the Owner Trustee comprising
the compensation and reimbursement of expenses to which the Owner Trustee is
entitled under this Section 6.07. Except as otherwise expressly provided in
this Trust Agreement and the other Operative Documents, neither the Owner
Participant nor the Trust Estate shall have any liability for any such fees and
expenses; provided, however, the Owner Participant shall be liable for such
additional compensation of the Owner Trustee if the same is attributable to an
Indenture Event of Default which is caused solely by the actions or inactions of
the Owner Participant; and further provided that the Owner Trustee shall have a
Lien upon the Trust Estate for any such fee not paid by Lessee as contemplated
by Section 7 of the Participation Agreement and such Lien shall entitle the
Owner Trustee to priority as to payment thereof over payment to any other Person
under this Trust Agreement but shall at all times be subordinated to the Lien of
the Trust Indenture.
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 of all monies under this Trust Agreement or any other agreement
contemplated hereby. The Owner Participant shall be responsible for causing to
be prepared and filed all income tax returns required to be filed by the Owner
Participant. The Owner Trustee shall be responsible for causing to be prepared,
at the request of the Owner Participant, all income tax returns required to be
filed with respect to the trust created hereby and shall execute and file such
returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such income tax returns. The Owner Trustee
will give to the Owner Participant, upon request, such periodic information
concerning receipts and
12
<PAGE>
[Trust Agreement (1995 777 B)]
disbursements by it with respect to the Trust Estate as would be helpful to the
Owner Participant in preparing its tax returns.
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify State Street. The Owner
Participant hereby agrees, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and hereby indemnifies,
protects, saves and keeps harmless State Street in its individual capacity and
its successors, assigns, legal representatives, agents and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by State Street in its individual capacity on or
measured by any compensation received by State Street in its individual capacity
for its services hereunder), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, and including without limitation any liability of an owner, any strict
liability and any liability without fault) of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against State Street 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, but only to the extent not otherwise paid or reimbursed by such
other person) in any way relating to or arising out of this Trust Agreement or
any of the Operative Documents 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
(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 or State Street in its individual
capacity hereunder, except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or State Street in its individual
capacity in the performance or nonperformance of its duties hereunder or under
any of the other Operative Documents to which the Owner Trustee is a party or
(b) those claims resulting from the inaccuracy of any representation or warranty
of State Street in its individual capacity (or from the failure of State Street
in its individual capacity to perform any of its covenants) in Section 6.03
hereof, in Section 4 of the Lease, in Section 8(b), 8(c) or 8(p) of the
13
<PAGE>
[Trust Agreement (1995 777 B)]
Participation Agreement or elsewhere in any of the other Operative Documents or
(c) as may result from a breach by State Street in its individual capacity of
its covenant in the last sentence of Section 5.04 hereof or (d) in the case of
the failure to use ordinary care on the part of the Owner Trustee or State
Street in its individual capacity in the disbursement of funds or (e) those
claims arising under any circumstances or upon any terms where Lessee would not
have been required to indemnify the Owner Trustee in its individual capacity
pursuant to Section 7(b) or 7(c) of the Participation Agreement (disregarding,
for this purpose, Sections 7(b)(ii)(2) (to the extent that such disposition
referred to therein results from the Owner Trustee acting in accordance with
written instructions of the Owner Participant), 7(b)(ii)(4)(i) (to the extent
that it results from the willful misconduct or gross negligence of the Owner
Participant to the extent imposed on the Owner Trustee), 7(b)(ii)(7), 7(c)(2)
(to the extent that such failure referred to therein results from the Owner
Trustee's acting in accordance with written instructions of the Owner
Participant), 7(c)(4) (to the extent that such disposition referred to therein
results from the Owner Trustee's acting in accordance with written instructions
of the Owner Participant), 7(c)(6), 7(c)(8) and 7(c)(10) of the Participation
Agreement and disregarding, for this purpose, those claims arising or resulting
from any action taken by or inaction of the Owner Trustee in accordance with
written instructions of the Owner Participant); provided, however, that the
exception set forth in clause (a) of this Section 7.01 shall not apply to any
action taken or omission made by the Owner Trustee pursuant to and in accordance
with written directions given to the Owner Trustee by the Owner Participant.
The indemnities contained in this Section 7.01 extend to State Street only in
its individual capacity and shall not be construed as indemnities of the Trust
Indenture Estate or the Trust Estate (except to the extent, if any, that State
Street in its individual capacity has been reimbursed by the Trust Indenture
Estate or the Trust Estate for amounts covered by the indemnities contained in
this Section 7.01). The indemnities contained in this
Section 7.01 shall survive the termination of this Trust Agreement. In
addition, if necessary, State Street in its individual capacity shall be
entitled to indemnification from the Trust Estate, subject to the Lien of the
Trust 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; and, to secure the same, State Street in its
individual capacity shall have a lien on the Trust Estate, subject to the lien
of the Trust Indenture, which shall be prior to any interest therein of the
Owner Participant. The payor of any indemnity under this Article
14
<PAGE>
[Trust Agreement (1995 777 B)]
VII shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interest. All provisions of Section 8(l)
of the Participation Agreement shall (with the same force and effect as if set
forth in full in this Section 8.01) be applicable to any assignment, conveyance
or other transfer by the Owner Participant of any of its right, title or
interest in and to the Participation Agreement, the Trust Estate or this Trust
Agreement. If there is more than one Owner Participant, no assignment,
conveyance or other transfer by an Owner Participant of any of its right, title
or interest in and to this Trust Agreement or the Trust Estate shall be valid
unless each other Owner Participant's prior written consent (which consent may
be withheld in the sole discretion of such other Owner Participants) is given to
such assignment, conveyance or other transfer.
SECTION 8.02. Actions of the Owner Participants. If at any time
prior to the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by all
Owner Participants and whenever any direction, authorization, approval, consent,
instruction, or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon unanimous agreement of all
Owner Participants provided, however, that the termination of this Trust
Agreement pursuant to Section 11.01 hereof may be effected upon the election of
any Owner Participant.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of 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 8(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) hereof. In
addition, the Owner Participant may
15
<PAGE>
[Trust Agreement (1995 777 B)]
at any time remove the Owner Trustee without cause by a notice in writing
delivered to the Owner Trustee, the Certificate Holders, the Indenture Trustee
and Lessee, such removal to be effective upon the acceptance of appointment by
the successor Owner Trustee under Section 9.01(b) hereof. In the case of the
removal or resignation of the Owner Trustee, the Owner Participant may appoint a
successor Owner Trustee by an instrument signed by the Owner Participant, such
successor to be approved by Lessee unless an Event of Default shall have
occurred and be continuing (which approval shall not be unreasonably withheld).
If a successor Owner Trustee shall not have been appointed within 30 days after
such notice of resignation or removal, the Owner Trustee, the Owner Participant,
Lessee 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.
(b) Execution and Delivery of Documents, etc. Any successor Owner
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee an instrument accepting such appointment, 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 trusts 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 execute such documents as are
provided to it by such successor Owner Trustee and will take such further
actions as are requested of it by such successor Owner Trustee as are reasonably
required to cause registration of the Aircraft included in the Trust Estate to
be transferred upon the records of the Federal Aviation Administration, or other
governmental authority having jurisdiction, into the name of the successor Owner
Trustee.
(c) Qualifications. Any successor Owner Trustee, however appointed,
shall be a Citizen of the United States and shall also be a bank or trust
company organized under the laws of the United States or any state thereof
having a combined capital
16
<PAGE>
[Trust Agreement (1995 777 B)]
and surplus of at least $50,000,000 (or the obligations and liabilities of
which, whether now in existence or hereafter incurred, are fully and
unconditionally guaranteed by an affiliate company having a combined capital and
surplus of at least $50,000,000), if there be such an institution willing, able
and legally qualified to perform the duties of the Owner Trustee hereunder upon
reasonable or customary terms. Subject to Section 14 of the Participation
Agreement, no such successor trustee shall (i) be located in a jurisdiction
which creates adverse consequences for the Lessee (unless such circumstances
would be created by substantially all jurisdictions where major banking or trust
institutions are located) or (ii) charge fees for its services as an Owner
Trustee in excess of the then prevailing market rates for such services (unless
the Owner Participant agrees that it and not the Lessee shall be liable for such
excess).
(d) Merger, etc. Any corporation into which State Street may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which State Street
shall be a party, or any corporation to which substantially all the corporate
trust business of State Street may be transferred, shall, subject to the terms
of Section 9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02. Co-Trustees and Separate Trustees. If at any time it
shall be necessary or prudent in order to conform to any law of any jurisdiction
in which all or any part of the Trust Estate is located, or make any claim or
bring any suit with respect to the Trust Estate or the Lease, or in the event
that the Owner Trustee shall have been requested to do so by the Owner
Participant or the Owner Trustee being advised by counsel shall determine 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 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 Trustee and the Owner Participant, either to act
as co-trustee, jointly with the Owner Trustee, or to act as separate trustee
hereunder (any such co-trustee or separate trustee being herein sometimes
referred to as an "additional trustee"). In the event 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 in case a Lease Event of Default or Indenture Event of Default shall
occur and be continuing, the Owner Trustee may act under the
17
<PAGE>
[Trust Agreement (1995 777 B)]
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
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 Owner Trustee;
(B) Any other rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such additional trustee
jointly, except to the extent that under any 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;
(C) No power given to, or which it is provided hereby may be exercised
by, any such additional trustee shall be exercised hereunder by such
additional trustee, except jointly with, or with the consent in writing of,
the Owner Trustee;
(D) No trustee hereunder shall be personally liable by reason of any
action 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 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
18
<PAGE>
[Trust Agreement (1995 777 B)]
attorney-in-fact for it in such connection in such contingency; and
(F) No appointment 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 Trust Indenture or affect the interests of
the Indenture Trustee or the Certificate Holders in the Trust Indenture
Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery Thereof.
(a) Supplements and Amendments. This Trust Agreement may not be
amended, supplemented or otherwise modified except by an instrument in writing
signed by the Owner Trustee and the Owner Participant. Subject to Section 10.02
hereof and Section 10(B) of the Participation Agreement, the Owner Trustee will
execute any amendment, supplement or other modification of this Trust Agreement
or of any other Operative Documents to which the Owner Trustee is a party which
it is requested to execute by the Owner Participant except that the Owner
Trustee shall not execute any such amendment, supplement or other modification
which, by the express provisions of any of the above documents, requires the
consent of any other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain Parties. A
signed copy of each amendment or supplement referred to in Section 10.01(a)
hereof shall be delivered promptly by the Owner Trustee to Lessee.
SECTION 10.02. Discretion as to Execution of Documents. Prior to
executing any document required to be executed by it pursuant to the terms of
Section 10.01 hereof, the Owner Trustee shall be entitled to receive an opinion
of its counsel to the effect that the execution of such document is authorized
hereunder. If in the opinion of the Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of the Owner Trustee
hereunder or under any other Operative Document to which the Owner Trustee is a
party, the Owner Trustee may in its discretion decline to execute such document.
19
<PAGE>
[Trust Agreement (1995 777 B)]
SECTION 10.03. Distribution of Documents. Promptly after the
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, 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. (a) This Trust
Agreement and the Trusts created hereby shall be of no further force or
effect upon the earliest of (i) both the final discharge of the Trust
Indenture pursuant to Section 10.01 thereof, the termination of the Lease
pursuant to its terms 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, (ii) in accordance with
Article IV hereof, provided that at such time Lessee and the Owner
Participant shall have fully complied with all of the terms of the Lease
and the Participation Agreement and (iii) twenty-one years less one day
after the death of the last survivor of all of the decedents of the
grandparents of David C. Rockefeller living on the date of the earliest
execution of this Trust Agreement by any party hereto, but if this Trust
Agreement and the Trust created hereby shall be or become authorized under
applicable law to be valid for a period commencing on the twenty-first
anniversary of the death of such last survivor (or, without limiting the
generality of the foregoing, if legislation shall become effective
providing for the validity of this Trust Agreement and the Trust created
hereby for a period in gross exceeding the period for which this Trust
Agreement and the Trust created hereby are hereinabove stated to extend and
be valid), then this Trust Agreement and the Trust created hereby shall not
terminate under this subsection (a) but shall extend to and continue in
effect, but only if such non-termination and extension shall then be valid
under applicable law, until the day proceeding such date as the same shall,
under applicable law, cease to be valid. In furtherance of the foregoing,
this Trust Agreement and the Trusts created hereby shall not be revoked,
modified or terminated except in accordance with the terms hereof and of
the Participation Agreement or with the prior written consent of the
Indenture Trustee. Upon such termination,
20
<PAGE>
[Trust Agreement (1995 777 B)]
all monies or other property or proceeds constituting part of the Trust
Estate shall be distributed in accordance with the terms of the Trust
Agreement.
(b) The bankruptcy, death or incapacity of the Owner Participant will
not terminate this Trust Agreement, nor entitle such person's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate,
nor otherwise effect the rights, obligations and liabilities of the parties
hereto. No creditor of the Owner Participant shall obtain legal title to
or exercise legal or equitable remedies with respect to the Trust Estate as
a result of the Owner Participant's status. No transfer, by operation of
law or otherwise, of any right, title and interest of the Owner Participant
in and to its beneficial interest in the Trust Estate shall operate to
terminate this Trust Agreement or the Trusts created hereby.
SECTION 11.02. Owner Participant Has No Legal Title in Trust Estate.
The Owner Participant shall 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 by the Owner Trustee made in
accordance with the express 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. 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 8(l) of the Participation Agreement incorporated
in Article VIII hereof and except as otherwise provided in Article IX and
Sections 5.01, 6.07, 10.01 and 11.01 hereof, nothing herein, whether expressed
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
21
<PAGE>
[Trust Agreement (1995 777 B)]
sole and exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05. Citizenship of the Owner Participant. If at any time
there shall be more than one Owner Participant, then any Owner Participant who
shall cease to be a Citizen of the United States shall have no voting or similar
rights hereunder and shall have no right to direct, influence or limit the
exercise of, or to prevent the direction or influence of, or place any
limitation on the exercise of, the Owner Trustee's authority or to remove the
Owner Trustee.
SECTION 11.06. Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Agreement
on the day that such writing is delivered or, if sent by registered or certified
mail, three Business Days after being deposited in the mails addressed to the
intended recipient thereof in accordance with the provisions of this Section
11.06. Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing provisions of this Section 11.06, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective telecopier numbers) as follows: (A) if to Lessee, the Owner Trustee,
the Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I to the Participation Agreement or (B) if to any Certificate
Holder, addressed to such Certificate Holder at its address as set forth in the
Loan Certificate register maintained pursuant to the Trust Indenture.
SECTION 11.07. Severability. Subject to Section 11.12 hereof, 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 11.08. 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 specific instance and
for the specific purpose given.
22
<PAGE>
[Trust Agreement (1995 777 B)]
SECTION 11.09. 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 11.10. 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 assigns, and the Owner Participant, its
successors and, to the extent permitted by Article VIII hereof, its assigns.
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner Participant shall bind its successors and assigns.
SECTION 11.11. 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 11.12. Governing Law. This Trust Agreement shall in all
respects be governed by, and construed in accordance with, the internal laws of
the Commonwealth of Massachusetts, including all matters of construction,
validity and performance.
SECTION 11.13. Performance by the Owner Participant. Any obligation
of the Owner Trustee in its individual capacity or as Owner Trustee hereunder or
under any other Operative Document or other document contemplated herein, may be
performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
* * *
23
<PAGE>
[Trust Agreement (1995 777 B)]
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.
__________________________________
By:_______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY
By:_______________________________
Title:____________________________
24
<PAGE>
[Trust Agreement (1995 777 B)]
EXHIBIT A
---------
TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE
SUPPLEMENT (1995 777 B)
This TRUST AGREEMENT AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1995
777 B), dated May __, 1995 (herein called the "Trust Supplement") of STATE
STREET BANK AND TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1995 777 B), dated as of May 1, 1995 (herein called the "Trust Agreement"),
between the Owner Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery
of one or more supplements thereto substantially in the form hereof, which shall
particularly describe the Aircraft (such term and other terms defined in the
Trust Indenture referred to below used herein as therein defined) included in
the property covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Mortgage (1995 777 B), dated as of
May 1, 1995 (herein called the "Trust Indenture"), between the Owner Trustee and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, as Indenture Trustee (herein
called the "Indenture Trustee"), provides for the execution and delivery of a
supplement thereto substantially in the form hereof, which shall particularly
describe the Aircraft, and shall specifically mortgage such Aircraft to the
Indenture Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement witnesseth, that, the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
<PAGE>
[Trust Agreement (1995 777 B)]
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
- ------------ ------- ------------ --------------
The Boeing Company 777-222 N766UA 26917
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated take-
off horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the Airframe or any other airframe, identified as
follows:
Manufacturer's
Manufacturer Model Serial Number
- --------------- ------ --------------
Pratt & Whitney PW4084 _______
Pratt & Whitney PW4084 _______
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and secured
by the Trust Indenture and hereby, the Owner Trustee hereby confirms that the
Lien of the Trust Indenture over the Trust Indenture Estate includes the Lease
Supplement of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the equal and proportionate
benefit and security of the holders from time to time of the Loan Certificates
outstanding, without any preference, distinction or priority of any one Loan
Certificate over any other by reason of series, priority of time
of issue, sale, negotiation, date of maturity thereof or
A-2
<PAGE>
[Trust Agreement (1995 777 B)]
otherwise for any reason whatsoever, and for the uses and purposes and subject
to the terms and provisions set forth in the Trust Indenture.
This Trust Supplement shall be construed as supplemental to the Trust
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
* * *
A-3
<PAGE>
[Trust Agreement (1995 777 B)]
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Supplement to be
duly executed by one of its officers, thereunto duly authorized, on the day and
year first above written.
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee,
By:_______________________________________________
Title:______________________________________
A-4
<PAGE>
Doc. No. 1.04
Aircraft N189UA
--------------------------------------------
FIRST AMENDED AND RESTATED TRUST AGREEMENT
(1993 747 A)
Dated as of May 1, 1995
between
___________________,
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY,
Owner Trustee
--------------------------------------------
United Air Lines, Inc.
1993 747 A Equipment Trust
One Boeing 747-422 Aircraft
--------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain Definitions.......................................... 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents............................... 3
SECTION 2.02. Declaration of Trust......................................... 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES
SECTION 3.01. Purchase of Certain Rights in the Aircraft................... 3
SECTION 3.02. Conditions Precedent......................................... 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01. Distribution of Payments..................................... 5
(a) Payments to the Indenture Trustee................................. 5
(b) Payments to Owner Trustee; Other Parties.......................... 5
(c) Certain Distributions to the Owner Participant.................... 6
(d) Excluded Payments................................................. 6
(e) Multiple Owner Participants....................................... 6
SECTION 4.02. Method of Payments........................................... 6
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01. Notice of Event of Default................................... 6
SECTION 5.02. Action Upon Instructions..................................... 7
i
<PAGE>
SECTION 5.03. Indemnification................................... 8
SECTION 5.04. No Duties Except as Specified in Trust
Agreement or Instructions......................... 8
SECTION 5.05. No Action Except Under Specified
Documents or Instruction.......................... 9
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties................... 9
SECTION 6.02. Absence of Certain Duties......................... 9
SECTION 6.03. No Representations or Warranties
as to Certain Matters............................. 10
SECTION 6.04. No Segregation of Monies; Interest................ 11
SECTION 6.05. Reliance Upon Certificates,
Counsel and Agents................................ 11
SECTION 6.06. Not Acting in Individual Capacity................. 12
SECTION 6.07. Fees and Compensation............................. 12
SECTION 6.08. Tax Returns....................................... 13
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify State Street....... 13
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interest.............................. 15
SECTION 8.02. Actions of the Owner Participants................. 15
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of Owner Trustee;
Appointment of Successor.......................... 16
ii
<PAGE>
(a) Resignation or Removal............................ 16
(b) Execution and Delivery of Documents, etc.......... 16
(c) Qualifications.................................... 17
(d) Merger, etc....................................... 17
SECTION 9.02. Co-Trustees and Separate Trustees.................. 18
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments
and Delivery Thereof.............................. 19
(a) Supplements and Amendments........................ 19
(b) Delivery of Amendments and Supplements
to Certain Parties................................ 20
SECTION 10.02. Discretion as to Execution of Documents........... 20
SECTION 10.03. Distribution of Documents......................... 20
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement.................... 20
SECTION 11.02. Owner Participant Has No Legal Title
in Trust Estate................................... 22
SECTION 11.03. Assignment, Sale, etc. of Aircraft................ 22
SECTION 11.04. Trust Agreement for Benefit of
Certain Parties Only.............................. 22
SECTION 11.05. Citizenship of the Owner Participant.............. 22
SECTION 11.06. Notices........................................... 22
SECTION 11.07. Severability...................................... 23
SECTION 11.08. Waivers, etc...................................... 23
SECTION 11.09. Counterparts...................................... 23
SECTION 11.10. Binding Effect, etc............................... 23
SECTION 11.11. Headings; References.............................. 23
SECTION 11.12. Governing Law..................................... 24
iii
<PAGE>
SECTION 11.13. Performance by the Owner Participant................. 24
EXHIBITS
EXHIBIT A Third Amended and Restated Trust Agreement
and Trust Indenture and Mortgage Supplement
(1993 747 A)
iv
<PAGE>
FIRST AMENDED AND RESTATED TRUST AGREEMENT (1993 747 A)
This FIRST AMENDED AND RESTATED TRUST AGREEMENT (1993 747 A) dated as
of May 1, 1995 between ___________________, a Delaware corporation (the "Owner
Participant"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company (in its individual capacity, "State Street", and otherwise not in its
individual capacity but solely as trustee hereunder with its permitted
successors and assigns called the "Owner Trustee") as successor to Wilmington
Trust Company ("Original Owner Trustee") amends and restates that certain Trust
Agreement (1993 747 A) dated as of April 1, 1993 ("Original Trust Agreement")
between the Owner Participant and and the Original Owner Trustee.
W I T N E S S E T H:
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning provided thereto in Article I hereof;
WHEREAS, a counterpart of the Original Trust Agreement was attached to
and made a part of Trust Indenture and Mortgage (1993 747 A) dated as of April
1, 1993 between the Original Owner Trustee, and the Owner Participant and was
recorded by the Federal Aviation Administration on April 21, 1993 as Conveyance
No. FF08935; and
WHEREAS, the Owner Trustee succeeded to the interests of the Original
Owner Trustee pursuant to that certain Assignment and Assumption Agreement dated
as of April 15, 1995, between the Owner Trustee and the Original Owner Trustee,
a counterpart of which was recorded by the FAA on ____________, 1995 as
Conveyance No. ____________; and
WHEREAS, the Owner Trustee and the Owner Participant desire to amend
and restate the Original Trust Agreement in its entirety and the Owner Trustee
and the Owner Participant desire and intend that the terms, provisions and
agreements herein set forth shall have the same force and effect as though
originally executed and delivered in the place of the Original Trust Agreement.
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain 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)
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
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:
"Actual Knowledge" has the meaning ascribed to such term in the Trust
Indenture.
"Excluded Payments" has the meaning ascribed to such term in the Trust
Indenture.
"Indenture Event of Default" has the meaning ascribed to such term in the
Trust Indenture.
"Lease" means that certain Amended and Restated Lease Agreement (1993 747
A), to be dated as of the date hereof, and to be entered into by the Owner
Trustee and Lessee concurrently with the execution and delivery of this Trust
Agreement, as said Lease Agreement may from time to time be supplemented or
amended, or the terms thereof waived or modified, to the extent permitted by,
and in accordance with, the terms of this Trust Agreement. The term "Lease"
shall also include each Lease Supplement from time to time entered into pursuant
to the terms of the Lease.
"Lease Event of Default" has the meaning which the term "Event of Default"
has in the Lease.
"Owner Participant" shall mean and include (i) ________________, a Delaware
corporation, as the original Owner Participant, and (ii) the successors and
assigns of __________________.
"Trust Estate" means all estate, right, title and interest of the Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement, the Purchase
Agreement and the Owner Trustee's Purchase Agreement, the Owner Trustee's Bill
of Sale and the Owner Trustee's FAA Bill of Sale, including, without limitation,
all amounts of Basic Rent and Supplemental Rent including without limitation
insurance proceeds (other than insurance proceeds payable to or for the benefit
of the Owner Trustee, for its own account or in its individual capacity, the
Owner Participant, the Certificate Holders or the Indenture Trustee) and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Certificate
Holder, or to any of their respective directors, officers, employees, servants
and agents, pursuant to Section 7 of the Participation Agreement).
2
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"Trust Indenture Estate" has the meaning ascribed to the term "Indenture
Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the Trust
Indenture.
"Trust Supplement" means a supplement to the Trust Agreement and Trust
Indenture in substantially the form of Exhibit A to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. 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 on or before the Delivery
Date, execute and deliver the Operative Documents to which it is a party and any
other agreements, instruments or documents to which the Owner Trustee is a party
in the respective forms thereof which are delivered from time to time by the
Owner Participant to the Owner Trustee for execution and delivery and, subject
to the terms hereof, to exercise its rights (upon instructions received from the
Owner Participant) and perform its duties under said Operative Documents 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 by the Trust Indenture and to the provisions
of the Lease and the Participation Agreement.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF LOAN CERTIFICATES
SECTION 3.01. Purchase of Certain Rights in the Aircraft. 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, on the
Delivery
3
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Date, subject to due compliance with the terms of Section 3.02 hereof:
(a) purchase the Aircraft pursuant to the Owner Trustee's Purchase
Agreement;
(b) accept from Lessee the delivery of the Owner Trustee's Bill of
Sale and the Owner Trustee's FAA Bill of Sale;
(c) execute and deliver a Lease Supplement covering the Aircraft;
(d) execute and deliver a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver the Loan Certificates in the amounts
and otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred to in
Section 4(a)(vi) of the Participation Agreement, together with all other
agreements, documents and instruments referred to in Section 4 of the
Participation Agreement to which the Owner Trustee is to be a party;
(g) effect the registration of the Aircraft in the name of the Owner
Trustee by filing or causing to be filed with the FAA: (i) the Owner
Trustee's FAA Bill of Sale; (ii) an application for registration of the
Aircraft in the name of the Owner Trustee (including without limitation an
affidavit from the Owner Trustee in compliance with the provisions of 14
C.F.R. (S) 47.7(c)(2)(ii)); and (iii) this Trust Agreement; and
(h) 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 deem
necessary or advisable in connection with the transactions contemplated
hereby.
SECTION 3.02. Conditions Precedent. The rights and obligations of
the Owner Trustee to take the actions required by Section 3.01 hereof with
respect to the Aircraft shall be subject to the following conditions precedent:
(a) the Owner Participant shall have made the full amount of its Commitment set
forth in Schedule II to the Participation Agreement available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the
4
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
terms and conditions of Section 4 of the Participation Agreement, insofar as
they relate to conditions precedent to performance by the Owner Participant of
its obligations thereunder, shall have been either fulfilled to the satisfaction
of or waived by the Owner Participant. The Owner Participant shall, by
instructing the Owner Trustee to release the funds then held by the Owner
Trustee as provided in Section 2 of the Participation Agreement, be deemed to
have found satisfactory to it, or waived, all such conditions precedent.
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 Trust Indenture
shall have been discharged pursuant to Section 10.01 thereof, all Basic Rent,
insurance proceeds and requisition or other payments of any kind included in the
Trust Estate (other than Excluded Payments and other than payments received from
the Indenture Trustee under the Trust Indenture) payable to the Owner Trustee
shall be payable directly to the Indenture Trustee (and any of the same which
are received by the Owner Trustee shall upon receipt 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 3 of the Trust
Indenture; provided, however, that any payments received by the Owner Trustee
from (i) the Lessee with respect to the Owner Trustee's fees and disbursements,
or (ii) the Owner Participant pursuant to Article VII hereof shall not be paid
over to the Indenture Trustee but shall be retained by the Owner Trustee and
applied toward the purpose for which such payments were made.
(b) Payments to Owner Trustee; Other Parties. After the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof, any
payment of the type referred to in Section 4.01(a) hereof (other than Excluded
Payments) received by the Owner Trustee, any payments received from the
Indenture Trustee other than as specified in Section 4.01(d) hereof and any
other amount 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 reimburse the Owner
Trustee for any expenses not otherwise reimbursed as to which the Owner Trustee
is entitled to be so reimbursed pursuant to the provisions hereof shall be
retained by the Owner Trustee; second,
5
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
so much of the remainder for which provision as to the application thereof is
contained in the Lease or any of the other Operative Documents shall be applied
and distributed in accordance with the terms of the Lease or such other
Operative Document; and third, the balance, if any, shall be paid to the Owner
Participant.
(c) Certain Distributions to the Owner Participant. All amounts from
time to time distributable by the Indenture Trustee to the Owner Participant
pursuant to the Trust Indenture shall, if paid to the Owner Trustee, be
distributed by the Owner Trustee to the Owner Participant in accordance with the
provisions of Article 3 of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by the Owner
Trustee shall be paid by the Owner Trustee to the Person to whom such Excluded
Payments are payable under the provisions of the Participation Agreement, the
Tax Indemnity Agreement or the Lease.
(e) Multiple Owner Participants. If as a result of a transfer by an
Owner Participant under Section 8.01 of this Trust Agreement, there is more than
one Owner Participant hereunder, each such Owner Participant shall hold in
proportion to its respective beneficial interest in the Trust Estate, an
undivided beneficial interest in the entire Trust Estate and is entitled to
receive ratably with any other Owner Participant payments distributable by the
Owner Trustee hereunder. No Owner Participant shall have legal title to the
Aircraft or any other portion of the Trust Estate.
SECTION 4.02. Method of Payments. The Owner Trustee shall make
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by the Owner Trustee
by 12:00 noon, New York City time), the amount to be distributed as provided in
Schedule I to the Participation Agreement or to such account or accounts of the
Owner Participant as the Owner Participant may designate from time to time 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 Lease Event of Default or
6
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Indenture Event of Default (or an event which with the passage of time or the
giving of notice or both would constitute a Lease Event of Default or an
Indenture Event of Default), the Owner Trustee shall give to the Owner
Participant and Lessee prompt telephonic or telecopier notice thereof followed
by prompt confirmation thereof by certified mail, postage prepaid, provided that
(i) in the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute an Indenture Event of Default referred to in paragraph
(d) of Section 8.01 of the Trust Indenture, such notice shall in no event be
furnished later than ten (10) days after the Owner Trustee shall first have
knowledge of such event. The notice shall set forth in reasonable detail the
facts or circumstances known to it with respect to such Lease Event of Default
or Indenture Event of Default. Subject to the terms of Section 5.03 hereof, the
Owner Trustee shall take such action or shall refrain from taking such action,
not inconsistent with the provisions of the Trust Indenture, with respect to
such Lease Event of Default, Indenture Event of Default or other event as the
Owner Trustee shall be directed in writing by the Owner Participant. For all
purposes of this Trust Agreement, the Lease and the other Operative Documents,
in the absence of Actual Knowledge by a responsible officer of the Trust Office
of the Owner Trustee in his or her capacity as such, the Owner Trustee shall not
be deemed to have knowledge of a Lease Event of Default, Indenture Event of
Default or other event referred to in this Section 5.01 unless notified in
writing by the Indenture Trustee, the Owner Participant or Lessee.
SECTION 5.02. Action Upon Instructions. Subject to the terms of
Sections 5.01 and 5.03 hereof, 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, not inconsistent with the provisions of the Lease and the
Trust Indenture, as may be specified in such instructions: (i) give such notice
or direction or exercise such right, remedy or power hereunder or take such
other actions under any of the Operative Documents 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 Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Documents 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
7
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
such matter as satisfactory to it; and (iv) subject to the rights of Lessee
under the Operative Documents, 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 net lease the Aircraft to such
lessee or lessees and on such terms as shall be designated in such instructions.
SECTION 5.03. Indemnification. The Owner Trustee shall not be
required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof 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 any
such action or refrain from taking any action, the Owner Participant agrees to
furnish such indemnity as shall be required and, in addition to the extent not
otherwise paid pursuant to the provisions of the Lease or of the Participation
Agreement, to pay the reasonable compensation of the Owner Trustee for the
services performed or to be performed by it pursuant to such direction and any
reasonable fees and disbursements of counsel or agents employed by the Owner
Trustee in connection therewith. The Owner Trustee shall not be required to
take any action under Section 5.01 or 5.02 hereof 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 Documents to which the Owner
Trustee is a party, or is otherwise contrary to 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 to otherwise take or refrain from taking
any action under, or in connection with any of the Operative Documents to which
the Owner Trustee is a party, except as expressly required by the terms of any
of the Operative Documents to which the Owner Trustee is a party, or (to the
extent not inconsistent with the provisions of the Trust Indenture) as expressly
provided by the terms hereof or in a written instruction from the Owner
Participant received pursuant to the terms of Section 5.01 or 5.02 hereof, and
no implied duties or obligations shall be read into this Trust Agreement against
the Owner Trustee. State Street agrees that it will, in its individual capacity
and at its own cost or expense (but without any right of indemnity in respect of
any such cost or expense under Section 7.01 hereof), promptly take such action
as may be necessary to duly discharge
8
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
and satisfy in full all Lessor Liens attributable to it in its individual
capacity which it is required to discharge pursuant to Section 8(g) of the
Participation Agreement and otherwise comply with the terms of said Section
binding upon it.
SECTION 5.05. No Action Except Under Specified Documents or
Instruction. The Owner Trustee shall have no power, right 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 Documents 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 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. State Street accepts
the trusts hereby created and agrees to perform the same but only upon the terms
hereof applicable to it. The Owner Trustee also agrees to receive and disburse
all monies received by it constituting part of the Trust Estate upon the terms
hereof. State Street shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or gross negligence,
(b) its failure (in its individual capacity) to perform its obligations under
the last sentence of Section 5.04 hereof and the first sentence of Section 5.01
hereof, (c) for its or the Owner Trustee's failure to use ordinary care to
disburse funds, (d) for any Tax based on or measured by any fees, commissions or
compensation received by it for acting as trustee in connection with any of the
transactions contemplated by the Operative Documents and (e) for liabilities
that may result from the inaccuracy of any representation or warranty of it (or
from the failure by it to perform any covenant) in Section 6.03 hereof, in
Section 4 of the Lease or in Sections 8(b), 8(c) and 8(p) of the Participation
Agreement.
SECTION 6.02. Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Section 5.02 hereof and except as
provided in, and without limiting the generality of, Sections 3.01 and 5.04
hereof and the last sentence of Section 9.01(b) hereof, neither the Owner
Trustee nor State Street shall have any duty (i) to see to any recording or
filing of any Operative Document or of any supplement to any thereof or to see
to the maintenance of any such recording or filing or any other filing of
reports with the
9
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Federal Aviation Administration or other governmental agencies, except that
State Street in its individual capacity agrees to comply with the Federal
Aviation Administration reporting requirements set forth in 14 CFR (S)47.45 and
14 CFR (S)47.51, and the Owner Trustee shall, to the extent that information for
that purpose is timely supplied by Lessee pursuant to any of the Operative
Documents, complete and timely submit (and furnish the Owner Participant with a
copy of) any and all reports relating to the Aircraft which may from time to
time be required by the Federal Aviation Administration 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, other than to forward to the Owner
Participant copies of all reports and other written information which the Owner
Trustee receives from Lessee pursuant to Section 11(c) of the Lease, (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 Indenture Estate or the Trust Estate,
except as provided in Section 8(g) of the Participation Agreement, or (iv) to
inspect Lessee's books and records with respect to the Aircraft at any time
permitted pursuant to the Lease. Notwithstanding the foregoing, the Owner
Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other Operative Document
to the extent that any of the same shall not state on its face or otherwise that
it has been so distributed.
SECTION 6.03. No Representations or Warranties as to Certain Matters.
NEITHER THE OWNER TRUSTEE NOR STATE STREET MAKES OR SHALL BE DEEMED TO HAVE MADE
(a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR
ANY PART THEREOF WHATSOEVER, except that State Street in its individual capacity
warrants that on the Delivery Date the Owner Trustee shall have received
whatever title was conveyed to it by Lessee and that the Aircraft shall during
the Term of the Lease be free of Lessor Liens attributable to State Street in
its individual capacity, or (b) any representation or warranty as to the
validity, legality or enforceability of this Trust Agreement or any Operative
Document to which the 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
10
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
such statement is expressly made herein or therein by such party as a
representation by State Street in its individual capacity or by the Owner
Trustee, as the case may be, and except that State Street in its individual
capacity hereby represents and warrants that this Trust Agreement has been, and
(assuming due authorization, execution and delivery by the Owner Participant of
this Trust Agreement) the Operative Documents to which it or the Owner Trustee
is a party have been (or at the time of execution and delivery of any such
instrument by it or 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 itself or the
Owner Trustee, as the case may be, and that the Trust Agreement constitutes the
legal, valid and binding obligation of State Street or the Owner Trustee, as the
case may be, enforceable against State Street or the Owner Trustee, as the case
may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies; Interest. Monies received by
the Owner Trustee hereunder need not be segregated in any manner except to the
extent provided by law and the Owner Trustee, except as provided in Section 22
of the Lease, shall not be liable for any interest thereon.
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 in
good faith to be genuine and reasonably believed by it in good faith 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 or Lessee mentioned herein or in any of the Operative
Documents to which the Owner Trustee is a party shall be sufficiently evidenced
by written instruments signed by the Chairman of the Board, the President, any
Vice President or any other duly authorized officer or representative and in the
name of any such Owner Participant or Lessee, as the case may be. The Owner
Trustee may accept a copy of a resolution of the Board of Directors or Executive
Committee of Lessee, certified by the Secretary or an Assistant Secretary of
Lessee as duly adopted and in full force and effect, as conclusive evidence that
such resolution has been duly adopted by said Board or Committee 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 for all purposes hereof rely on a certificate signed by the Chairman of the
Board, the President, any Vice President or any other duly authorized
11
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
officer or representative of Lessee, 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 trusts hereunder, the Owner Trustee may execute any of the
trusts or powers hereof and perform its powers and duties hereunder directly or
through agents or attorneys and may, at the expense of the Trust Estate, consult
with counsel, accountants and other skilled persons to be selected and employed
by it. 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, within the
scope of such person's competence, of any such counsel, accountants or other
skilled persons and the Owner Trustee shall not be liable for the negligence of
any such counsel, accountant or other skilled person appointed by it with due
care hereunder.
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, the Lease, the
Participation Agreement and the Trust Indenture, all persons, other than the
Owner Participant, as provided herein, 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 except to the extent the Owner
Trustee shall expressly agree otherwise in writing.
SECTION 6.07. Fees and Compensation. The Owner Trustee shall be
entitled to receive compensation, reasonable as regards its responsibilities
hereunder, together with reimbursement within three (3) months of its request
for all reasonable expenses incurred or made by it in accordance with any of the
provisions of this Trust Agreement or any other Operative Document (including
the reasonable compensation and the expenses of its counsel, accountants or
other skilled persons and of all other persons not regularly in its employ). If
a Lease Event of Default or Indenture Event of Default shall occur and be
continuing or if the Lease or the Trust Indenture is declared to be in default,
the Owner Trustee shall be entitled to receive compensation, reasonable as
regards its additional responsibilities hereunder, and payment or reimbursement
for its expenses as provided above. Pursuant to Section 7(c) of the
Participation Agreement and subject to Section 16 thereof, Lessee shall be
required to pay the reasonable fees and expenses of the Owner Trustee comprising
the compensation and reimbursement of expenses to which the Owner Trustee is
entitled under this Section 6.07. Except as otherwise expressly provided in
this Trust Agreement and the other Operative Documents, neither the
12
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Owner Participant nor the Trust Estate shall have any liability for any such
fees and expenses; provided, however, the Owner Participant shall be liable for
such additional compensation of the Owner Trustee if the same is attributable to
an Indenture Event of Default which is caused solely by the actions or inactions
of the Owner Participant; and further provided that the Owner Trustee shall have
a Lien upon the Trust Estate for any such fee not paid by Lessee as contemplated
by Section 7 of the Participation Agreement and such Lien shall entitle the
Owner Trustee to priority as to payment thereof over payment to any other Person
under this Trust Agreement but shall at all times be subordinated to the Lien of
the Trust Indenture.
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 of all monies under this Trust Agreement or any other agreement
contemplated hereby. The Owner Participant shall be responsible for causing to
be prepared and filed all income tax returns required to be filed by the Owner
Participant. The Owner Trustee shall be responsible for causing to be prepared,
at the request of the Owner Participant, all income tax returns required to be
filed with respect to the trust created hereby and shall execute and file such
returns. The Owner Trustee and the Owner Participant, upon request, will
furnish each other with all such information as may be reasonably required in
connection with the preparation of such income tax returns. The Owner Trustee
will give to the Owner Participant, upon request, such periodic information
concerning receipts and disbursements by it with respect to the Trust Estate as
would be helpful to the Owner Participant in preparing its tax returns.
ARTICLE VII
INDEMNIFICATION OF STATE STREET
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify State Street. The Owner
Participant hereby agrees, whether or not any of the transactions contemplated
hereby shall be consummated, to assume liability for, and hereby indemnifies,
protects, saves and keeps harmless State Street in its individual capacity and
its successors, assigns, legal representatives, agents and servants, from and
against any and all liabilities, obligations, losses, damages, penalties, taxes
(excluding any taxes payable by State Street in its individual capacity on or
measured by any compensation received by State Street in its individual capacity
for its services hereunder), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, and including without
13
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
limitation any liability of an owner, any strict liability and any liability
without fault) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against State Street 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, but
only to the extent not otherwise paid or reimbursed by such other person) in any
way relating to or arising out of this Trust Agreement or any of the Operative
Documents 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
(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 or State Street in its individual
capacity hereunder, except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or State Street in its individual
capacity in the performance or nonperformance of its duties hereunder or under
any of the other Operative Documents to which the Owner Trustee is a party or
(b) those claims resulting from the inaccuracy of any representation or warranty
of State Street in its individual capacity (or from the failure of State Street
in its individual capacity to perform any of its covenants) in Section 6.03
hereof, in Section 4 of the Lease, in Section 8(b), 8(c) or 8(p) of the
Participation Agreement or elsewhere in any of the other Operative Documents or
(c) as may result from a breach by State Street in its individual capacity of
its covenant in the last sentence of Section 5.04 hereof or (d) in the case of
the failure to use ordinary care on the part of the Owner Trustee or State
Street in its individual capacity in the disbursement of funds or (e) those
claims arising under any circumstances or upon any terms where Lessee would not
have been required to indemnify the Owner Trustee in its individual capacity
pursuant to Section 7(b) or 7(c) of the Participation Agreement (disregarding,
for this purpose, Sections 7(b)(ii)(2) (to the extent that such disposition
referred to therein results from the Owner Trustee acting in accordance with
written instructions of the Owner Participant), 7(b)(ii)(4)(i) (to the extent
that it results from the willful misconduct or gross negligence of the Owner
Participant to the extent imposed on the Owner Trustee), 7(b)(ii)(7), 7(c)(2)
(to the extent that such failure referred to therein results from the Owner
Trustee's acting in accordance with written instructions of the Owner
Participant), 7(c)(4) (to the extent that such disposition referred to therein
results from the Owner Trustee's acting in accordance with written instructions
of the Owner Participant), 7(c)(6), 7(c)(8) and
14
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
7(c)(10) of the Participation Agreement and disregarding, for this purpose,
those claims arising or resulting from any action taken by or inaction of the
Owner Trustee in accordance with written instructions of the Owner Participant);
provided, however, that the exception set forth in clause (a) of this Section
7.01 shall not apply to any action taken or omission made by the Owner Trustee
pursuant to and in accordance with written directions given to the Owner Trustee
by the Owner Participant. The indemnities contained in this Section 7.01 extend
to State Street only in its individual capacity and shall not be construed as
indemnities of the Trust Indenture Estate or the Trust Estate (except to the
extent, if any, that State Street in its individual capacity has been reimbursed
by the Trust Indenture Estate or the Trust Estate for amounts covered by the
indemnities contained in this Section 7.01). The indemnities contained in this
Section 7.01 shall survive the termination of this Trust Agreement. In addition,
if necessary, State Street in its individual capacity shall be entitled to
indemnification from the Trust Estate, subject to the Lien of the Trust
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; and, to secure the same, State Street in its individual capacity
shall have a lien on the Trust Estate, subject to the lien of the Trust
Indenture, which shall be prior to any interest therein of the Owner
Participant. The payor of any indemnity under this Article VII shall be
subrogated to any right of the person indemnified in respect of the matter as to
which such indemnity was paid.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interest. All provisions of Section 8(l)
of the Participation Agreement shall (with the same force and effect as if set
forth in full in this Section 8.01) be applicable to any assignment, conveyance
or other transfer by the Owner Participant of any of its right, title or
interest in and to the Participation Agreement, the Trust Estate or this Trust
Agreement. If there is more than one Owner Participant, no assignment,
conveyance or other transfer by an Owner Participant of any of its right, title
or interest in and to this Trust Agreement or the Trust Estate shall be valid
unless each other Owner Participant's prior written consent (which consent may
be withheld in the sole discretion of such other Owner Participants) is given to
such assignment, conveyance or other transfer.
15
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
SECTION 8.02. Actions of the Owner Participants. If at any time
prior to the termination of this Trust Agreement there is more than one Owner
Participant, then during such time, if any action is required to be taken by all
Owner Participants and whenever any direction, authorization, approval, consent,
instruction, or other action is permitted to be given or taken by the Owner
Participant it shall be given or taken only upon unanimous agreement of all
Owner Participants; provided, however, that the termination of this Trust
Agreement pursuant to Section 11.01 hereof may be effected upon the election of
any Owner Participant.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of 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 8(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) hereof. In
addition, the Owner Participant may at any time remove the Owner Trustee without
cause by a notice in writing delivered to the Owner Trustee, the Certificate
Holders, the Indenture Trustee and Lessee, such removal to be effective upon the
acceptance of appointment by the successor Owner Trustee under Section 9.01(b)
hereof. In the case of the removal or resignation of the Owner Trustee, the
Owner Participant may appoint a successor Owner Trustee by an instrument signed
by the Owner Participant, such successor to be approved by Lessee unless an
Event of Default shall have occurred and be continuing (which approval shall not
be unreasonably withheld). If a successor Owner Trustee shall not have been
appointed within 30 days after such notice of resignation or removal, the Owner
Trustee, the Owner Participant, Lessee 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.
(b) Execution and Delivery of Documents, etc. Any successor Owner
Trustee, however appointed, shall execute and
16
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
deliver to the predecessor Owner Trustee an instrument accepting such
appointment, 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 trusts 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 execute such
documents as are provided to it by such successor Owner Trustee and will take
such further actions as are requested of it by such successor Owner Trustee as
are reasonably required to cause registration of the Aircraft included in the
Trust Estate to be transferred upon the records of the Federal Aviation
Administration, or other governmental authority having jurisdiction, into the
name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however appointed,
shall be a Citizen of the United States and shall also be a bank or trust
company organized under the laws of the United States or any state thereof
having a combined capital and surplus of at least $50,000,000 (or the
obligations and liabilities of which, whether now in existence or hereafter
incurred, are fully and unconditionally guaranteed by an affiliate company
having a combined capital and surplus of at least $50,000,000), if there be such
an institution willing, able and legally qualified to perform the duties of the
Owner Trustee hereunder upon reasonable or customary terms. Subject to Section
14 of the Participation Agreement, no such successor trustee shall (i) be
located in a jurisdiction which creates adverse consequences for the Lessee
(unless such circumstances would be created by substantially all jurisdictions
where major banking or trust institutions are located) or (ii) charge fees for
its services as an Owner Trustee in excess of the then prevailing market rates
for such services (unless the Owner Participant agrees that it and not the
Lessee shall be liable for such excess).
(d) Merger, etc. Any corporation into which State Street may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which State Street
shall be a party, or any corporation to which substantially all the
17
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
corporate trust business of State Street may be transferred, shall, subject to
the terms of Section 9.01(c) hereof, be the Owner Trustee hereunder without
further act.
SECTION 9.02. Co-Trustees and Separate Trustees. If at any time it
shall be necessary or prudent in order to conform to any law of any jurisdiction
in which all or any part of the Trust Estate is located, or make any claim or
bring any suit with respect to the Trust Estate or the Lease, or in the event
that the Owner Trustee shall have been requested to do so by the Owner
Participant or the Owner Trustee being advised by counsel shall determine 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 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 Trustee and the Owner Participant, either to act
as co-trustee, jointly with the Owner Trustee, or to act as separate trustee
hereunder (any such co-trustee or separate trustee being herein sometimes
referred to as an "additional trustee"). In the event 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 in case a Lease Event of Default or Indenture 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
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 Owner Trustee;
(B) Any other rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such additional trustee
jointly, except to
18
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
the extent that under any 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;
(C) No power given to, or which it is provided hereby may be exercised
by, any such additional trustee shall be exercised hereunder by such
additional trustee, except jointly with, or with the consent in writing of,
the Owner Trustee;
(D) No trustee hereunder shall be personally liable by reason of any
action 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 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 for it in such connection in such contingency; and
(F) No appointment 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 Trust Indenture or affect the interests of
the Indenture Trustee or the Certificate Holders in the Trust Indenture
Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery Thereof.
(a) Supplements and Amendments. This Trust Agreement may not be
amended, supplemented or otherwise modified except by an instrument in writing
signed by the Owner Trustee and the Owner Participant. Subject to Section 10.02
hereof and Section
19
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
10(B) of the Participation Agreement, the Owner Trustee will execute any
amendment, supplement or other modification of this Trust Agreement or of any
other Operative Documents to which the Owner Trustee is a party which it is
requested to execute by the Owner Participant except that the Owner Trustee
shall not execute any such amendment, supplement or other modification which, by
the express provisions of any of the above documents, requires the consent of
any other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain Parties. A
signed copy of each amendment or supplement referred to in Section 10.01(a)
hereof shall be delivered promptly by the Owner Trustee to Lessee.
SECTION 10.02. Discretion as to Execution of Documents. Prior to
executing any document required to be executed by it pursuant to the terms of
Section 10.01 hereof, the Owner Trustee shall be entitled to receive an opinion
of its counsel to the effect that the execution of such document is authorized
hereunder. If in the opinion of the Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of the Owner Trustee
hereunder or under any other Operative Document to which the Owner Trustee is a
party, the Owner Trustee may in its discretion decline to execute such document.
SECTION 10.03. Distribution of Documents. Promptly after the
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, 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. (a) This Trust
Agreement and the Trusts created hereby shall be of no further force or
effect upon the earliest of (i) both the final discharge of the Trust
Indenture pursuant to Section 10.01 thereof, the termination of the Lease
pursuant to its terms 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, (ii) in accordance with
Article IV
20
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
hereof, provided that at such time Lessee and the Owner Participant shall
have fully complied with all of the terms of the Lease and the
Participation Agreement and (iii) twenty-one years less one day after the
death of the last survivor of all of the decedents of the grandparents of
David C. Rockefeller living on the date of the earliest execution of this
Trust Agreement by any party hereto, but if this Trust Agreement and the
Trust created hereby shall be or become authorized under applicable law to
be valid for a period commencing on the twenty-first anniversary of the
death of such last survivor (or, without limiting the generality of the
foregoing, if legislation shall become effective providing for the validity
of this Trust Agreement and the Trust created hereby for a period in gross
exceeding the period for which this Trust Agreement and the Trust created
hereby are hereinabove stated to extend and be valid), then this Trust
Agreement and the Trust created hereby shall not terminate under this
subsection (a) but shall extend to and continue in effect, but only if such
non-termination and extension shall then be valid under applicable law,
until the day proceeding such date as the same shall, under applicable law,
cease to be valid. In furtherance of the foregoing, this Trust Agreement
and the Trusts created hereby shall not be revoked, modified or terminated
except in accordance with the terms hereof and of the Participation
Agreement or with the prior written consent of the Indenture Trustee. Upon
such termination, all monies or other property or proceeds constituting
part of the Trust Estate shall be distributed in accordance with the terms
of the Trust Agreement.
(b) The bankruptcy, death or incapacity of the Owner Participant will
not terminate this Trust Agreement, nor entitle such person's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate,
nor otherwise effect the rights, obligations and liabilities of the parties
hereto. No creditor of the Owner Participant shall obtain legal title to
or exercise legal or equitable remedies with respect to the Trust Estate as
a result of the Owner Participant's status. No transfer, by operation of
law or otherwise, of any right, title and interest of the Owner Participant
in and to its beneficial interest in the Trust Estate shall operate to
terminate this Trust Agreement or the Trusts created hereby.
SECTION 11.02. Owner Participant Has No Legal Title in Trust Estate.
The Owner Participant shall 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
21
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
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 by the Owner Trustee made in
accordance with the express 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. 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 8(l) of the Participation Agreement incorporated
in Article VIII hereof and except as otherwise provided in Article IX and
Sections 5.01, 6.07, 10.01 and 11.01 hereof, nothing herein, whether expressed
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.
SECTION 11.05. Citizenship of the Owner Participant. If at any time
there shall be more than one Owner Participant, then any Owner Participant who
shall cease to be a Citizen of the United States shall have no voting or similar
rights hereunder and shall have no right to direct, influence or limit the
exercise of, or to prevent the direction or influence of, or place any
limitation on the exercise of, the Owner Trustee's authority or to remove the
Owner Trustee.
SECTION 11.06. Notices. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Agreement
on the day that such writing is delivered or, if sent by registered or certified
mail, three Business Days after being deposited in the mails addressed to the
intended recipient thereof in accordance with the provisions of this Section
11.06. Unless otherwise specified in a notice sent or delivered in
22
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
accordance with the foregoing provisions of this Section 11.06, notices,
demands, instructions and other communications in writing shall be given to or
made upon the respective parties hereto at their respective addresses (or to
their respective telecopier numbers) as follows: (A) if to Lessee, the Owner
Trustee, the Indenture Trustee or the Owner Participant, to the respective
addresses set forth on Schedule I to the Participation Agreement or (B) if to
any Certificate Holder, addressed to such Certificate Holder at its address as
set forth in the Loan Certificate register maintained pursuant to the Trust
Indenture.
SECTION 11.07. Severability. Subject to Section 11.12 hereof, 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 11.08. 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 specific instance and
for the specific purpose given.
SECTION 11.09. 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 11.10. 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 assigns, and the Owner Participant, its
successors and, to the extent permitted by Article VIII hereof, its assigns.
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner Participant shall bind its successors and assigns.
SECTION 11.11. 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 11.12. Governing Law. This Trust Agreement shall in all
respects be governed by, and construed in accordance with, the internal laws of
the Commonwealth of Massachusetts, including all matters of construction,
validity and performance.
23
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
SECTION 11.13. Performance by the Owner Participant. Any obligation
of the Owner Trustee in its individual capacity or as Owner Trustee hereunder or
under any other Operative Document or other document contemplated herein, may be
performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
* * *
24
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amended and
Restated Trust Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
_______________________________
By:_______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY
By:_______________________________
Title:____________________________
25
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
EXHIBIT A
---------
THIRD AMENDED AND RESTATED TRUST AGREEMENT
AND TRUST INDENTURE AND MORTGAGE SUPPLEMENT (1993 747 A)
This THIRD AMENDED AND RESTATED TRUST AGREEMENT AND TRUST INDENTURE
AND MORTGAGE SUPPLEMENT (1993 747 A), dated May __, 1995 (herein called the
"Trust Supplement") of STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the First Amended and Restated Trust Agreement (1993 747 A),
dated as of May 1, 1995 (herein called the "Trust Agreement"), between the Owner
Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery
of one or more supplements thereto substantially in the form hereof, which shall
particularly describe the Aircraft (such term and other terms defined in the
Trust Indenture referred to below used herein as therein defined) included in
the property covered by the Trust Agreement;
WHEREAS, Wilmington Trust Company (herein called the "Original Owner
Trustee") and State Street Bank and Trust Company of Connecticut, National
Association, as Indenture Trustee (herein called the "Original Indenture
Trustee"), have entered into that certain Trust Indenture and Mortgage (1993 747
A) dated as of April 1, 1993 (the "Original Trust Indenture"), which Original
Trust Indenture was recorded with the Federal Aviation Administration on April
21, 1993 under Conveyance No. FF08935;
WHEREAS, the Original Owner Trustee and the Original Indenture Trustee
have entered into that certain First Amended and Restated Trust Indenture and
Mortgage (1993 747 A) dated as of April 1, 1993 (such First Amended and Restated
Trust Indenture and Mortgage, as supplemented by First Amended and Restated
Trust Agreement and Trust Indenture and Mortgage Supplement (the "First Amended
and Restated Trust Supplement"), being referred to herein as the "First Amended
and Restated Trust Indenture") which First Amended and Restated Trust Indenture
was recorded with the Federal Aviation Administration on May 6, 1993 under
Conveyance No. VV003010;
WHEREAS, the Original Owner Trustee and the Original Indenture Trustee
have entered into that certain Second Amended and Restated Trust Indenture and
Mortgage (1993 747 A) dated as of July 1, 1994, as supplemented by Second
Amended and Restated
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
Trust Agreement and Trust Indenture and Mortgage Supplement (the "Second Amended
and Restated Trust Supplement"), was recorded with the Federal Aviation
Administration on August 10, 1994 under Conveyance No. FF006617, as amended by
the First Amendment to Second Amended and Restated Trust Indenture and Mortgage
(1993 747 A) dated September 27, 1994 between the Original Owner Trustee and the
Original Indenture Trustee was recorded with the Federal Aviation Administration
on November 2, 1994 under Conveyance No. JJ12459 (the Second Amended and
Restated Trust Indenture and Mortgage, as supplemented by the Second Amended and
Restated Trust Supplement and as amended by the First Amendment to Second
Amended and Restated Trust Indenture and Mortgage being referred to herein as
the "Second Amended and Restated Trust Indenture");
WHEREAS, the Trust Indenture and Mortgage (1993 747 A), dated as of
May 1, 1995 (herein called the "Trust Indenture"), between the Owner Trustee and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, as Indenture Trustee (herein
called the "Indenture Trustee"), provides for the execution and delivery of a
supplement thereto substantially in the form hereof, which shall particularly
describe the Aircraft, and shall specifically mortgage such Aircraft to the
Indenture Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, this Trust Supplement witnesseth, that, the Owner
Trustee hereby confirms that the Lien of the Trust Indenture over the Trust
Indenture Estate includes the following described property:
AIRFRAME
One Airframe Identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ --------------
The Boeing Company 747-422 N189UA 26878
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed
A-2
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
therefrom, but where title to which remains vested in the Owner Trustee in
accordance with the Lease.
AIRCRAFT ENGINES
Four aircraft engines, each such engine having 750 or more rated take-
off horsepower or the equivalent thereof, whether or not such engines shall be
installed in or attached to the Airframe or any other airframe, identified as
follows:
Manufacturer's
Manufacturer Model Serial Number
- ----------------- ------ --------------
Pratt & Whitney PW4056 P727301
Pratt & Whitney PW4056 P727302
Pratt & Whitney PW4056 P727303
Pratt & Whitney PW4056 P727304
together with all Parts which are from time to time incorporated or installed in
or attached thereto or which have been removed therefrom, but where title to
which remains vested in the Owner Trustee in accordance with the Lease.
As further security for the obligations referred to above and secured
by the Trust Indenture and hereby, the Owner Trustee hereby confirms that the
Lien of the Trust Indenture over the Trust Indenture Estate includes the Lease
Supplement of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the equal and proportionate
benefit and security of the holders from time to time of the Loan Certificates
outstanding, without any preference, distinction or priority of any one Loan
Certificate over any other by reason of series, priority of time of issue, sale,
negotiation, date of maturity thereof or otherwise for any reason whatsoever,
and for the uses and purposes and subject to the terms and provisions set forth
in the Trust Indenture.
This Trust Supplement shall be construed as supplemental to the Trust
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
A-3
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
* * *
A-4
<PAGE>
[First Amended and Restated Trust Agreement (1993 747 A)]
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Supplement
to be duly executed by one of its officers, thereunto duly authorized, on the
day and year first above written.
STATE STREET BANK AND TRUST
COMPANY,
not in its individual capacity but
solely as Owner Trustee,
By: ____________________________________
Title: ___________________________
A-5
<PAGE>
S&S FINAL DRAFT
- ------------------------------------------------------------------------------
REDEMPTION AND REFINANCING AGREEMENT (1993 747 A)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
as Lessee
____________________,
as Owner Participant
THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH,
and
BAYERISCHE LANDESBANK GIROZENTRALE, FRANKFURT BRANCH,
as Successor Original Loan Participants
STATE STREET BANK AND TRUST COMPANY,
as Owner Trustee
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Pass Through Trustee
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Indenture Trustee
--------------------------------------------------
One Boeing 747-422 Aircraft
N189UA
Leased to United Air Lines, Inc.
- ------------------------------------------------------------------------------
<PAGE>
INDEX TO REDEMPTION AND REFINANCING AGREEMENT
(1993 747 A)
<TABLE>
<CAPTION>
page
----
<C> <S> <C>
SECTION 1. Redemption and Refinancing of Successor Original
Certificates................................................. 4
SECTION 2. Adjustments to Exhibits to the Lease........................... 6
SECTION 3. Conditions Precedent........................................... 6
SECTION 4. Representations and Warranties................................. 12
SECTION 5. Notices........................................................ 26
SECTION 6. Expenses....................................................... 26
SECTION 7. Miscellaneous.................................................. 27
</TABLE>
EXHIBIT A MATURITY DATES, PRINCIPAL AMOUNTS
AND INTEREST RATES OF SERIES
1993 747 A CERTIFICATES
EXHIBIT A-1 INSTALLMENT PAYMENT DATES AND
INSTALLMENT PAYMENT PERCENTAGES
EXHIBIT A-2 ISSUANCE OF SERIES 1993 747 A
CERTIFICATES
EXHIBIT B FORM OF AMENDED AND RESTATED
INDENTURE
EXHIBIT C FORM OF FIRST AMENDMENT TO LEASE
AGREEMENT
EXHIBIT D FORM OF FIRST AMENDMENT TO
PARTICIPATION AGREEMENT
EXHIBIT E FORM OF FIRST AMENDMENT TO TRUST
AGREEMENT
<PAGE>
REDEMPTION AND REFINANCING AGREEMENT (1993 747 A)
This REDEMPTION AND REFINANCING AGREEMENT (1993 747 A), dated as of
May 1, 1995, among (i) UNITED AIR LINES, INC., a Delaware corporation (the
"Lessee" or the "Company"), (ii) __________, a Delaware corporation (the "Owner
Participant"), (iii) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company (as successor to Wilmington Trust Company), not in its individual
capacity except as otherwise expressly provided herein, but solely as Owner
Trustee (the "Owner Trustee"), under that certain Trust Agreement (1993 747 A),
dated as of April 1, 1993, between the Owner Participant and the Owner Trustee,
(iv) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity except as otherwise provided
herein, but solely as trustee under the Pass Through Trust Agreement, dated as
of February 1, 1992 as amended and restated as of May 1, 1995 (the "Basic
Agreement"), between the Lessee and State Street Bank and Trust Company of
Connecticut, National Association, as supplemented by Trust Supplements Nos.
1995-A1 and 1995-A2 thereto, each dated as of May 1, 1995, creating the 1995-A1
Pass Through Trust and the 1995-A2 Pass Through Trust, respectively (the Basic
Agreement as so supplemented, being the "1995-A1 Pass Through Trust Agreement"
and the "1995-A2 Pass Through Trust Agreement", respectively, each of the
1995-A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust
Agreement being a "Pass Through Trust Agreement", and First Security Bank of
Utah, National Association, in its capacity as trustee under each Pass Through
Trust Agreement being a "Pass Through Trustee"), (v) FIRST SECURITY BANK OF
UTAH, NATIONAL ASSOCIATION, a national banking association (as successor to
State Street Bank and Trust Company of Connecticut, National Association), not
in its individual capacity except as otherwise provided herein, but solely as
indenture trustee (the "Indenture Trustee") under the Original Indenture (as
defined below) as amended and restated by the Third Amended and Restated Trust
Indenture and Mortgage (1993 747 A) dated as of May 1, 1994 (the "Third Amended
and Restated Indenture") and (vi) THE MITSUBISHI TRUST AND BANKING CORPORATION,
NEW YORK BRANCH and BAYERISCHE LANDESBANK GIROZENTRALE, FRANKFURT BRANCH (each
herein called a "Successor Original Loan Participant").
W I T N E S S E T H:
WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the
Original Loan Participant and the Indenture Trustee entered into a
Participation Agreement (1993 747 A), dated as of April 1, 1993 (the "Original
Participation Agreement"; all capitalized terms used herein without definition
shall have the meanings set forth in the Original Participation Agreement; the
Original Participation Agreement as amended by the First Amendment to
Participation Agreement (1993 747 A) dated as of December 1, 1993, as further
amended by the Second Amendment to Participation Agreement (1993 747 A) dated
as of July 1, 1994, and as further amended and restated by the First Amended
and Restated
<PAGE>
2
Participation Agreement (1993 747 A) dated as of May 1, 1995, being herein
called the "Participation Agreement"), providing for the sale and lease of one
Boeing Model 747-422 aircraft, bearing U.S. registration number N189UA and
Manufacturer's Serial Number 26878 (the "Aircraft");
WHEREAS, concurrently with the execution and delivery of the
Original Participation Agreement, the Owner Participant entered into a Trust
Agreement (1993 747 A), dated as of April 1, 1993 (such Trust Agreement, as
supplemented by Trust Agreement and Trust Indenture and Mortgage Supplement No.
1 (1993 747 A), dated April 20, 1993, being herein called the "Original Trust
Agreement"; the Original Trust Agreement as amended by the First Amended and
Restated Trust Agreement (as defined below) being herein called the "Trust
Agreement"), with the Owner Trustee in its individual capacity, pursuant to
which Trust Agreement the Owner Trustee agreed, among other things, to hold the
Trust Estate defined in Section 1.01 of such Trust Agreement for the benefit of
the Owner Participant thereunder;
WHEREAS, concurrently with the execution and delivery of the
Original Participation Agreement, the Owner Trustee and the Indenture Trustee
entered into a Trust Indenture and Mortgage (1993 747 A), dated as of April 1,
1993 (such Trust Indenture and Mortgage, as supplemented by Trust Agreement and
Trust Indenture and Mortgage Supplement No. 1 (1993 747 A), dated April 20,
1993 (the "Trust Supplement"), as amended and restated by the First Amended and
Restated Trust Indenture and Mortgage (1993 747 A) dated as of April 1, 1993,
as further amended and restated by the Second Amended and Restated Trust
Indenture and Mortgage (1993 747 A) dated as of July 1, 1994 (the "Second
Amended and Restated Indenture") and as amended by the First Amendment to the
Second Amended and Restated Indenture and Mortgage (1993 747 A) dated September
27, 1994, being herein called the "Original Indenture"; the Original Indenture
as amended and restated as contemplated by Section 3(c) below, being herein
called the "Indenture") for the benefit of the Original Loan Participant (and,
upon the issuance of the Equipment Notes (as defined below), the Holders (as
defined in the Third Amended and Restated Indenture) of the Equipment Notes
issued thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Section 2.01 thereof (a
"Successor Original Certificate") was issued to each Successor Original Loan
Participant as evidence of the loan then being made by such Successor Original
Loan Participant to the Owner Trustee, the proceeds of which were applied by
the Owner Trustee to the payment of Lessor's Cost for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the
Original Participation Agreement, the Owner Trustee and the Lessee entered into
a Lease Agreement (1993 747 A), dated as of April 1, 1993 (such Lease
Agreement, as supplemented by Lease Supplement No. 1 (1993 747 A) dated April
20, 1993, as amended and restated by the First Amended and Restated Lease
Agreement (1993 747 A) dated as of April 1, 1993, as
<PAGE>
3
amended by the First Amendment to First Amended and Restated Lease Agreement
(1993 747 A) dated April 19, 1994, as further amended by the Second Amendment
to First Amended and Restated Lease Agreement (1993 747 A) dated as of July 1,
1994, as further amended by the Third Amendment to First Amended and Restated
Lease Agreement (1993 747 A) dated July 22, 1994, being herein called the
"Original Lease"; the Original Lease as amended and restated by the Second
Amended and Restated Lease Agreement (1993 747 A) dated as of May 1, 1995 being
herein called the "Lease"), relating to the Aircraft whereby, subject to the
terms and conditions set forth in the Original Lease, the Owner Trustee agreed
to lease to the Lessee, and the Lessee agreed to lease from the Owner Trustee,
the Aircraft on the Delivery Date;
WHEREAS, concurrently with the execution and delivery of the
Original Participation Agreement, the Lessee and the Owner Participant entered
into a Tax Indemnity Agreement (1993 747 A), dated as of April 1, 1993 (such
Tax Indemnity Agreement being herein called the "Original Tax Indemnity
Agreement"), and in connection with the refinancing contemplated hereby, Lessee
and the Owner Participant are entering into the Amended and Restated Tax
Indemnity Agreement (as defined below) (the Original Tax Indemnity Agreement as
amended and restated by the Amended and Restated Tax Indemnity Agreement, being
called herein the "Tax Indemnity Agreement");
WHEREAS, the parties hereto wish to effect an optional redemption
of each Successor Original Certificate issued to the Successor Original Loan
Participants pursuant to the Second Amended and Restated Indenture and as
permitted by Section 20 of the Original Participation Agreement as part of a
refunding or refinancing transaction;
WHEREAS, the Owner Trustee has agreed, in connection with the
redemption of the Successor Original Certificates issued to the Successor
Original Loan Participants pursuant to the Second Amended and Restated
Indenture, to issue Equipment Notes substantially in the form set forth in
Exhibit A-1 and Exhibit A-2 to the Third Amended and Restated Indenture (for
the purposes hereof, "Equipment Notes" shall have the meaning set forth for the
term "Series 1993 747 A Certificates" in the Third Amended and Restated
Indenture) to the two separate grantor trusts created by the Pass Through Trust
Agreements, and each Pass Through Trustee will thereafter issue the Pass
Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate the Owner Trustee's sale of the Equipment
Notes to the Pass Through Trustee and the purchase of such Equipment Notes by
the Pass Through Trustee, the Lessee, referred to as the "Company" in the Basic
Agreement, has duly authorized the execution and delivery of each of the two
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the Pass Through Certificates being issued thereunder as
<PAGE>
4
the "obligor" thereunder, as such term is defined in and solely for purposes of
the Trust Indenture Act of 1939, as amended, with respect to the Pass Through
Certificates and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional redemption of the Successor
Original Certificates issued to the Successor Original Loan Participants
pursuant to the Second Amended and Restated Indenture; and
WHEREAS, in connection with the refunding or refinancing
transaction as contemplated hereby, the Owner Trustee and the Lessee have
agreed to adjust all payments of Basic Rent, Excess Amount, Stipulated Loss
Value, Termination Value, Special Termination Value and EBO Percentages, and to
adjust the debt amortization schedule on the Refinancing Date (as defined
below) in accordance with Section 20 of the Original Participation Agreement,
and to amend Exhibits B, C, D and H of the Lease so as to reflect such
adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Redemption and Refinancing of Successor Original
Certificate. (a) Subject to the satisfaction or waiver of the conditions
set forth herein at or prior to 10:00 a.m. (Central Standard Time) on the date
designated by the Lessee, on behalf of the Owner Trustee, pursuant to Section
20 of the Original Participation Agreement or at such other date and time
agreed to by the parties hereto (the "Refinancing Date"):
(i) the Owner Trustee shall, in accordance with Section 2.01 of
the Third Amended and Restated Indenture, issue and deliver to the
Indenture Trustee Equipment Notes, dated the Refinancing Date and of the
maturities, in the principal amounts, bearing the interest rates and of
the other economic terms specified in Exhibits A, A-1 and A-2 hereto (the
aggregate principal amount of such Equipment Notes being not less than
___% of the aggregate outstanding principal amount of the Successor
Original Certificates);
(ii) the Indenture Trustee shall authenticate such Equipment Notes
pursuant to Section 2.02 of the Third Amended and Restated Indenture, and
deliver such Equipment Notes to the Pass Through Trustees as specified in
Exhibit A-2 hereto against payment by the Pass Through Trustees of the
amounts specified in Exhibit A hereto (the aggregate amounts being the
"Refinancing Amount");
<PAGE>
5
(iii) the Lessee shall on the Refinancing Date pay to the
Indenture Trustee for the account of the Owner Trustee and on an
after-tax basis to the Owner Trustee and the Owner Participant all
Supplemental Rent (including Break Amount (as defined in the Original
Indenture), if any), necessary to effectuate on the Refinancing Date the
transactions contemplated hereby or otherwise due and owing on the
Refinancing Date;
(iv) the Indenture Trustee shall disburse to each Successor
Original Loan Participant the amount of principal, interest and Break
Amount, if any, owing to such Successor Original Loan Participant on the
Refinancing Date with respect to the Successor Original Certificate
issued to such Successor Original Loan Participant pursuant to the Second
Amended and Restated Indenture in accordance with Section 2.11 of the
Second Amended and Restated Indenture and Section 20 of the Original
Participation Agreement; and
The Owner Participant, by its execution and delivery hereof, requests and
directs the Owner Trustee, in accordance with Section 5.02 of the Trust
Agreement, to execute and deliver this Agreement, the First Amended and
Restated Participation Agreement, the Second Amended and Restated Lease
Agreement and the Third Amended and Restated Indenture and to take all actions
necessary or desirable to effect the issuance of the Equipment Notes and the
redemption of the Successor Original Certificates issued to the Successor
Original Loan Participants pursuant to the Second Amended and Restated
Indenture.
(b) On the Refinancing Date, subject to the receipt by each
Successor Original Loan Participant of the aggregate amount provided for in
Section 20 of the Original Participation Agreement, such Successor Original
Loan Participant shall deliver the Successor Original Certificate issued to
such Successor Original Loan Participant to the Owner Trustee for cancellation
by the Indenture Trustee. Each Successor Original Loan Participant hereby
authorizes the Indenture Trustee to act for its benefit as contemplated in this
Section 1, and agrees to take all actions necessary or desirable to effect the
issuance of the Equipment Notes and the redemption of the Successor Original
Certificate issued to such Successor Original Loan Participant.
(c) In case a Pass Through Trustee shall fail to make the payment
described in Section 1(a)(ii), above, or in case the Owner Trustee shall for
any reason fail to issue and deliver to the Indenture Trustee the Equipment
Notes pursuant to Section 1(a)(i), above, (i) the written notice given by the
Lessee with respect to the refinancing contemplated hereby shall be deemed to
have never been given, (ii) the Indenture Trustee, the Owner Trustee, the Owner
Participant and the Lessee shall have no obligation to pay to any Successor
Original Loan Participant any amount in respect of the redemption of the
Successor Original Certificate issued to such Successor Original Loan
Participant pursuant hereto other than Break Amount, if any, resulting from a
failure of such redemption to occur, (iii) none of the
<PAGE>
6
First Amended and Restated Trust Agreement, the First Amended and Restated
Participation Agreement, Second Amended and Restated Lease Agreement, the
Amended and Restated Tax Indemnity Agreement and the Third Amended and Restated
Indenture shall be deemed to have been delivered and (iv) each Successor
Original Certificate issued to the Successor Original Loan Participant shall
remain outstanding and in full force and effect and shall continue to be
subject to the terms of the Second Amended and Restated Indenture.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vedder, Price, Kaufman &
Kammholz, 222 North LaSalle Street, Suite 2600, Chicago, Illinois 60601, on the
Refinancing Date, or at such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall be deemed to have occurred except in conjunction with the occurrence of
all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Refinancing Date in immediately available funds to such accounts and at such
banks as the parties hereto shall designate in writing not less than one
Business Day prior to the Refinancing Date.
(f) This Agreement shall apply only to the redemption and
refunding of the Successor Original Certificates issued to the Successor
Original Loan Participants as described herein and not to the redemption or
refunding of any Equipment Notes or any other Certificate (as defined in the
Third Amended and Restated Indenture) issued under the Third Amended and
Restated Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The parties
hereto agree, by their execution and delivery hereof, that the transactions
contemplated hereby constitute a refinancing transaction as contemplated by
Section 20 of the Participation Agreement and that they will take all actions
contemplated thereby, including the revision of Exhibits B, C, D and H of the
Lease and Schedule I to the Tax Indemnity Agreement to reflect the adjustments
contemplated thereby. Subject to the consummation of such refinancing
transaction as described herein, such revised Exhibits B, C, D and H to the
Lease and Schedule I to the Tax Indemnity Agreement shall be effective as of
the Refinancing Date.
SECTION 3. Conditions Precedent. The obligations of each of
the parties hereto to participate in the transactions contemplated by this
Agreement on the Refinancing Date are subject to the fulfillment, prior to or
on the Refinancing Date, of the following conditions precedent; provided,
however, that it shall not be a condition precedent to the obligations of
any party hereto that any document be produced or action taken that is to be
produced or taken by such party or any Person within such party's control;
provided further, however, that only the condition set forth in clause (a) of
this Section 3 shall be a condition precedent to the actions of the Successor
Original Loan Participants:
<PAGE>
7
(a) Each Pass Through Trustee shall have received, concurrently
with the payment to the Indenture Trustee by such Pass Through Trustee of an
amount equal to the amount specified on Exhibit A, the Equipment Notes as
required by Section 1(a)(ii), and the Indenture Trustee shall have received any
other amounts, including Break Amount, if any, required to be paid in
connection with the redemption of the Successor Original Certificates issued to
the Successor Original Loan Participants on the Refinancing Date, and such
amounts shall have been paid to the Successor Original Loan Participants.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Third Amended and Restated Indenture, and there shall
have been transferred to the Indenture Trustee in immediately available funds
the amounts referred to above in Section 1(a)(ii)-(iii).
(c) The Owner Trustee and the Indenture Trustee shall have entered
into a Third Amended and Restated Indenture in substantially the form of
Exhibit B hereto which shall have been duly filed for recording with the FAA.
(d) The Lessee and the Owner Trustee shall have entered into the
Second Amended and Restated Lease Agreement in substantially the form of
Exhibit C hereto, which shall have been duly filed for recording with the FAA.
(e) Each of (i) the Lessee, the Owner Participant, the Owner
Trustee, the Pass Through Trustees and the Indenture Trustee shall have entered
into the First Amended and Restated Participation Agreement in substantially
the form of Exhibit D hereto and (ii) the Lessee and the Owner Participant
shall have entered into an Amended and Restated Tax Indemnity Agreement (the
"Amended and Restated Tax Indemnity Agreement").
(f) The Owner Participant and the Owner Trustee shall have entered
into the First Amended and Restated Trust Agreement in substantially the form
of Exhibit E hereto which shall have been duly filed for recording with the
FAA.
(g) (i) The Indenture Trustee shall have received on or prior to
the Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting the Owner Trustee as debtor and the Indenture Trustee as
secured party, as to the Indenture Estate, evidencing its filing with the
office of the Secretary of State of the Commonwealth of Massachusetts, and (B)
a copy (or other documentation satisfactory to it) of the acknowledgment copy
of a properly completed Uniform Commercial Code financing statement, reflecting
the Lessee as debtor and the Owner Trustee as secured party (and reflecting the
Indenture Trustee as assignee), evidencing its filing with the office of the
Secretary of State of the State of Illinois, and (ii) no financing statement or
similar filing described above in clause (i) shall have been terminated or
amended subsequent to the date of
<PAGE>
8
its filing and (iii) the Indenture Trustee shall have received, on or prior to
the Delivery Date, the only original copy of the Original Lease and, on or
prior to the Refinancing Date, the only original copy of the Second Amended and
Restated Lease Agreement and shall have (and shall have retained without
interruption subsequent to its receipt thereof) possession of each thereof on
the Refinancing Date.
(h) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Owner Participant shall have received the following
documents (each of which shall be reasonably satisfactory in form and substance
to each of them):
(i) a certificate of an Independent Appraiser (as defined in
the Amended and Restated Indenture) to the effect that the fair
value of the Aircraft as of the Refinancing Date is not less than
125% of the aggregate principal amount of the Equipment Notes;
(ii) a certificate, dated the Refinancing Date, of a
Responsible Company Officer (as defined in the Indenture) to the
effect that the issuance of the Pass Through Certificates and the
application of the proceeds thereof will not be inconsistent with
any of the provisions of the Pass Through Trust Agreement and that
all conditions precedent specified herein required to be satisfied
by Lessee prior to the issuance of the Equipment Notes have been
satisfied; and
(iii) revised Exhibits B, C, D and H to the Lease, as
provided for in the Second Amended and Restated Lease Agreement.
(i) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Owner Participant shall have received a certificate
signed by a Responsible Company Officer (as defined in the Indenture) of the
Lessee, dated the Refinancing Date, certifying that:
(i) the representations and warranties contained herein of
the Lessee are correct as though made on and as of the Refinancing
Date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such
representations and warranties shall be certified to have been
correct on and as of such earlier date);
(ii) no event has occurred and is continuing which
constitutes an Event of Default or Default (as each such term is
defined in the Lease); and
<PAGE>
9
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(j) Each of the Indenture Trustee, the Owner Participant, the Pass
Through Trustees and the Lessee shall have received a certificate signed by a
Responsible Officer (as defined in the Third Amended and Restated Indenture) of
the Owner Trustee, dated the Refinancing Date, certifying that the
representations and warranties contained herein of the Owner Trustee are
correct as though made on and as of the Refinancing Date, except to the extent
that such representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be certified to have been
correct on and as of such earlier date).
(k) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Lessee shall have received a certificate signed by an
authorized officer of the Owner Participant, dated the Refinancing Date,
certifying that the representations and warranties contained herein of the
Owner Participant are correct as though made on and as of the Refinancing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(l) Each of the Pass Through Trustees, the Owner Trustee, the
Owner Participant and the Lessee shall have received a certificate signed by a
Responsible Officer of the Indenture Trustee, dated the Refinancing Date,
certifying that the representations and warranties contained herein of the
Indenture Trustee are correct as though made on and as of the Refinancing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(m) Each of the Indenture Trustee, the Owner Trustee, the Owner
Participant and the Lessee shall have received a certificate signed by an
authorized officer of each of the Pass Through Trustees, dated the Refinancing
Date, certifying that the representations and warranties contained herein of
such Pass Through Trustee are correct as though made on and as of the
Refinancing Date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties are correct on and as of such earlier date).
(n) Each of the Pass Through Trustees, the Indenture Trustee, the
Owner Trustee and the Owner Participant shall have received the following:
(i) an incumbency certificate of the Lessee as to the person
or persons authorized to execute and deliver this Agreement, the
First Amended and
<PAGE>
10
Restated Participation Agreement, the Second Amended and Restated
Lease Agreement, the Amended and Restated Tax Indemnity Agreement
and any other documents to be executed on behalf of the Lessee in
connection with the transactions contemplated hereby and the
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors of
the Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of the Lessee, duly authorizing
the transactions contemplated hereby and the execution and delivery
of each of the documents required to be executed and delivered on
behalf of the Lessee in connection with the transactions
contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Documents, the Underwriting
Agreement (as defined below) and the Pass Through Trust Agreements
and the taking of all necessary corporate action in connection
therewith and compliance with the conditions herein set forth.
(o) Each of the Pass Through Trustees, the Indenture Trustee, the
Owner Trustee and the Owner Participant shall have received a certificate
signed by an authorized officer of the Lessee, dated the Refinancing Date,
certifying that:
(i) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Original
Lease;
(ii) the Owner Trustee's FAA Bill of Sale, the Original
Lease, the Original Trust Agreement and the Original Indenture have
been duly recorded with the FAA pursuant to the Federal Aviation
Act of 1958, as amended;
(iii) the Aircraft has been registered with the FAA in the
name of the Owner Trustee and the Lessee has authority to operate
the Aircraft; and
(iv) the Second Amended and Restated Lease, the Third
Amended and Restated Indenture and the First Amended and Restated
Trust Agreement have been duly filed for recording with the FAA.
(p) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Owner Participant shall have received an opinion
addressed to them from Vedder, Price, Kaufman & Kammholz, special counsel for
the Lessee, substantially to the
<PAGE>
11
same effect as the opinion delivered by it on the Delivery Date pursuant to
Section 4(a)(xi) of the Original Participation Agreement.
(q) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Owner Participant shall have received an opinion
addressed to them from Francesca M. Maher, Esq., Vice President-Law, Deputy
General Counsel and Corporate Secretary of the Lessee, substantially to the
same effect as the opinion delivered by internal counsel to the Lessee on the
Delivery Date pursuant to Section 4(a)(xi) of the Original Participation
Agreement.
(r) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees, the Owner Participant and the Lessee shall have received an
opinion addressed to them from Bingham, Dana & Gould, special counsel for the
Owner Trustee, substantially to the same effect as the opinion delivered on the
Delivery Date pursuant to Section 4(a)(xiii) of the Original Participation
Agreement.
(s) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees, the Owner Participant and the Lessee shall have received an
opinion addressed to them from Ray, Quinney & Nebeker, special counsel for the
Pass Through Trustees and the Indenture Trustee, substantially to the same
effect as the opinion delivered on the Delivery Date pursuant to Section
4(a)(xvi) of the Original Participation Agreement.
(t) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees, the Owner Participant and the Lessee shall have received
opinions addressed to them from Dewey Ballantine, special counsel for the Owner
Participant, and the Vice President-General Counsel of the Owner
Participant, substantially to the same effect as the opinions delivered by them
on the Delivery Date pursuant to Section 4(a)(xiv) of the Original
Participation Agreement.
(u) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees, the Owner Participant and the Lessee shall receive an opinion
addressed to them from Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the Third
Amended and Restated Indenture, the Second Amended and Restated Lease Agreement
and the First Amended and Restated Trust Agreement, (i) as the opinion
delivered by it pursuant to Section 4(a)(xv) of the Original Participation
Agreement on the Delivery Date and (ii) as the opinion delivered to them
subsequent to the Delivery Date pursuant to the final paragraph of Section 4(a)
of the Original Participation Agreement.
(v) Each of the Indenture Trustee, the Owner Trustee, the Pass
Through Trustees and the Owner Participant shall have received an independent
insurance broker's report, and certificates of insurance, dated the Refinancing
Date, substantially in the form of
<PAGE>
12
the report and certificates delivered pursuant to Section 4(a)(xxi) of the
Original Participation Agreement on the Delivery Date, as to the due compliance
with the terms of Section 11 of the Lease relating to the insurance with
respect to the Aircraft and with any other agreements of the Lessee with
respect of such insurance, and references in such report and certificates to
the "Indenture", the "Participation Agreement", the "Trust Agreement" and the
"Lease" shall be to such documents as amended and restated by the Third Amended
and Restated Indenture, the First Amended and Restated Participation Agreement,
the Second Amended and Restated Lease Agreement and the First Amended and
Restated Trust Agreement. Such report and certificates shall recognize the
redemption of the Original Certificate issued to the Successor Original Loan
Participant consummated pursuant to this Agreement.
(w) Each Successor Original Loan Participant shall have executed
and delivered a receipt and release of indebtedness as to the Successor
Original Certificate issued to such Successor Original Loan Participant.
The opinions described above in clauses (p)-(u) shall be dated the Refinancing
Date and references therein corresponding to references in prior opinions to
the "Indenture", the "Participation Agreement", the "Lease", the "Trust
Agreement" or the "Tax Indemnity Agreement" shall be to such documents as
amended by the Third Amended and Restated Indenture, the First Amended and
Restated Participation Agreement, the Second Amended and Restated Lease
Agreement, the First Amended and Restated Trust Agreement and the Amended and
Restated Tax Indemnity Agreement, respectively.
Promptly upon the recording with the FAA of the Third Amended and
Restated Indenture, the Second Amended and Restated Lease Agreement and the
First Amended and Restated Trust Agreement, the Lessee will cause Crowe &
Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, to deliver to the
parties hereto an opinion as to the due recording thereof and the lack of
filing of any intervening documents with respect to the Aircraft.
Each of the parties hereto agrees to instruct its counsel to
prepare and deliver the respective opinions described above in clauses (p)-(u)
and to address each such opinion to the Underwriters in addition to the
respective addressees set forth above.
SECTION 4. Representations and Warranties. (a) The Lessee
represents and warrants to the Indenture Trustee, the Owner Trustee, each Pass
Through Trustee and the Owner Participant that:
(i) it is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware, is
duly qualified to do business as a foreign corporation in each
jurisdiction in which its operations or the nature of its business
requires, except for any jurisdiction where the failure
<PAGE>
13
to be so qualified would not have a material adverse effect on it
or its business; is a "citizen of the United States" as defined in
Section 40102(a)(15) of Title 49 of the United States Code, as
amended (the "Act") and an "air carrier" within the meaning of the
Act operating under certificates issued under Section 41102 of such
Act; holds all material licenses, certificates, permits and
franchises from the appropriate agencies of the United States
and/or all other governmental authorities having jurisdiction
necessary to authorize it to engage in air transport and to carry
on scheduled passenger service as presently conducted; has its
chief executive office (as such term is defined in Article 9 of the
Uniform Commercial Code) in Elk Grove Township, Illinois; and has
the corporate power and authority to conduct its business as it is
presently being conducted, to hold under lease the Aircraft and to
enter into this Agreement, the Original Lease, the Lease Supplement
covering the Aircraft, the Second Amended and Restated Lease
Agreement, the Original Participation Agreement, the First
Amendment to Participation Agreement, the Second Amendment to
Participation Agreement, the First Amended and Restated
Participation Agreement, the Original Tax Indemnity Agreement, the
Amended and Restated Tax Indemnity Agreement, the Basic Agreement,
each Pass Through Trust Agreement Supplement and the Owner
Trustee's Purchase Agreement (as defined in the Lease) and perform
its obligations under this Agreement, the Lease, the Participation
Agreement, the Tax Indemnity Agreement, each Pass Through Trust
Agreement and any other Operative Document to which it is or is to
be a party;
(ii) the execution and delivery by it of each of this
Agreement, the Original Lease, the Lease Supplement covering the
Aircraft, the Second Amended and Restated Lease Agreement, the
Original Participation Agreement, the First Amendment to
Participation Agreement, the Second Amendment to Participation
Agreement, the First Amended and Restated Participation Agreement,
the Original Tax Indemnity Agreement, the Amended and Restated Tax
Indemnity Agreement, the Basic Agreement, each Pass Through Trust
Agreement Supplement and the Owner Trustee's Purchase Agreement,
and the performance by it of each of this Agreement, the Lease, the
Participation Agreement, the Tax Indemnity Agreement, each Pass
Through Trust Agreement and any other Operative Document to which
it is or is to be a party has been duly authorized by all necessary
corporate action on the part of the Lessee, does not require any
stockholder approval or approval or consent of any trustee or
holder of any indebtedness or obligations of the Lessee except such
as have been duly obtained and are in full force and effect, and
does not contravene any law, judgment, governmental rule,
regulation or order binding on it or its certificate of
incorporation or by-laws or contravene the provisions of, or
constitute a default under, or result in the creation of any
<PAGE>
14
Lien (other than Permitted Liens) upon its property under, its
certificate of incorporation or by-laws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan, credit agreement, contract or other agreement
or instrument to which it is a party or by which it or any of its
properties may be bound or affected;
(iii) neither the execution and delivery by it of this
Agreement, the Original Lease, the Lease Supplement covering the
Aircraft, the Second Amended and Restated Lease Agreement, the
Original Participation Agreement, the First Amendment to
Participation Agreement, the Second Amendment to Participation
Agreement, the First Amended and Restated Participation Agreement,
the Original Tax Indemnity Agreement, the Amended and Restated Tax
Indemnity Agreement, the Basic Agreement, each Pass Through Trust
Agreement Supplement or the Owner Trustee's Purchase Agreement, nor
the performance by it of its obligations under this Agreement, the
Lease, the Participation Agreement, the Tax Indemnity Agreement,
each Pass Through Trust Agreement and any other Operative Document
to which it is or is to be a party, requires the consent or
approval of, the giving of notice to, or the registration with, or
the taking of any other action in respect of any federal, state or
foreign governmental authority or agency, except for (A) the
orders, permits, waivers, exemptions, authorizations and approvals
of the regulatory authorities having jurisdiction over the
operation of the Aircraft by it, which orders, permits, waivers,
exemptions, authorizations and approvals have been duly obtained
and are in full force and effect, (B) the registration of the
Aircraft referred to in Section 4(a)(ix)(2) of the Participation
Agreement, (C) the registrations and filings referred to in Section
4(a)(vi), (D) the recordings with the FAA described in the opinion
referred to in Section 3(v) and (E) any normal periodic and other
reporting requirements under the applicable rules and regulations
of the FAA to the extent required to be given or obtained only
after the Delivery Date, it being understood that the registration
of the issuance and sale of the Pass Through Certificates to be
issued pursuant to the provisions of the Pass Through Trust
Agreements under the Securities Act of 1933, as amended, and under
the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the
qualification of each Pass Through Trust Agreement under the Trust
Indenture Act of 1939, as amended, has been duly obtained;
(iv) each of this Agreement, the Original Lease, the Lease
Supplement covering the Aircraft, the Second Amended and Restated
Lease Agreement, the Original Participation Agreement, the First
Amendment to Participation Agreement, the Second Amendment to
Participation Agreement, the First
<PAGE>
15
Amended and Restated Participation Agreement, the Original Tax
Indemnity Agreement, the Amended and Restated Tax Indemnity
Agreement, the Basic Agreement, each Pass Through Trust Agreement
Supplement and the Owner Trustee's Purchase Agreement has been, or
on the Refinancing Date will have been, duly executed and delivered
by the Lessee; and each of this Agreement, the Lease, the
Participation Agreement, the Tax Indemnity Agreement, each Pass
Through Trust Agreement and each other Operative Document to which
it is or is to be a party will as of the Refinancing Date
constitute a legal, valid and binding obligation of the Lessee
enforceable against the Lessee in accordance with the terms
thereof;
(v) there are no pending or threatened actions or
proceedings before any court or administrative agency which
individually (or in the aggregate in the case of any group of
related lawsuits) is expected to have a material adverse effect on
its financial condition or its ability to perform its obligations
under, any of this Agreement, the Lease, the Participation
Agreement, the Tax Indemnity Agreement, each Pass Through Trust
Agreement and each other Operative Document to which it is or is to
be a party;
(vi) except for (A) the registration of the Aircraft
pursuant to the Act, (B) the filing for recording pursuant to said
Act of the Trust Agreement, the First Amended and Restated Trust
Agreement, the Original Lease, the Lease Supplement covering the
Aircraft, the Second Amended and Restated Lease Agreement, the
Original Indenture, the Trust Supplement, the First Amended and
Restated Trust Indenture, the Second Amended and Restated
Indenture, the Third Amended and Restated Trust Indenture and the
Owner Trustee's FAA Bill of Sale, (C) the filing of financing
statements (and continuation statements at periodic intervals) with
respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which
financing statements have been duly filed) and the Uniform
Commercial Code of the Commonwealth of Massachusetts (which
financing statements have been duly filed) and (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Original Lease, the Lease Supplement covering the Aircraft and
the Second Amended and Restated Lease Agreement, no further action,
including any filing or recording of any document (including any
financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is
necessary or advisable in order to establish and perfect the Owner
Trustee's title to and interest in the Aircraft as against it, and
to perfect the Indenture Trustee's security interest in the
Aircraft as against the Owner Trustee, and in each case as against
any third parties in any applicable jurisdictions in the United
States;
<PAGE>
16
(vii) no event has occurred and is continuing which
constitutes an Event of Default or Default (as each such term is
defined in the Lease); and there has not occurred any event which
constitutes or would, with the passage of time or the giving of
notice, or both, constitute, an Event of Loss;
(viii) on the Delivery Date, the Owner Trustee received good
and marketable title to the Aircraft free and clear of all Liens,
except the rights of the Lessee under the Original Lease and the
Lease Supplement covering the Aircraft, the Lien of the Original
Indenture, the beneficial interest of the Owner Participant in the
Aircraft and the Liens permitted by clauses (ii) and (iii) (solely
for taxes not yet due) of Section 6 of the Original Lease;
(ix) the Lessee is not in default in the performance of any
term or condition of the Owner Trustee's Purchase Agreement, and is
not in default in the performance of any term or condition of the
Purchase Agreement which materially adversely impairs the
transactions contemplated by the Participation Agreement or hereby;
(x) no governmental approval of any kind is required of the
Owner Participant, the Successor Original Loan Participant, the
Owner Trustee, the Indenture Trustee or any Pass Through Trustee
for their respective execution of or performance under this
Agreement or any agreement contemplated hereby solely by reason of
any fact or circumstance peculiar to: (A) the Lessee, (B) the
nature of the Aircraft, or (C) the Lessee's proposed operation or
use of the Aircraft;
(xi) the Aircraft has been duly certified by the FAA as to
type and airworthiness and such certification remains in full force
and effect; the Aircraft has been and is currently insured by the
Lessee in accordance with the terms of the Lease and is in the
condition and State of repair required under the terms of the
Lease; and each of the Engines has 750 or more rated take off
horsepower or the equivalent of such horsepower;
(xii) the Owner Trustee, as Lessor under the Lease, and the
Indenture Trustee, as assignee of the Owner Trustee's rights under
the Lease pursuant to the Indenture, are, and after giving effect
to the refinancing transaction contemplated hereby, will be
entitled to the protection of Section 1110 of the United States
Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's rights to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United
States Bankruptcy Code in which the Lessee is a debtor, and the
refinancing contemplated herein will not
<PAGE>
17
materially affect the Owner Trustee and the Indenture Trustee's
rights with regard thereto;
(xiii) neither it nor any of its subsidiaries is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940,
as amended; and
(xiv) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered the Pass Through
Certificates or the Equipment Notes for sale other than in a manner
in compliance with the requirements of the Securities Act and the
rules and regulations thereunder.
(b) The Owner Participant represents and warrants to the Indenture
Trustee, the Owner Trustee, each Pass Through Trustee and the Lessee that:
(i) the Owner Participant is a corporation duly organized
and validly existing in good standing under the laws of the State
of Delaware and has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into this Agreement, the Original
Participation Agreement, the First Amendment to Participation
Agreement, the Second Amendment to Participation Agreement, the
First Amended and Restated Participation Agreement, the Original
Tax Indemnity Agreement, the Amended and Restated Tax Indemnity
Agreement, the Original Trust Agreement and the First Amended and
Restated Trust Agreement and to perform its obligations under this
Agreement, the Participation Agreement, the Tax Indemnity Agreement
and the Trust Agreement;
(ii) each of this Agreement, the Original Participation
Agreement, the First Amendment to Participation Agreement, the
Second Amendment to Participation Agreement, the First Amended and
Restated Participation Agreement, the Original Tax Indemnity
Agreement, the Amended and Restated Tax Indemnity Agreement, the
Original Trust Agreement and the First Amended and Restated Trust
Agreement has been duly authorized by all necessary corporate
action on the part of the Owner Participant, does not require any
approval not already obtained of stockholders of the Owner
Participant or any approval or consent not already obtained of any
trustee or holders of any indebtedness or obligations of the Owner
Participant, and has been, or on the Refinancing Date will have
been, duly executed and delivered by it, and none of the execution
and delivery by the Owner Participant thereof, the consummation by
the Owner Participant of the transactions contemplated by this
Agreement, the Participation Agreement, the Tax Indemnity Agreement
and the Trust Agreement or compliance by it with the terms and
provisions
<PAGE>
18
thereof will contravene any United States federal or state law,
judgment, governmental rule, regulation or order applicable to or
binding on it (it being understood that no representation or
warranty is made with respect to laws, rules or regulations
relating to aviation or to the nature of the equipment owned by the
Owner Trustee, other than such laws, rules or regulations relating
to the citizenship requirements of the Owner Participant under
applicable aviation law) or contravenes or results or will
contravene or result in any breach of or constitute any default
under, or result in the creation of any Lien (other than Liens
provided for or otherwise permitted in the Operative Documents)
upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or
instrument to which it is a party or by which it or its properties
may be bound or affected;
(iii) each of this Agreement, the Participation Agreement,
the Tax Indemnity Agreement and the Trust Agreement will as of the
Refinancing Date constitute the legal, valid and binding obligation
of the Owner Participant enforceable against the Owner Participant
in accordance with the terms thereof;
(iv) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which
individually (or in the aggregate in the case of any group of
related lawsuits) purports to affect the legality, validity or
enforceability of, or which is reasonably likely to materially
adversely affect the ability of the Owner Participant to perform
its obligations under, any of this Agreement, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement;
(v) there are no Lessor Liens (including for this purpose
Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens) attributable to the Owner Participant;
(vi) it is a "citizen of the United States" as defined in
Section 40102(a)(15) of the Act;
(vii) no part of the funds used by it to make its investment
pursuant to Section 1 of the Original Participation Agreement
constituted, and no part of the funds to be used by it to make any
payment required hereunder shall constitute, "plan assets" of any
"employee benefit plan" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, or of any
"plan" within the meaning of Section 4975(e)(1) of the Code; and
<PAGE>
19
(viii) neither the Owner Participant nor anyone authorized
by it to act on its behalf (other than for purposes of this
paragraph, the Lessee and the Underwriters) has directly or
indirectly offered any Equipment Notes or any interest in or any
similar interest for sale to, or solicited any offer to acquire any
of the same from, any Person.
(c)(I) State Street Bank and Trust Company in its individual
capacity ("SSBT") represents and warrants to the Indenture Trustee, each Pass
Through Trustee, the Owner Participant and the Lessee that:
(i) neither the execution and delivery thereof nor the
performance by SSBT or the Owner Trustee of any of the terms and
conditions of this Agreement, the Third Amended and Restated
Indenture, the Second Amended and Restated Lease, the First Amended
and Restated Participation Agreement, and the Equipment Notes will
violate any federal or Massachusetts law or regulation relating to
the banking or trust powers of SSBT or contravene or result in any
breach of, or constitute any default under, its charter or by-laws
or the provisions of any indenture, mortgage, contract or other
agreements to which it is a party or by which its properties may be
bound or affected;
(ii) each of the First Amended and Restated Trust Agreement,
this Agreement, the Third Amended and Restated Indenture, the
Second Amended and Restated Lease, the First Amended and Restated
Participation Agreement and the Equipment Notes has been, or on the
Refinancing Date will have been, duly executed and delivered by one
of its officers who is duly authorized to execute and deliver such
instruments;
(iii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBT, and there are no Liens affecting the title of
the Owner Trustee to the Aircraft resulting from any act or claim
against SSBT or the Owner Trustee arising out of any event or
condition not related to the ownership, leasing, use or operation
of the Aircraft or to any other transaction contemplated by this
Agreement, the Participation Agreement or any of the other
Operative Documents, including any Lien resulting from the
nonpayment by SSBT of any Taxes imposed or measured by its net
income;
(iv) there has not occurred any event which constitutes (or
to the best of its knowledge, with the passage of time or the
giving of notice or both, would constitute) an Indenture Event of
Default (as defined in the Indenture) which has been caused by or
relates to SSBT or the Owner Trustee and which is presently
continuing;
<PAGE>
20
(v) SSBT is a trust company duly organized and validly
existing in good standing under the laws of the Commonwealth of
Massachusetts and has the corporate power and authority to enter
into this Agreement, the First Amended and Restated Trust
Agreement, the First Amended and Restated Participation Agreement,
and to perform its obligations under this Agreement, the First
Amended and Restated Trust Agreement and the First Amended and
Restated Participation Agreement;
(vi) each of the First Amended and Restated Trust Agreement,
this Agreement, and the First Amended and Restated Participation
Agreement has been duly authorized by all necessary corporate
action on its part, and neither the execution and delivery thereof
nor the performance by SSBT of any of the terms and conditions of
this Agreement, the First Amended and Restated Trust Agreement, the
First Amended and Restated Participation Agreement will violate any
federal or Massachusetts law or regulation relating to its banking
or trust powers or contravene or result in any breach of, or
constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreements
to which it is a party or by which its properties may be bound or
affected;
(vii) each of the First Amended and Restated Trust
Agreement, this Agreement, the First Amended and Restated
Participation Agreement has been, or on the Refinancing Date will
have been, duly executed and delivered by it, and each of this
Agreement, the First Amended and Restated Trust Agreement, and the
First Amended and Restated Participation Agreement on the
Refinancing Date, will constitute a legal, valid and binding
obligation of SSBT enforceable against it in accordance with the
terms thereof;
(viii) the principal place of business of SSBT and the Owner
Trustee is 225 Franklin Street, Boston, Massachusetts 02110, and
the place where its records concerning the Aircraft and all its
interest in, to and under all documents relating to the Trust
Estate, is located at Two International Place, Boston,
Massachusetts 02110, Attention: Corporate Trust Department and
SSBT agrees that it will not change the location of such office to
a location outside of Boston, Massachusetts, without providing
written notice to the Lessee, the Indenture Trustee and the Owner
Participant within thirty (30) days following such change in
location;
(ix) no consent, approval, order or authorization of, giving
of notice to, or registration or filing with, or taking of any
other action in respect of, any Massachusetts State or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking
<PAGE>
21
or trust powers of SSBT is required for the execution and delivery
of, or the carrying out by, SSBT, of any of the transactions
contemplated by the First Amended and Restated Trust Agreement,
this Agreement, the First Amended and Restated Participation
Agreement, or of any of the transactions contemplated by any other
of the Operative Documents to which SSBT is or is to be a party,
other than any such consent, approval, order, authorization,
registration, notice or action as has been duly obtained, given or
taken;
(x) SSBT has not directly or indirectly offered any
Equipment Note or any interest in or to the Trust Estate, the Trust
Agreement or any similar interest for sale to, or solicited any
offer to acquire any of the same from, any Person other than the
Indenture Trustee, each of the Pass Through Trustees, the Successor
Original Loan Participant and the Owner Participant; and SSBT has
not authorized any Person to act on its behalf (other than for
purposes of this paragraph, the Lessee and the Underwriters) to
offer directly or indirectly any Equipment Note or any interest in
and to the Trust Estate, the Trust Agreement or any similar
interest for sale to, or to solicit any offer to acquire any of the
same from, any Person;
(xi) SSBT is a "citizen of the United States" as defined in
Section 40102(a)(15) of the Act; and
(xii) there are no pending or threatened actions or
proceedings against SSBT or the Owner Trustee before any court or
administrative agency which, if determined adversely to it, would
materially adversely affect the ability of SSBT or the Owner
Trustee, as the case may be, to perform its obligations under any
of this Agreement, the First Amended and Restated Participation
Agreement, the First Amended and Restated Trust Agreement, the
Second Amended and Restated Lease, the Owner Trustee's Purchase
Agreement (as defined in the Participation Agreement), the Third
Amended and Restated Indenture, the Equipment Notes or any other
documents executed by the Owner Trustee or SSBT in connection with
the transactions contemplated by the Operative Documents.
(II) State Street Bank and Trust Company solely in its capacity as
Owner Trustee further represents and warrants that:
(i) SSBT is a trust company duly organized and validly
existing in good standing under the laws of the Commonwealth of
Massachusetts and has the corporate power and authority to enter
into this Agreement, and the First Amended and Restated
Participation Agreement and to perform its obligations under said
Agreements;
<PAGE>
22
(ii) assuming due authorization, execution and delivery of
the Trust Agreement and the First Amended and Restated Trust
Agreement by the Owner Participant, each of the Trust Agreement,
this Agreement, the Third Amended and Restated Indenture, the
Second Amended and Restated Lease, the First Amended and Restated
Participation Agreement, and the Equipment Notes has been, or on
the Refinancing Date will have been, duly executed and delivered by
it, and each of this Agreement, the First Amended and Restated
Trust Agreement, the Second Amended and Restated Lease, the First
Amended and Restated Participation Agreement and the Third Amended
and Restated Indenture, on the Refinancing Date, will constitute a
legal, valid and binding obligation of the Owner Trustee,
enforceable against it in accordance with the terms thereof;
(iii) the Owner Trustee has never directly or indirectly
offered any Equipment Note or any interest in or to the Trust
Estate, the Trust Agreement or any similar interest for sale to, or
solicited any offer to acquire any of the same from, any Person
other than the Indenture Trustee, each of the Pass Through
Trustees, the Successor Original Loan Participant and the Owner
Participant; and it has not authorized any Person to act on its
behalf (other than for purposes of this paragraph, the Lessee and
the Underwriters) to offer directly or indirectly any Equipment
Note or any interest in and to the Trust Estate, the Trust
Agreement or any similar interest for sale to, or to solicit any
offer to acquire any of the same from, any Person;
(iv) there are no pending or threatened actions or
proceedings against the Owner Trustee before any court or
administrative agency which, if determined adversely to it, would
materially adversely affect its ability to perform its obligations
under any of this Agreement, the First Amended and Restated
Participation Agreement, the First Amended and Restated Trust
Agreement, the Second Amended and Restated Lease, the Owner
Trustee's Purchase Agreement (as defined in the Participation
Agreement), the Third Amended and Restated Indenture, the Equipment
Notes or any other documents executed by it in connection with the
transactions contemplated by the Operative Document; and
(d) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU"), represents to the Owner Trustee, the Owner
Participant and the Lessee that:
(i) it is a "citizen of the United States" as defined in
Section 40102(a)(15) of the Act, that it will notify promptly all
parties to this agreement if in its reasonable opinion its status
as a "citizen of the United
<PAGE>
23
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) it is a national banking association duly organized and
validly existing in good standing under the laws of the United
States of America and has the full corporate power, authority and
legal right under the laws of Utah and the United States pertaining
to its banking, trust and fiduciary powers to enter into this
Agreement, the Third Amended and Restated Indenture, and the First
Amended and Restated Participation Agreement, to perform its
obligations under this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement
and each Pass Through Trust Agreement and, in its capacity as
Indenture Trustee, authenticate the Equipment Notes to be delivered
on the Refinancing Date;
(iii) this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement
and each Pass Through Trust Agreement and the authentication of the
Equipment Notes to be delivered on the Refinancing Date have been
duly authorized by all necessary corporate action on the part of
FSBU, the Indenture Trustee and the relevant Pass Through Trustee,
as it shall be a party thereto in any such capacity, and neither
the execution (or, in the case of the Equipment Notes, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and
provisions of this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement
or the Equipment Notes will violate any federal or Utah law or
regulation relating to the banking or trust powers of FSBU or
contravene or result in any breach of, or constitute any default
under its charter or by-laws or the provisions of any indenture,
mortgage, contract or other agreement to which any of FSBU or the
Indenture Trustee is a party or by which it or its properties may
be bound or affected;
(iv) each of this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement,
each Pass Through Trust Agreement and the Equipment Notes has been,
or on the Refinancing Date will have been, duly executed (or, in
the case of the Equipment Notes, authenticated) and delivered by
FSBU, the Indenture Trustee and the relevant Pass Through Trustee,
as it shall be a party thereto in any such capacity, and, assuming
that each of this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement
and each Pass Through Trust Agreement constitutes on the
Refinancing Date the legal, valid and binding obligation of each of
the parties
<PAGE>
24
thereto (other than FSBU, the Indenture Trustee and the relevant
Pass Through Trustee), each such document, on the Refinancing Date,
will constitute the legal, valid and binding obligation of FSBU,
the Indenture Trustee and the relevant Pass Through Trustee, as it
is a party thereto in any such capacity, enforceable against it in
such capacity in accordance with its terms;
(v) neither the execution (or, in the case of the Equipment
Notes, the authentication) and delivery by FSBU, the Indenture
Trustee or any Pass Through Trustee, as it is a party in any such
capacity to any of this Agreement, the Third Amended and Restated
Indenture, the First Amended and Restated Participation Agreement,
the Pass Through Trust Agreements or the Equipment Notes, nor the
consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Indenture, by the Pass Through Trust
Agreements or by the Equipment Notes requires the consent or
approval of, the giving of notice to, or the registration with, or
the taking of any other action with respect to, any Utah or federal
governmental authority or agency regulating the banking, trust or
fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture
Trustee or any Pass Through Trustee imposed by the State of Utah or
any political subdivision or taxing authority thereof in connection
with the execution (or, in the case of the Equipment Notes, the
authentication) and delivery by it as a party in any such capacity
to this Agreement, the Third Amended and Restated Indenture, the
First Amended and Restated Participation Agreement, any Pass
Through Trust Agreement or the Equipment Notes or performance by it
as a party in any such capacity of this Agreement, the Third
Amended and Restated Indenture, the First Amended and Restated
Participation Agreement, the Pass Through Trust Agreements or the
Equipment Notes (other than franchise or other taxes based on or
measured by any fees or compensation received by FSBU, the
Indenture Trustee or any Pass Through Trustee, as the case may be,
for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State
of Utah or any political subdivision thereof in connection with the
acquisition, possession or ownership by any 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 a Pass
Through Trustee for services rendered in connection with the
transactions contemplated by the Pass Through Trust Agreements)
and, assuming that the trust created by the respective Pass Through
Trust Agreement will not be taxable as a corporation, but, rather,
will be
<PAGE>
25
characterized as a grantor trust under subpart E, Part I of
Subchapter J of the Code, such trust will not be subject to any
Taxes imposed by the State of Utah or any political subdivision
thereof;
(vii) there are no pending or threatened actions or
proceedings against any of FSBU, the Indenture Trustee or the Pass
Through Trustees before any court or administrative agency which
individually (or in the aggregate in the case of any group of
related lawsuits) purports to affect the legality, validity or
enforceability of, or which is reasonably likely to materially
adversely affect the ability of FSBU, the Indenture Trustee or the
Pass Through Trustees to perform its obligations as a party in any
such capacity under, any of this Agreement, the Third Amended and
Restated Indenture, the First Amended and Restated Participation
Agreement, the relevant Pass Through Trust Agreement or the
Equipment Notes; and
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreements of the Pass Through
Certificates contemplated thereby, neither FSBU nor any Pass
Through Trustee has directly or indirectly offered any Equipment
Note for sale to any Person, or solicited any offer to acquire any
Equipment Notes from any Person other than the Owner Trustee and
the Owner Participant, and neither FSBU nor any Pass Through
Trustee has 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 other than the Owner Trustee and the Owner Participant.
SECTION 5. Notices. Unless otherwise specifically provided
herein, all notices required or permitted by the terms of this Agreement shall
be given in accordance with the provisions of Section 13 of the Participation
Agreement.
SECTION 6. Expenses. (a) As more fully specified in Section
16 and Section 20(a)(6) of the Participation Agreement and except as provided
in paragraph (b), below, all of the Transaction Expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated by this Agreement shall be paid promptly by the Owner Participant.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, the Lessee
shall bear and pay all Transaction Expenses referred to above on an after-tax
basis to the Owner Participant and the Owner Trustee; provided that, if the
transaction fails to be consummated as a result of the failure of the Owner
Participant to comply with the terms hereof or thereof, the Owner Participant
shall bear and pay its own fees, costs and expenses (including, without
limitation,
<PAGE>
26
the fees and expenses of its special counsel) and the Lessee shall pay all
other Transaction Expenses as aforesaid.
(c) SSBT is entering into this Agreement solely as Owner Trustee
under the Trust Agreement and not in its individual capacity except as
expressly provided for herein, and in no case whatsoever shall SSBT (or any
entity acting as successor trustee under the Trust Agreement) be personally
liable for, or for any loss in respect of, any statements, representations,
warranties, agreements or obligations of the Owner Trustee hereunder; provided,
however, that SSBT shall be liable hereunder in its individual capacity to the
extent expressly provided for hereunder and for its own willful misconduct or
gross negligence. If a successor owner trustee is appointed in accordance with
the terms of the Trust Agreement and the Participation Agreement, such successor
owner trustee shall, without any further act, succeed to all of the rights,
duties, immunities and obligations hereunder, and its predecessor owner trustee
and SSBT shall be released from all further duties and obligations hereunder,
without prejudice to any claims against SSBT or such predecessor owner trustee
for any default by SSBT or such predecessor owner trustee, respectively, in the
performance of its obligations hereunder prior to such appointment.
SECTION 7. Miscellaneous. 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. 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; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to the Indenture Trustee. 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 extent provided herein to the benefit only of the following
parties: the Lessee and, subject to the terms of the Participation Agreement,
its successors and permitted assigns, each Successor Original Loan Participant,
the Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Third Amended and Restated Indenture,
the Owner Trustee and its successors as Owner Trustee under the Trust
Agreement, each Pass Through Trustee and its successors as Pass Through Trustee
under the 1995-A1 Pass Through Trust Agreement or the 1995-A2 Pass Through
Trust Agreement, respectively, and the Owner Participant and, subject to the
provisions of the Participation Agreement, its successors and permitted
assigns. No purchaser or holder of any of the Equipment Notes shall be deemed
to be a successor or assign of the Successor Original Loan Participant or to
have any rights or benefits hereunder. THIS AGREEMENT SHALL IN
<PAGE>
27
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE
STATE OF ILLINOIS.
<PAGE>
28
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.
UNITED AIR LINES, INC.,
as Lessee
By: ______________________________________
Name:
Title:
_________________,
as Owner Participant
By: ______________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except
as expressly provided for herein,
but solely as Owner Trustee
By: ______________________________________
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, NEW YORK BRANCH.,
as Successor Original Loan Participant
By: ______________________________________
Name:
Title:
<PAGE>
29
BAYERISCHE LANDESBANK GIROZENTRALE,
FRANKFURT BRANCH,
as Successor Original Loan Participant
By: ________________________________________
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
as Pass Through Trustee
By: ______________________________________
Name:
Title:
<PAGE>
Exhibit A to
Redemption and
Refinancing Agreement
Maturity Dates, Principal Amounts and
-------------------------------------
Interest Rates of Series 1993 747 A Certificates
------------------------------------------------
Principal Interest Rate
Maturity Date Amount Per Annum
------------- --------- -------------
Series 1993 747 A-1 $ %
Series 1993 747 A-2 $ %
<PAGE>
Exhibit A-1 to
Redemption and
Refinancing Agreement
Installment Payment Dates and Installment Payment Percentages
-------------------------------------------------------------
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________
Installment Payment Aggregate Installment
- ------------------- ---------------------
Date Payment Amount
---- --------------
$
TOTAL $________________
Installment Certificate No. 2 - Maturity Date: ________
Installment Payment Aggregate Installment
- ------------------- ---------------------
Date Payment Amount
---- --------------
TOTAL $ ________________
<PAGE>
Exhibit A-2 to
Redemption and
Refinancing Agreement
Issuance of Series 1993 747 A Certificates
------------------------------------------
The Series 1993 747 A Loan Certificates issued hereunder shall be
issued to and shall be payable to each of the Pass Through Trustees under the
1995-A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust
Agreement with respect to the grantor trusts created thereby, each such trust
as described below consisting in the aggregate of the certificates issued
hereunder and the other certificates contained therein:
1995 A1 Trust:
% Certificate due
---- ------------------
1995 A2 Trust:
% Certificate due
---- ------------------
<PAGE>
Exhibit B to
Redemption and
Refinancing Agreement
Form of
Third Amended and Restated Indenture
------------------------------------
<PAGE>
Exhibit C to
Redemption and
Refinancing Agreement
Form of
Second Amended and Restated Lease Agreement
-------------------------------------------
<PAGE>
Exhibit D to
Redemption and
Refinancing Agreement
Form of
First Amended and Restated Participation Agreement
--------------------------------------------------
<PAGE>
Exhibit E to
Redemption and
Refinancing Agreement
Form of
First Amended and Restated Trust Agreement
------------------------------------------
<PAGE>
FSB 160-32177-0
[LETTERHEAD OF RAY, QUINNEY & NEBEKER -- ATTORNEYS AT LAW]
April 28, 1995
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
RE: UNITED AIR LINES PASS THROUGH CERTIFICATES SERIES 1995-A
Dear Sir or Madam:
We have acted as special counsel to First Security Bank of Utah, National
Association, a national banking association in its individual capacity, and as
pass through trustee (the "Pass Through Trustee") under the Basic Agreement and
each Trust Supplement to be entered into by the Pass Through Trustee and United
Air Lines, Inc. ("United"), a Delaware corporation. Pursuant to the Basic
Agreement, the Pass Through Trustee will execute, authenticate and deliver
Certificates to be registered with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "1933 Act"), by a Registration
Statement on Form S-3 (File No.33-46033), as amended (the "Registration
Statement"). Terms used herein and not otherwise defined herein shall have the
meanings set forth in the Appendix to the Preliminary Prospectus Supplement
dated April 28, 1995 (the "Prospectus Supplement") to the Prospectus dated April
28, 1995 relating to the United Air Lines Pass Through Certificates, Series
1995-A (the "Prospectus").
<PAGE>
As such counsel, we have reviewed the form of the Certificates, the Basic
Agreement, the discussion in the Prospectus Supplement entitled "Certain Utah
Taxes" and other agreements and documents relating to the transactions therein
contemplated, and we have examined and relied upon originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or advisable
for the purposes of this opinion.
Based on the foregoing, we are of the opinion that:
1. The execution, authentication, issue and delivery by the Trustee of the
Certificates and the Basic Agreement have been duly authorized by the
Trustee.
2. With respect to the Certificates of each series, when (a) the execution
and delivery of the Basic Agreement by United shall have been duly
authorized by all necessary corporate action of United, (b) the Basic
Agreement shall have been executed and delivered by United and the Pass
Through Trustee, (c) the Trust Supplement establishing the terms of the
Certificates of such series and forming the related Trust shall have been
duly authorized, executed and delivered by United and the Pass Through
Trustee in accordance with the terms and conditions of the Basic Agreement,
and (d) the Certificates of such series shall have been duly executed,
authenticated, issued and delivered by the Pass Through Trustee and sold as
contemplated by each of the Registration Statement, the Prospectus, the
supplement or supplements to the Prospectus relating to the Certificates
of such series, the Basic Agreement and the related Trust Supplement,
assuming that the terms of the Certificates of such series are in
compliance with then applicable law, (i) the Basic Agreement, as
supplemented by the Trust Supplement, will constitute a valid and binding
obligation of the Pass Through Trustee enforceable against the Pass Through
Trustee in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and by general
principles of equity, and (ii) the Certificates of such series will be
validly issued and will entitled to the benefits of the Basic Agreement and
the related Trust Supplement.
3. The discussion in the Prospectus Supplement entitled "Certain Utah
Taxes" insofar as it relates to statements of law or legal conclusions, is
correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit to the 8-K
filing and to the use of our name in the first paragraph of the Prospectus
Supplement under the caption "Certain Utah Taxes". In giving this consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the 1933 Act or the Rules and Regulations of the
Securities and Exchange Commission.
<PAGE>
We are attorneys admitted to practice in the State of Utah and in rendering the
foregoing opinions we have not passed upon, or purported to pass upon, the laws
of any jurisdiction other than the State of Utah and the Federal banking law
governing the banking and trust powers of First Security Bank of Utah, National
Association.
Very truly yours,
RAY, QUINNEY & NEBEKER
/s/ M. John Ashton
M. John Ashton
<PAGE>
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
[_] A TRUSTEE PURSUANT TO SECTION 305(b)(2)
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE 87-0131890
(JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
NOT APPLICABLE
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
UNITED AIR LINES, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2675206
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, IL 60007
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
PASS THROUGH CERTIFICATES
(TITLE OF THE INDENTURE SECURITIES)
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining of supervising authority to
which it is subject.
Comptroller of the Currency, Washington, D.C. 20230; Federal Reserve
Bank of San Francisco, San Francisco, CA 94120; Federal Deposit
Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations With The Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the Trustee.
Item 16. List of Exhibits. List below all exhibits filed as part of this
statement of eligibility and qualification.
Exhibit 1: copy of the articles of association as now in effect
Exhibit 2: certificate of authority to commence business including a
certificate of the Comptroller of the Currency evidencing
the change of the Trustee's name
Exhibit 3: copy of the authorization of the trustee to exercise
corporate trust powers
Exhibit 4: copy of the bylaws of the trustee
Exhibit 5: Not applicable
Exhibit 6: Not applicable
Exhibit 7: A copy of the latest report published pursuant to law or
its supervising or examining authority
Exhibit 8: Not applicable
Exhibit 9: Not applicable
<PAGE>
Signature
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Security Bank of Utah, National Association, a
national banking association organized and existing under the laws of the United
States, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned thereunder duly authorized, all in the
City of Salt Lake City, and State of Utah, on the 24th day of April, 1995.
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, Trustee
By: Greg A. Hawley
----------------------------------
Greg A. Hawley
Assistant Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FIRST SECURITY BANK OF UTAH
NATIONAL ASSOCIATION
(As Amended)
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "First
Security Bank of Utah, National Association."
SECOND. The place where the main banking house or office of this
Association shall be located shall be Ogden, County of Weber, State of Utah.
Its general business and its operations of discount and deposit shall also be
carried on in said city, and the branch or branches established or maintained by
it in accordance with the provisions of Section 36 of Title 12, United States
Code.
THIRD. The Board of Directors of the consolidated association shall
consist of not less than five (5) nor more than twenty-five (25) of its
shareholders.
FOURTH. There shall be an annual meeting of the shareholders the
purpose of which shall be the election of Directors and the transaction of
whatever other business may be brought before said meeting. It shall be held at
the main office of the Bank or other convenient place as the Board of Directors
may designate, on the third Monday of March of each year, but if no election is
held on that day, it may be held on any subsequent day according to such lawful
rules as may be prescribed by the Board of Directors. Nominations for election
to the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Bank entitled to
vote for election of directors. Nominations, other than those made by or on
behalf of the existing management of the Bank, shall be made in writing and
shall be delivered or mailed to the President of the Bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of stockholders called for the election of directors,
provided, however, that if less than 21 days notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the Bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
his discretion, be disregarded by the Chairman of the meeting, and upon his
instructions, the voting inspectors may disregard all votes cast for each such
nominee.
FIFTH. The authorized amount of capital stock of this association
shall be twenty-seven million dollars ($27,000,000.00), divided into 1,080,000
shares of common stock of the par value of Twenty-five Dollars ($25.00) each;
but said capital stock may be increased or decreased from time to time, in
accordance with the provision of the laws of the United States. In the event of
an increase in said capital stock by the sale of additional shares thereof, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him before the
stock is increased. The Board of Directors without the approval of the
shareholders may authorize and issue debt obligations whether or not such
obligations are subordinated to other obligations of the Bank.
Articles of Association
<PAGE>
SIXTH. (1) The Board of Directors shall appoint one of its members
President of this Association. It may also appoint a Chairman of the Board, and
one or more Vice Chairman. The Board of Directors shall have the power to
appoint one or more Vice Presidents, at least one of whom shall also be a member
of the Board of Directors, and who shall be authorized, in the absence of the
President, to perform all acts and duties pertaining to the office of the
President; to appoint a Cashier and such other officers and employees as may be
required to transact the business of this Association; to fix the salaries to be
paid to such officers or employees and appoint others to take their place.
(2) The Board of Directors shall have the power to define the duties
of officers and employees of this Association and to require adequate bonds from
them for the faithful performance of their duties; to make all By-Laws that may
be lawful for the general regulation of the business of this Association and the
management of its affairs, and generally to do and perform all acts that may be
lawful for a Board of Directors to do and perform.
(3) Each person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, administrative or investigative (other than an action by or in
the right of the Association) by reason of the fact that he is or was a
director, officer, employee or agent of the Association or is or was serving at
the request of the Association as a director, officer, employee, fiduciary or
agent of another corporation, partnership, joint venture, trust, estate or other
enterprise or was acting in furtherance of the Association's business shall be
indemnified against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Association provided, however, no indemnification shall be given to a person
adjudged guilty of, or liable for, willful misconduct, gross neglect of duty, or
criminal acts. The termination of any action, suit or proceeding by judgement,
order, settlement, or its equivalent, shall not of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Association.
(4) Each person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Association (such action or suit being known as a "derivative
proceeding") to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Association or is or was
serving at the request of the Association as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust,
estate or other enterprise shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Association and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
Association unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(5) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in (3) or (4) of this Article or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him in
connection therewith.
Articles of Association
<PAGE>
(6) Any indemnification under (3) or (4) of this Article (unless
ordered by a court) shall be made by the Association only as authorized in the
specific case upon a reasonable determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in (3) or (4) of this
Article. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in written opinion, or (c) by the stockholders.
(7) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Association in advance of the final disposition
of such action, suit or proceeding as authorized in the manner provided in (6)
of this Article upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Association as
authorized in this Article.
(8) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors, successors in interest, and administrators of
such a person.
(9) The Board of Directors shall have the power to change the
location of the main office of this Association to any other place within the
limits of Salt Lake City, Utah, without the approval of the shareholders of this
Association but subject to the approval of the Comptroller of the Currency; and
shall have the power to change the location of any branch or branches of this
Association to any other location, without the approval of the shareholders of
this Association but subject to the approval of the Comptroller of the Currency.
SEVENTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The Board of Directors of this Association, or any three or
more shareholders owning, in the aggregate, not less than ten per centum of the
stock of this Association, may call a special meeting of shareholders at any
time: Provided, however, that unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this Association. These Articles of
Association may be amended at any regular or special meeting of the Shareholders
by the affirmative vote of the shareholders owning at least a majority of the
stock of this Association, subject to the provisions of the banking laws of the
United States. The notice of any shareholders' meeting, at which an amendment
to the Articles of Association of this Association is to be considered shall be
given as hereinabove set forth.
Articles of Association
<PAGE>
EXHIBIT 2
CERTIFICATE
TREASURY DEPARTMENT )
Office of ) ss:
Comptroller of the Currency )
I, Thomas G. DeShazo, Deputy Comptroller of the Currency, do hereby certify
that:
Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the
Comptroller of the Currency charters and exercises regulatory and supervisory
authority over all national banking associations;
On December 9, 1881, The First National Bank of Ogden, Ogden, Utah was chartered
as a National Banking Association under the laws of the United States and under
Charter No. 2597;
The document hereto attached is a true and complete copy of the Comptroller
Certificate issued to The First National Bank of Ogden, Ogden, Utah, the
original of which certificate was issued by this Office on December 9, 1881;
On October 2, 1922, in connection with a consolidation of The First Bank of
Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title
was charged to "The First & Utah National Bank of Ogden"; on January 18, 1923,
The First & Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; and on February 24, 1934, the title was changed to
"First Security Bank of Utah, National Association"; and
First Security Bank of Utah, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking Association.
IN TESTIMONY WHEREOF, I have hereunto subscribed my
name and caused the seal of Office of the Comptroller
of the Currency to be affixed to these presents at the
Treasury Department, in the City of Washington and
District of Columbia, this fourth day of April, A.D.
1972.
Thomas G. DeShazo
----------------------------------------------------
Deputy Comptroller of the Currency
<PAGE>
TREASURY DEPARTMENT
Comptroller of the Currency,
Washington, December 9th, 1881
WHEREAS, by satisfactory evidence presented to the undersigned it has been
made to appear that "The First National Bank of Ogden" in Ogden City in the
County of Weber, and Territory of Utah has complied with all the provisions of
the Revised Statutes of the United States, required to be complied with before
an association shall be authorized to commence the business of Banking.
Now, therefore, I, John Jay Knox, Comptroller of the Currency, do hereby
certify that "The First National Bank of Ogden" in Ogden City in the County of
Weber, and Territory of Utah is authorized to commence the business of Banking,
as provided in Section Fifty-one hundred and sixty-nine of the Revised Statutes
of the United States.
In testimony whereof, witness my hand and seal of office this 9th day of
December, 1881.
John Jay Knox
________________________________________
Comptroller of the Currency
<PAGE>
EXHIBIT 3
FEDERAL RESERVE BOARD
WASHINGTON, D.C.
I, S.R. Carpenter, Assistant Secretary of the Federal Reserve Board, do hereby
certify that it appears from the records of the Federal Reserve Board that:
(1) Pursuant to authority vested in the Federal Reserve Board by an Act of
Congress approved December 23, 1913, known as the Federal Reserve Act, as
amended, the Federal Reserve Board has heretofore granted to the First National
Bank of Ogden, Ogden, Utah, the right to act when not in contravention of State
or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with national banks
are permitted to act under the laws of the State of Utah;
(2) On February 24, 1934, the First National Bank of Ogden, Ogden, Utah,
changed its title to First Security Bank of Utah, National Association, under
the provisions of an Act of Congress approved May 1, 1886, whereby all of the
rights, liabilities and powers of such national bank under its old name devolved
upon and inured to the bank under its new name; and
(3) Pursuant to the permission heretofore granted by the Federal Reserve
Board to the First National Bank of Ogden, Ogden, Utah, as aforesaid, and by
virtue of the change in the title of such bank, the First Security Bank of Utah,
National Association has authority to act, when not in contravention of State or
local law, as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates of lunatics, or in any other fiduciary capacity in which
State
<PAGE>
banks, trust companies or other corporations which come into competition with
national banks are permitted to act under the laws of the State of Utah, subject
to regulations prescribed by the Federal Reserve Board.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal of
the Federal Reserve Board to be affixed at the City of Washington, in the
District of Columbia, on the 1st day of March, 1934.
S.R. Carpenter
___________________________________________
Assistant Secretary, Federal Reserve Board.
<PAGE>
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1, 1934.
First Security Bank of Utah, National Association,
Ogden, Utah.
Dear Sirs:
Reference is made to the change in the name of the First National Bank of
Ogden, Ogden, Utah, pursuant to the provisions of the Act of May 1, 1886, to
First Security Bank of Utah, National Association, and there is inclosed a
certificate issued by the Federal Reserve Board showing the trust powers
heretofore granted to the bank under its former name and that it is authorized
to exercise such powers under its new name.
Very truly yours,
/s/ S.R. Carpenter
S.R. Carpenter,
Assistant Secretary.
Inclosure
<PAGE>
EXHIBIT 4
BY-LAWS OF THE
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION
Organized under the National Banking laws of the United States.
MEETINGS
--------
SECTION 1. Unless otherwise provided by the articles of association a notice
of each shareholder's meeting, setting forth clearly the time, place and purpose
of the meeting, shall be given, by mail, to each shareholder of record of this
bank at lease 10 days prior to the date of such meeting. Any failure to mail
such notice or any irregularity therein, shall not affect the validity of such
meeting or of any of the proceedings thereat.
SECTION 2. A record shall be made of the shareholders represented in person
and by proxy, after which the shareholders shall proceed to the transaction of
any business that may properly come before the meeting. A record of the
shareholder's meeting, giving the names of the shareholders present and the
number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, and the names of the
proxies, shall be entered in the records of the meeting in the minute book of
the bank. This record shall show the names of the shareholders and the number
of shares voted for each resolution or voted for each candidate for director.
Proxies shall be secured for the annual meeting alone, shall be dated, and shall
be filed with the records of the meeting. No officer, director, employee, or
attorney for the bank may act as proxy.
The chairman or Secretary of the meeting shall notify the directors-elect of
their election and of the time at which they are required to meet at the banking
house for the purpose of organizing the new board. At the appointed time, which
as closely as possible shall follow their election, the directors-elect shall
convene and organize.
The president or cashier shall then forward to the office of the Comptroller of
the Currency a letter stating that a meeting of the shareholders was held in
accordance with these by-laws, stating the number of shares represented in
person and the number of shares represented by proxy, together with a list of
the directors elected and the report of the appointment and signatures of
officers.
OFFICERS
--------
SECTION 3. Each officer and employee of this bank shall be responsible for
all such moneys, funds, valuables, and property of every kind as may be
entrusted to his care or otherwise come into his possession, and shall
faithfully and honestly discharge his duties and apply and account for all such
moneys, funds, valuables and other property that may come into his hands as such
officer or employee and pay over and deliver the same to the order of the Board
of Directors or to such person or persons as may be authorized to demand and
receive same.
SECTION 4. If the Board of Directors shall not require separate bonds, it
shall require a blanket bond in an amount deemed by it to be sufficient.
Asssociation By-Laws
<PAGE>
SECTION 5. The following is an impression of the seal adopted by the Board of
Directors of this bank: (Here in the original resolution was imprinted the
Association's seal).
SECTION 6. The various branches of this bank shall be open for business
during such hours as shall be customary in the vicinity, or as shall be fixed,
as to any branch, by the clearing house association of which such branch shall
be a member.
SECTION 7. The regular meeting of the board of directors shall be held on the
first Wednesday after the first Tuesday of each month. When any regular meeting
of the board of directors falls upon a holiday, the meeting shall be held on
such other day as the board may previously designate. Special meetings may be
called by the president, any vice-president, the secretary or the cashier, or at
the request of three or more directors.
MINUTE BOOK
-----------
SECTION 8. The organization papers of this bank, the returns of the
elections, the proceedings of all regular and special meetings of the directors
and of the shareholders, the by-laws and any amendments thereto, and reports of
the committees of directors shall be recorded in the minute book; and the
minutes of each meeting shall be signed by the chairman and attest by the
secretary of the meeting.
TRANSFERS OF STOCK
------------------
SECTION 9. The stock of this bank shall be assignable and transferable only
on the books of this bank, subject to the restrictions and provisions of the
national banking laws; and a transfer book shall be provided in which all
assignments and transfers of stock shall be made.
SECTION 10. Certificates of stock, signed by the president or vice-president,
and the secretary or the cashier or any assistant cashier, may be issued to
shareholders, and when stock is transferred the certificates thereof shall be
returned to the association, cancelled, preserved, and new certificates issued.
Certificates of stock shall state upon the face thereof that the stock is
transferable only upon the books of the association, and shall meet the
requirements of section 5139, United States Revised Statutes, as amended.
EXPENSES
--------
SECTION 11. All the current expenses of the bank shall be paid by the
cashier, except that the current expenses of each branch shall be paid by the
manager thereof; and such officer shall, every six months, or more often if
required, make to the board a report thereof.
EXAMINATIONS
------------
SECTION 12. There shall be appointed by the board of directors a committee of
three members, exclusive of the active officers of the bank, whose duty it shall
be to examine, at least once in each period of eighteen months, the affairs of
each branch as well as the head office of the association, count its cash, and
compare its assets and liabilities with the accounts of the general ledgers,
ascertain whether the accounts are correctly kept and that the condition of the
bank corresponds therewith, and whether the bank is in a sound and solvent
condition, and to recommend to the board such changes in the manner of doing
business, etc., as shall seem to be desirable, the result of which examination
shall be reported in writing to the board at the next regular meeting
thereafter, provided that the appointment of such committee and the examinations
by it may be dispensed with if the board shall cause such examination to be made
and reported to the board by accountants approved by it.
Association By-Laws
<PAGE>
CHANGES IN BY-LAWS
------------------
SECTION 13. These by-laws may be changed or amended by the vote of a majority
of the directors at any regular or special meeting of the board, provided,
however, that the directors shall have been given 10 days notice of the
intention to change or offer an amended thereto.
REPEAL
------
SECTION 14. All by-laws heretofore adopted are repealed.
Association By-Laws
<PAGE>
Consolidated Report of Condition for Insured Commercial and State-Chartered
Savings Banks for March 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
1. Cash and balances due from depository institutions
(from Schedule RC-A):
a. Noninterest-bearing balances and currency and
coin (1)........................................... 371,272
b. Interest-bearing balances (2)...................... 0
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B,
column A).......................................... 125,150
b. Available-for-sale securities (from Schedule RC-B,
column D).......................................... 1,006,115
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries, and in
IBFs:
a. Federal funds sold................................. 38,368
b. Securities purchased under agreements to resell.... 0
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned
income (from Schedule RC-C)............ 3,694,859
b. LESS: Allowance for loan and lease
losses................................. 57,672
c. LESS: Allocated transfer risk
reserve................................ 0
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and
4.c)............................................... 3,637,187
5. Trading assets (from Schedule RC-D)................... 179,652
6. Premises and fixed assets (including capitalized
leases)............................................... 87,078
7. Other real estated owned (from Schedule RC-M)......... 1,026
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)............. 0
9. Customers' liability to this bank on acceptances
outstanding........................................... 247
10. Intangible assets (from Schedule RC-M)................ 123,341
11. Other assets (from Schedule RC-F)..................... 125,235
12. Total assets (sum of items 1 through 11).............. 5,694,671
</TABLE>
- --------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A
and C from Schedule RC-E, part I)............... 3,835,531
(1) Noninterest-bearing(1)...............853,580
(2) Interest-bearing...................2,981,951
b. In foreign offices, Edge and Agreement subsidiar-
ies, and IBFs (from Schedule RC-E, part II)..... 0
(1) Noninterest-bearing.................... 0
(2) Interest-bearing...................... 0
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds purchased......................... 981,348
b. Securities sold under agreements to repurchase.. 501
15. a. Demand notes issued to the U.S. Treasury........ 20,632
b. Trading Liabilities (from Schedule RC-D)........ 14,774
16. Other borrowed money...............................
a. With original maturity of one year or less...... 97,223
b. With original maturity of more than one year.... 162,975
17. Mortgage indebtedness and obligations under
capitalized leases................................. 0
18. Bank's liability on acceptances executed and
outstanding........................................ 247
19. Subordinated notes and debentures.................. 15,000
20. Other liabilities (from Schedule RC-G)............. 97,063
21. Total liabilities (sum of items 13 through 20)..... 5,225,294
22. Limited-life preferred stock and related surplus... 0
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus...... 0
24. Common stock....................................... 37,851
25. Surplus (exclude all surplus related to preferred
stock)............................................. 197,951
26. a. Undivided profits and capital reserves.......... 247,358
b. Net unrealized holding gains (losses) on
available-for-sale securities...................... (13,783)
27. Cumulative foreign currency translation
adjustments........................................ 0
28. Total equity capital (sum of items 23 through 27).. 469,377
29. Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21, 22, and 28)... 5,694,671
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed for the Number
bank by independent external auditors as of any date
during 1994.............................................. 2
1=Independent audit of the bank conducted in accordance with generally accepted
auditing standards by a certified public accounting firm which submits a
report on the bank
2=Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3=Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4=Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5=Review of the bank's financial statements by external auditors
6=Compilation of the bank's financial statements by external auditors
7=Other audit procedures (excluding tax preparation work)
8=No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
