<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): January 30, 1996.
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>
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
and a joint Registration Statement on Form S-3 (Registration No. 33-57192) held
by UAL Corporation and United Air Lines, Inc. as declared effective on May 28,
1993, relating to Pass Through Certificates, Series 1996-A. Capitalized terms
not otherwise defined shall have the same meanings ascribed thereto in the
related Prospectus Supplement dated January 30, 1996 and filed with the
Commission pursuant to Rule 424(b)(3).
<TABLE>
<CAPTION>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No. Document
- ----------- ----------- --------
<S> <C> <C>
Exhibit 1(c)(1) Exhibit 1(f) Form of Underwriting Agreement
relating to the issuance of Pass
Through Certificates, Series
1996-A.
Exhibit 4(l)(1)* 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(1)(2) Exhibit 4(a)(8) Forms of Pass Through Trust
Supplement Nos. 1996-A1 and
1996-A2 between United and the
First Security Bank of Utah,
National Association relating to
Pass Through Certificates, Series
1996-A1 and 1996-A2, respectively.
Exhibit 4(m)(1) Exhibit 4(a)(9) Forms of Pass Through Certificates,
Series 1996-A1 and 1996-A2,
respectively (included in Exhibits
4(l)(2) and 4(a)(8), respectively).
Exhibit 4(n)(1) Exhibit 4(b)(42) Forms of Amended and Restated Trust
Indenture and Mortgage between the
Owner Trustee and the Loan Trustee
relating to the Equipment Notes for
Aircraft No. 1 and Aircraft No. 2,
respectively.
</TABLE>
- -------------------------
* Incorporated by reference from indicated corresponding exhibit to Form S-3
(Registration No. 33-46033) filed as an exhibit to United Air Lines, Inc. Form
8-K dated May 2, 1995, and filed with the Commission on May 4, 1995.
/+/ Previously filed.
-2-
<PAGE>
<TABLE>
<CAPTION>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No. Document
- ----------- ----------- --------
<S> <C> <C>
Exhibit 4(n)(2) Exhibit 4(b)(43) Forms of Equipment Notes (included
in Exhibits 4(n)(1) and 4(b)(42),
respectively).
Exhibit 4(n)(3) Exhibit 4(b)(44) 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 and Aircraft No. 2,
respectively.
Exhibit 4(n)(4) Exhibit 4(b)(45) Forms of Lease Agreement between
United and the Owner Trustee
relating to the Equipment Notes for
Aircraft No. 1 and Aircraft No. 2,
respectively.
Exhibit 4(n)(5) Exhibit 4(b)(46) Forms of Trust Agreement between
the Owner Participant and the Owner
Trustee relating to the Equipment
Notes for Aircraft No. 1 and
Aircraft No. 2, respectively.
Exhibit 4(n)(6) Exhibit 4(b)(47) Forms 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. 1 and Aircraft No. 2,
respectively.
Exhibit 5(c)(1)* Exhibit 5(c)/+/ Opinion of Ray, Quinney & Nebeker,
counsel for First Security Bank of
Utah, National Association as
Trustee and Loan Trustees as to
legality of the Securities.
Exhibit 24(b)(1)* Exhibit 24(d)/+/ Consent of Ray, Quinney & Nebeker
(included in Exhibit 5(c)(1)).
Exhibit 26(b)(1)* Exhibit 26(a)/+/ Statement of Eligibility of Trustee
on Form T-1 for First Security Bank
of Utah, National Association.
</TABLE>
- -------------------------
* Incorporated by reference from indicated corresponding exhibit to Form S-3
(Registration No. 33-46033) filed as an exhibit to United Air Lines, Inc.
Form 8-K dated May 2, 1995, and filed with the Commission on May 4, 1995.
/+/ Previously filed.
-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.
January 31, 1996 By: /s/DOUGLAS A. HACKER
-----------------------------------
Douglas A. Hacker
Senior Vice President--Finance
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No. Document Page
- ----------- ----------- -------- ----
<S> <C> <C> <C>
Exhibit 1(c)(1) Exhibit 1(f) Form of Underwriting
Agreement relating to the
issuance of Pass Through
Certificates, Series 1996-A.
Exhibit 4(l)(1)* 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(1)(2) Exhibit 4(a)(8) Forms of Pass Through Trust
Supplement Nos. 1996-A1 and
1996-A2 between United and
the First Security Bank of
Utah, National Association
relating to Pass Through
Certificates, Series 1996-A1
and 1996-A2, respectively.
Exhibit 4(m)(1) Exhibit 4(a)(9) Forms of Pass Through
Certificates, Series 1996-A1
and 1996-A2, respectively
(included in Exhibits 4(l)(2)
and 4(a)(8), respectively).
Exhibit 4(n)(1) Exhibit 4(b)(42) Forms of Amended and
Restated Trust Indenture and
Mortgage between the Owner
Trustee and the Loan Trustee
relating to the Equipment
Notes for Aircraft No. 1 and
Aircraft No. 2, respectively.
Exhibit 4(n)(2) Exhibit 4(b)(43) Forms of Equipment Notes
(included in Exhibits 4(n)(1)
and 4(b)(42), respectively).
</TABLE>
- ------------------------------
* Incorporated by reference from indicated corresponding exhibit to Form S-3
(Registration No. 33-46033) filed as an exhibit to United Air Lines, Inc. Form
8-K dated May 2, 1995, and filed with the Commission on May 4, 1995.
/+/ Previously filed.
<PAGE>
<TABLE>
<CAPTION>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No. Document Page
- ----------- ----------- -------- ----
<S> <C> <C> <C>
Exhibit 4(n)(3) Exhibit 4(b)(44) 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 and Aircraft
No. 2, respectively.
Exhibit 4(n)(4) Exhibit 4(b)(45) Forms of Lease Agreement
between United and the Owner
Trustee relating to the
Equipment Notes for Aircraft
No. 1 and Aircraft No. 2,
respectively.
Exhibit 4(n)(5) Exhibit 4(b)(46) Forms of Trust Agreement
between the Owner
Participant and the Owner
Trustee relating to the
Equipment Notes for
Aircraft No. 1 and Aircraft
No. 2, respectively.
Exhibit 4(n)(6) Exhibit 4(b)(47) Forms 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. 1 and Aircraft No. 2,
respectively.
Exhibit 5(c)(1)* Exhibit 5(c)/+/ Opinion of Ray, Quinney &
Nebeker, counsel for First
Security Bank of Utah,
National Association as
Trustee and Loan Trustees
as to legality of the
Securities.
Exhibit 24(b)(1)* Exhibit 24(d)/+/ Consent of Ray, Quinney &
Nebeker (included in Exhibit
5(c)).
</TABLE>
- ----------------------------
* Incorporated by reference from indicated corresponding exhibit to Form S-3
(Registration No. 33-46033) filed as an exhibit to United Air Lines, Inc. Form
8-K dated May 2, 1995, and filed with the Commission on May 4, 1995.
/+/ Previously filed.
<PAGE>
<TABLE>
<CAPTION>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No. Document Page
- ----------- ----------- -------- ----
<S> <C> <C> <C>
Exhibit 26(b)(1)* Exhibit 26(a)/+/ Statement of Eligibility
of Trustee on Form T-1
for First Security Bank
of Utah, National
Association.
</TABLE>
- ----------------------------
* Incorporated by reference from indicated corresponding exhibit to Form S-3
(Registration No. 33-46033) filed as an exhibit to United Air Lines, Inc. Form
8-K dated May 2, 1995, and filed with the Commission on May 4, 1995.
/+/ Previously filed.
<PAGE>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 1(c)(1) Exhibit 1(f)
<PAGE>
================================================================================
UNITED AIR LINES, INC.
$
Pass Through Certificates, Series 1996-A1 and 1996-A2
UNDERWRITING AGREEMENT
Dated: January 30, 1996
================================================================================
<PAGE>
UNITED AIR LINES, INC.
$164,700,000
Pass Through Certificates, Series 1996-A1 and 1996-A2
UNDERWRITING AGREEMENT
New York, New York
January 30, 1996
To the Underwriters named in Schedule I:
Dear Sirs:
United Air Lines, Inc., a Delaware corporation (the "Company"), in
connection with the refinancing of two leveraged lease transactions 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"), as supplemented with respect to each of the Pass
Through Certificate Designations by a Trust Supplement, each dated as of
February 1, 1996 (each, a "Trust Supplement"), between the Company and the
Trustee (the Basic Agreement as it is to be supplemented by either such Trust
Supplement being referred to herein as a "Designated Agreement"; collectively
the "Designated Agreements"). The Offered Certificates and each Designated
Agreement are more fully described in the Prospectus referred to below.
<PAGE>
3
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 a portion of the Offered Securities, and (ii) a registration statement
(No. 33-57192) on Form S-3 ("Registration Statement 33-57192"; each of
Registration Statement 33-46033 and Registration Statement 33-57192, including
the respective exhibits thereto and the respective documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, as amended
at the date hereof, being a "Registration Statement" and, collectively, being
the "Registration Statements") relating to certain securities, including a
portion of the Offered 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 Registration Statement 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". The
basic prospectus included in Registration Statement 33-57192 relating to
offerings of pass through certificates under the Registration Statements, 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
either 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:
<PAGE>
4
(i) The Company meets the requirements for use of Form S-3 under the
1933 Act; each Registration Statement has become effective; (A) on the
original effective date of each 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 each Registration Statement, each
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 neither Registration Statement 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; and (B) on the date hereof and at all times subsequent thereto
up to the Closing Time (as defined below), neither the Prospectus nor any
amendment or supplement thereto includes or will include an untrue
statement of a material fact or omits or will 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 either Registration Statement or the Prospectus or to statements or
omissions in that part of each Registration Statement which constitutes a
Statement of Eligibility under the Trust Indenture Act of 1939, as amended
(the "1939 Act") (the "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 either 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 either 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
<PAGE>
5
and its consolidated subsidiaries for the periods specified. Such
financial statements have been prepared in conformity with generally
accepted accounting principles 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
either 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 either 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 of 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
<PAGE>
6
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 realization of the benefits
intended to be provided thereby. The Basic Agreement as executed is
substantially in the form filed as an exhibit to the Registration
Statements and has been duly qualified under the 1939 Act. 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 such 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 Statements 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,
<PAGE>
7
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 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, as amended, 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 Connecticut and Illinois and filings thereunder,
<PAGE>
8
which filings listed in the preceding clauses (y) and (z) shall have been
made or obtained, or duly presented for filing, 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 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 either Registration Statement or the Prospectus or to be filed
as exhibits to either 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.
(c) NatWest Capital Markets Limited ("NatWest"), one of the
Underwriters, represents and agrees that:
<PAGE>
9
(i) NatWest has not offered or sold and will not offer or sell any
Offered Certificates to persons in the United Kingdom, except to persons
whose ordinary activities involve acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result
in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 or persons.
(ii) NatWest will not offer or sell any Offered Certificates within
the United States, its territories or possessions or to persons who are
citizens thereof or residents therein.
(iii) NatWest has complied with and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done
by it in relation to the Offered Certificates in, from or otherwise
involving the United Kingdom.
(iv) NatWest has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue of the Offered Certificates to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemption) Order 1995 or is a person to whom such document
may otherwise lawfully be issued or passed on.
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 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.
<PAGE>
10
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, each
Owner Trustee will pay to each Underwriter an amount equal to that percentage of
the aggregate principal amount of each Pass Through Certificate Designation (to
the extent that such Designation relates to Equipment Notes to be issued by such
Owner Trustee) purchased by it as set forth in Schedule A; provided that if
either Owner Trustee fails to 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 counsel for the Underwriters or counsel for the
Company, to amend either Registration Statement or amend or supplement the
Prospectus in order that the
<PAGE>
11
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 either
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 either 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 either
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 either 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 either Registration Statement, the Prospectus or the Prospectus
Supplement, (iv) of any request by the Commission for any amendment to
either 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>
12
the effectiveness of either 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 each Registration Statement (as originally filed)
and of all amendments thereto, whether filed before or after such
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 each 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 thereof; 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
each 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>
13
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 Registration Statement 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 each 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 Offered 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
<PAGE>
14
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 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
either 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;
(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; and
(3) An opinion of Ray, Quinney & Nebeker, counsel for First
Security, substantially to the effect set forth on Exhibit C attached
hereto.
<PAGE>
15
(c) A favorable opinion of Shearman & Sterling, counsel for the
Underwriters, to the effect that the opinions delivered pursuant to
Sections 5(b)(1), (2) and (3) 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 Statements, the Prospectus and such other related matters
as you may reasonably require. In giving such opinion such counsel may
rely, as to all matters 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 each 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 Standard & Poor's Ratings Services or Moody's Investors
Service, Inc.
(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
<PAGE>
16
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, each of the Financing Agreements shall have
been duly executed and delivered by each of the parties thereto; the
representations and warranties of the Company contained in each of the
Financing Agreements shall be accurate as of the Closing Time (except 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.
The Company agrees to furnish promptly after the applicable Transfer
Date, to the Underwriters a copy of each opinion required to be delivered under
the applicable Financing Agreement addressed to the Underwriters and of such
other documents furnished in connection with the fulfillment of the conditions
precedent therein 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 either 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;
<PAGE>
17
(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, which
consent shall not be unreasonably withheld; 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 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 Statements (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 either Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933
<PAGE>
18
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 such 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 such 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 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 and the indemnifying parties shall be liable for the reasonable fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. 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
<PAGE>
19
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 either
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.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company or its officers or an Underwriter or its
representatives 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 Statements 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.
<PAGE>
20
(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 or More of the Underwriters. If at the
Closing Time any Underwriter shall fail in the performance of its obligations
under this Agreement, the remaining non-defaulting Underwriters shall be
obligated to purchase the Offered Certificates that the defaulting Underwriter
agreed but failed to purchase in the respective proportions that the number of
Offered Certificates set opposite the name of each remaining non-defaulting
Underwriter in Schedule I hereto bears to the total number of Offered
Certificates set opposite the names of all the remaining non-defaulting
Underwriters in Schedule I hereto; provided however, that the remaining non-
defaulting Underwriters shall not be obligated to purchase any of the Offered
Certificates if the aggregate principal amount of the Offered Certificates that
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
date exceeds 9.9% of the aggregate principal amount of the Offered Certificates,
and any remaining non-defaulting Underwriter shall not be obligated to purchase
more than 110% of the number of Offered Certificates that it agreed to purchase
pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the
remaining non-defaulting Underwriters, or those other underwriters satisfactory
to the non-defaulting Underwriters, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Offered Certificates. If the remaining Underwriters or other underwriters
satisfactory to the non-defaulting Underwriters do not elect to purchase the
Offered Certificates that the defaulting Underwriter or Underwriters agreed but
failed to purchase, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Section 4. As used in this Agreement, the term "Underwriter" includes, for all
purposes of this Agreement unless the context requires otherwise, any party not
listed in Schedule I hereto who, pursuant to this Section 10, purchases Offered
Certificates that a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Offered Certificates
of a defaulting or withdrawing Underwriter, either the Underwriters or the
Company may postpone the Closing Time for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in either Registration Statement,
in the Prospectus or in any other document or arrangement.
<PAGE>
21
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 and Chief
Financial Officer, or at United Air Lines, Inc., 1200 East Algonquin Road, Elk
Grove Township, Illinois 60007, attention of Senior Vice President and Chief
Financial Officer.
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 either 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>
22
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:
LEHMAN BROTHERS INC.
MORGAN STANLEY & CO. INCORPORATED
NATWEST CAPITAL MARKETS LIMITED
By: LEHMAN BROTHERS INC.
By:____________________________________
Name:
Title:
<PAGE>
SCHEDULE A
(1996 Pass Through Certificates, Series 1996-A1 and 1996-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>
1996-A1 $109,512,000 7.27 % January 30, 2013 .65% 100 %
1996-A2 $ 55,188,000 7.87 % January 30, 2019 .65% 100%
</TABLE>
________________________________________________________
** Expressed as percentage of Aggregate Principal Amount
<PAGE>
SCHEDULE I
to
Underwriting
Agreement
Dated: January 30, 1996
UNITED AIR LINES, INC.
Principal Amount
Being Purchased
---------------
1996-A1 1996-A2
------- -------
<TABLE>
<CAPTION>
<S> <C> <C>
LEHMAN BROTHERS INC. $71,182,000 $35,872,200
3 World Financial Center
New York, New York 10285
Notice to: David N. Frank
MORGAN STANLEY & CO. INCORPORATED $27,378,000 $13,797,000
1585 Broadway
New York, NY 10036
Notice to: Bruce Paone
NATWEST CAPITAL MARKETS LIMITED $10,951,200 $ 5,518,000
175 Water Street
20th Floor
New York, NY 10038-4924
Notice to: Stephan Sayre
</TABLE>
<PAGE>
SCHEDULE II
to
Underwriting
Agreement
Dated: January 30, 1996
UNITED AIR LINES, INC.
Underwriting fees,
discounts, commissions
or other compensation: $1,070,550
Closing date, time and location: February 6, 1996
9:00 A.M.,
Chicago Time;
Vedder, Price, Kaufman
& Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
<PAGE>
SCHEDULE III
to
Underwriting
Agreement
Dated: January 30, 1996
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 each 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 September 30, 1995 incorporated
by reference in each 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
September 30, 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; or
(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
Underwriting
Agreement
(Pass Through Certificates, Series 1996-A1 and 1996-A2)
[Provisions of Opinion of
Vedder, Price, Kaufman & Kammholz]
United Air Lines, Inc.
Pass Through Certificates, Series 1996-A1 and 1996-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 Underwriting 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 Underwriting 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
Underwriting 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
<PAGE>
2
such authorizations, approvals, consents and licenses, including
filings under the Uniform Commercial Code as is in effect in
Connecticut and Illinois, have been made or obtained or duly presented
for filing 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, upon due execution
and delivery by the Company, will each be a valid and binding
obligation of the Company
<PAGE>
3
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 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.
<PAGE>
4
(14) Assuming due authorization, execution and delivery of the Trust
Supplements by the Trustee, each 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.
In connection with the preparation of each Registration Statement and
the Prospectus, such counsel has examined various documents and other papers,
including the documents incorporated by reference in each 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 each 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
either 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 either 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
either Registration Statement or any amendment thereto (except for the financial
statements and other financial or statistical data included therein or omitted
therefrom and the Statements of Eligibility on Form T-1 filed in connection
therewith, as to which such counsel expresses no opinion), at the time such
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
<PAGE>
5
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.
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, when delivered, each such document will have 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 assumed the delivery of,
and has relied upon, the opinion to be delivered pursuant to the Financing
Agreements by Lytle Soule & Curlee, special counsel for Aviation Act matters, as
to all matters dealing with the Aviation Act.
The foregoing opinion is limited to matters governed by the laws of
the State of Illinois, the corporate law of the State of Delaware and the
federal law of the United States.
<PAGE>
Exhibit B
to
Underwriting
Agreement
(Pass Through Certificates, Series 1996-A1 and 1996-A2)
[Provisions of Opinion of General Counsel or Assistant General Counsel
of United Air Lines, Inc.]
United Air Lines, Inc.
Pass Through Certificates, Series 1996-A1 and 1996-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 Underwriting Agreement, the
Designated Agreements, the Financing Agreements and the other
Operative Documents to which the Company is or is to be a party.
(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 of 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, 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
<PAGE>
2
required, nor any contracts or documents of a character required under
the 1933 Act to be described or referred to in the Registration
Statement or the Prospectus or to 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, contracts and other documents therein
described (other than those relating to the Offered Certificates) 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 Underwriting
Agreement, the Designated Agreements, and the other Operative
Documents to which the Company is or is to be a party, the issuance
and sale of the Offered Certificates, the consummation by the Company
of the transactions contemplated in the Underwriting 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 Underwriting 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
<PAGE>
3
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.
(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 attorneys under such counsel's supervision have
participated in the preparation of the Registration Statements, 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 either
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 filed in connection
therewith, 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 statement 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>
Exhibit C
to
Underwriting
Agreement
(Pass Through Certificates, Series 1996-A1 and 1996-A2)
[Provisions of Opinion of Ray, Quinney & Nebeker]
United Air Lines, Inc.
Pass Through Certificates, Series 1996-A1 and 1996-A2
-----------------------------------------------------
(1) First Security is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and, in its individual capacity or as Trustee, as the case
may be, has the full corporate power and authority to execute, deliver
and perform its obligations under each Designated Agreement and the
other Operative Documents to which it is a party;
(2) The execution, delivery and performance by First Security or the
Trustee, as the case may be, of the Designated Agreements and the
other Operative Documents to which it is a party has been duly
authorized by all necessary corporate action on the part of First
Security or the Trustee, as the case may be, and the Designated
Agreements and the other Operative Documents to which it is a party
constitute the valid and binding obligations of First Security or the
Trustee, as the case may be, enforceable against First Security or the
Trustee, as the case may be, in accordance with their respective
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting enforcement
of 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);
(3) The Offered Certificates have been duly authorized and validly
executed, authenticated, issued and delivered by the Trustee pursuant
to the respective Designated Agreements; and the holders of the
Offered Certificates are entitled to the benefits of the related
Designated Agreements;
(4) The authorization, execution, delivery and performance by First
Security or the Trustee, as the case may be, of the Designated
Agreements and the other
<PAGE>
2
Operative Documents to which it is or will be a party and the
consummation of the transactions therein contemplated and compliance
with the terms thereof and issuance of the Offered Certificates
thereunder do not and will not result in the violation of the
provisions of the Articles of Association or By-Laws of First
Security, and do not and will not conflict with, or result in a breach
of any terms or provisions of, or constitute a default under, or
result in the creation or the imposition of any lien, charge or
encumbrance upon any property or assets of First Security or the
Trustee, as the case may be, under any indenture, mortgage or other
agreement or instrument known to such counsel to which First Security
or the Trustee, as the case may be, is a party or by which it or any
of its property is bound, or any Utah or Federal law, rule or
regulation governing First Security's or the Trustee's banking or
trust powers, or of any judgment, order or decree known to such
counsel to be applicable to First Security or the Trustee, as the case
may be, of any court, regulatory body, administrative agency,
government or governmental body having jurisdiction of First Security
or the Trustee or its properties;
(5) No authorization, approval, consent, license or order of, giving of
notice to, registration with, or taking of any other action in respect
of, any Federal or state governmental authority or agency pursuant to
any Federal or Utah law governing the banking or trust powers of First
Security or the Trustee is required for the authorization, execution,
delivery and performance by First Security or the Trustee of the
Designated Agreements and the other Operative Documents to which it is
or will be a party or the consummation of any of the transactions by
the Trustee contemplated thereby or the issuance of the Offered
Certificates under the Designated Agreements (except as shall have
been duly obtained, given or taken); and such authorization,
execution, delivery, performance, consummation and issuance do not
conflict with or result in a breach of the provisions of any such law;
(6) There are no taxes, fees or other governmental charges payable under
the laws of the State of Utah or any political subdivision of such
State in connection with the execution and delivery by the Trustee, in
its individual capacity or as Trustee, as the case may be, of the
Designated Agreements and the other Operative Documents or in
connection with the issuance, execution and delivery of the Offered
Certificates by the Trustee pursuant to the Designated Agreements;
(7) The statements in the Registration Statements and in the Prospectus
under the caption "Certain Utah Taxes" to the extent that they
constitute matters of law or legal conclusions with respect thereto,
have been prepared and reviewed by such counsel and are correct in all
material respects.
<PAGE>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(1)(2) Exhibit 4(a)(8)
<PAGE>
S & S DRAFT
1/22/96
TRUST SUPPLEMENT NO. 1996-A1
DATED AS OF JANUARY 1, 1996
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 AIR LINES 1996-A1 Pass Through Trust
PASS THROUGH CERTIFICATES, SERIES 1996-A1
<PAGE>
TRUST SUPPLEMENT NO. 1996-A1
DATED AS OF JANUARY 1, 1996
Series 1996-A1 Pass Through Certificates
--------------------------
Table of Contents
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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...................................... 5
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........................ 6
</TABLE>
<PAGE>
This Trust Supplement No. 1996-A1, dated as of January 1, 1996 (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, each Owner Trustee, acting on behalf of its respective 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 each 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
"1996-A1 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1996-A1 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1996-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>
3
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 1996-A1" (hereinafter defined as the "Series
1996-A1 Certificates"). Each Certificate represents a Fractional Undivided
Interest in the 1996-A1 Trust created hereby. The terms and conditions
applicable to the Series 1996-A1 Certificates are as follows:
1. The aggregate principal amount of the Series 1996-A1 Certificates
that shall be authenticated under the Agreement (except for Series 1996-A1
Certificates authenticated and delivered pursuant to Sections 3.03, 3.04
and 3.05 of the Basic Agreement) upon their initial issuance is
$____________.
2. The Cut-off Date is March 31, 1996.
3. The Regular Distribution Dates with respect to any payment of
Scheduled Payments means each January 30 and July 30, commencing July 30,
1996, until payment of all of the Scheduled Payments to be made under the
Equipment Notes has been made.
4. 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).
5. The Series 1996-A1 Certificates shall be in the form attached
hereto as Exhibit A. The Series 1996-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.
6. The Scheduled Payments of principal shall be as set forth in
Exhibit C hereto.
7. The proceeds of the Series 1996-A1 Certificates shall be used to
purchase the Equipment Notes in the principal amount specified below:
<PAGE>
4
Principal
Equipment Note Amount Maturity
-------------- ---------- --------
Series 1995 777 C $
Series 1994 747 B $
8. Each Owner Trustee, acting on behalf of its respective 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 to such Owner Trustee of the
following Aircraft:
<TABLE>
<CAPTION>
U.S.
Registration Manufacturer's
Aircraft Number Serial Number
-------- ------------ --------------
<S> <C> <C>
1 Boeing 777-222 N767UA 25393
1 Boeing 747-451 N106UA 26474
</TABLE>
9. The related Note Documents are as follows:
(a) Trust Indenture and Security Agreement (1995 777 C), dated as of
May 1, 1995, as supplemented by the Trust Indenture and Security
Agreement Supplement No. 1 (1995 777 C) dated May 31, 1995;
(b) Amended and Restated Trust Indenture and Mortgage (1995 777
C), dated as of January 1, 1996;
(c) Lease Agreement (1995 777 C), dated as of May 1, 1995, as
supplemented by Lease Supplement No. 1 (1995 777 C) dated May 31,
1995, and as amended by the First Amendment to Lease Agreement
dated February __, 1996;
(d) Owner Trustee's Purchase Agreement and Assignment (1995 777 C),
dated as of May 1, 1995;
(e) Participation Agreement (1995 777 C), dated as of May 1, 1995, as
amended by the First Amendment to Participation Agreement (1995
777 C) dated February __, 1996;
<PAGE>
5
(f) Trust Agreement (1995 777 C), dated as of May 1, 1995, as amended
by the First Amendment to Trust Agreement (1995 777 C) dated
February __, 1996;
(g) Lease Supplement (1995 777 C), dated the relevant Transfer Date;
(h) Trust Supplement (1995 777 C), dated the relevant Transfer Date;
(i) Redemption and Refinancing Agreement (1995 777 C), dated as of
January 1, 1996 and effective as of the Effective Date;
(j) Trust Indenture and Security Agreement (1994 747 B), dated as of
August 1, 1994, as supplemented by the Trust Indenture and
Security Agreement Supplement No. 1 (1994 747 B) dated August 1,
1994;
(k) Amended and Restated Trust Indenture and Mortgage (1994 747 B),
dated as of January 1, 1996;
(l) Lease Agreement (1994 747 B), dated as of August 1, 1994, as
supplemented by Lease Supplement No. 1 (1994 747 B), dated August
1, 1994, as amended by the First Amendment to Lease Agreement
(1994 747 B), dated February __, 1996;
(m) Owner Trustee's Purchase Agreement and Assignment (1994 747 B),
dated as of August 1, 1994;
(n) Participation Agreement (1994 747 B), dated as of August 1, 1994,
as amended by the First Amendment to Participation Agreement
(1994 747 B) dated February __, 1996;
(o) Trust Agreement (1994 747 B), dated as of August 1, 1994, as
amended by the First Amendment to Lease Agreement, dated January
31, 1995, and the Second Amendment to Trust Agreement (1994 747
B), dated February __, 1996.
(p) Lease Supplement (1994 747 B), dated the relevant Transfer Date;
(q) Trust Supplement (1994 747 B), dated the relevant Transfer Date;
and
(r) Redemption and Refinancing Agreement (1994 747 B), dated as of
January 1, 1996, and effective as of the Effective Date.
<PAGE>
6
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-1 or its equivalent by Moody's Investors Service, Inc. or at
least A-1 or its equivalent by Standard & Poor's Ratings Services, (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 $750,000,000 which banks or their
holding companies have a rating of A or its equivalent by Moody's Investors
Service or Standard & Poor's Ratings Services; 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 and (iv) repurchase agreements with any financial institution
having combined capital and surplus of at least $750,000,000 with any of
the obligations described in clauses (i) through (iii) 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.
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
<PAGE>
7
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
1996-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 1996-A1 PASS THROUGH TRUST
Pass Through
Certificate, Series 1996-A1
Issuance Date: ____________
Final Distribution Date: ________, ____
Evidencing A Fractional Undivided Interest In the 1996-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 1996-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. 1996-A1 thereto, dated as of January __, 1996 (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 1996-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
1996-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 1996-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 January
30 and July 30 (a "Regular Distribution Date"), commencing July 30, 1996, 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
<PAGE>
3
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>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
UNITED AIRLINES
1996-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 DRAFT
1/22/96
TRUST SUPPLEMENT NO. 1996-A2
DATED AS OF JANUARY 1, 1996
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 AIR LINES 1996-A2 Pass Through Trust
PASS THROUGH CERTIFICATES, SERIES 1996-A2
<PAGE>
TRUST SUPPLEMENT NO. 1996-A2
DATED AS OF JANUARY 1, 1996
Series 1996-A2 Pass Through Certificates
--------------------------
Table of Contents
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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....................................... 5
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......................... 6
</TABLE>
<PAGE>
This Trust Supplement No. 1996-A2, dated as of January 1, 1996 (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, each Owner Trustee, acting on behalf of its respective 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 each 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
"1996-A2 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1996-A2 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1996-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>
3
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 1996-A2" (hereinafter defined as the "Series
1996-A2 Certificates"). Each Certificate represents a Fractional Undivided
Interest in the 1996-A2 Trust created hereby. The terms and conditions
applicable to the Series 1996-A2 Certificates are as follows:
1. The aggregate principal amount of the Series 1996-A2 Certificates
that shall be authenticated under the Agreement (except for Series 1996-A2
Certificates authenticated and delivered pursuant to Sections 3.03, 3.04
and 3.05 of the Basic Agreement) upon their initial issuance is
$____________.
2. The Cut-off Date is March 31, 1996.
3. The Regular Distribution Dates with respect to any payment of
Scheduled Payments means each January 30 and July 30, commencing July 30,
1996, until payment of all of the Scheduled Payments to be made under the
Equipment Notes has been made.
4. 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).
5. The Series 1996-A2 Certificates shall be in the form attached
hereto as Exhibit A. The Series 1996-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.
6. The Scheduled Payments of principal shall be as set forth in
Exhibit C hereto.
7. The proceeds of the Series 1996-A2 Certificates shall be used to
purchase the Equipment Notes in the principal amount specified below:
<PAGE>
4
Principal
Equipment Note Amount Maturity
-------------- ---------- --------
Series 1995 777 C $
Series 1994 747 B $
8. Each Owner Trustee, acting on behalf of its respective 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 to such Owner Trustee of the
following Aircraft:
<TABLE>
<CAPTION>
U.S.
Registration Manufacturer's
Aircraft Number Serial Number
-------- ------------ --------------
<S> <C> <C>
1 Boeing 777-222 N767UA 25393
1 Boeing 747-451 N106UA 26474
</TABLE>
9. The related Note Documents are as follows:
(a) Trust Indenture and Security Agreement (1995 777 C), dated as of
May 1, 1995, as supplemented by the Trust Indenture and Security
Agreement Supplement No. 1 (1995 777 C) dated May 31, 1995;
(b) Amended and Restated Trust Indenture and Mortgage (1995 777 C),
dated as of January 1, 1996;
(c) Lease Agreement (1995 777 C), dated as of May 1, 1995, as
supplemented by Lease Supplement No. 1 (1995 777 C) dated May 31,
1995, and as amended by the First Amendment to Lease Agreement
dated February __, 1996;
(d) Owner Trustee's Purchase Agreement and Assignment (1995 777 C),
dated as of May 1, 1995;
(e) Participation Agreement (1995 777 C), dated as of May 1, 1995, as
amended by the First Amendment to Participation Agreement (1995
777 C) dated February __, 1996;
<PAGE>
5
(f) Trust Agreement (1995 777 C), dated as of May 1, 1995, as amended
by the First Amendment to Trust Agreement (1995 777 C) dated
February __, 1996;
(g) Lease Supplement (1995 777 C), dated the relevant Transfer Date;
(h) Trust Supplement (1995 777 C), dated the relevant Transfer Date;
(i) Redemption and Refinancing Agreement (1995 777 C), dated as of
January 1, 1996 and effective as of the Effective Date;
(j) Trust Indenture and Security Agreement (1994 747 B), dated as of
August 1, 1994, as supplemented by the Trust Indenture and
Security Agreement Supplement No. 1 (1994 747 B) dated August 1,
1994;
(k) Amended and Restated Trust Indenture and Mortgage (1994 747 B),
dated as of January 1, 1996;
(l) Lease Agreement (1994 747 B), dated as of August 1, 1994, as
supplemented by Lease Supplement No. 1 (1994 747 B), dated August
1, 1994, as amended by the First Amendment to Lease Agreement
(1994 747 B), dated February __, 1996;
(m) Owner Trustee's Purchase Agreement and Assignment (1994 747 B),
dated as of August 1, 1994;
(n) Participation Agreement (1994 747 B), dated as of August 1, 1994,
as amended by the First Amendment to Participation Agreement
(1994 747 B) dated February __, 1996;
(o) Trust Agreement (1994 747 B), dated as of August 1, 1994, as
amended by the First Amendment to Lease Agreement, dated January
31, 1995, and the Second Amendment to Trust Agreement (1994 747
B), dated February __, 1996.
(p) Lease Supplement (1994 747 B), dated the relevant Transfer Date;
(q) Trust Supplement (1994 747 B), dated the relevant Transfer Date;
and
(r) Redemption and Refinancing Agreement (1994 747 B), dated as of
January 1, 1996, and effective as of the Effective Date.
<PAGE>
6
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-1 or its equivalent by Moody's Investors Service, Inc. or at
least A-1 or its equivalent by Standard & Poor's Ratings Services, (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 $750,000,000 which banks or their
holding companies have a rating of A or its equivalent by Moody's Investors
Service or Standard & Poor's Ratings Services; 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 and (iv) repurchase agreements with any financial institution
having combined capital and surplus of at least $750,000,000 with any of
the obligations described in clauses (i) through (iii) 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.
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
<PAGE>
7
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
1996-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 1996-A2 PASS THROUGH TRUST
Pass Through
Certificate, Series 1996-A2
Issuance Date: ____________
Final Distribution Date: ________, ____
Evidencing A Fractional Undivided Interest In the 1996-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 1996-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. 1996-A2 thereto, dated as of January __, 1996 (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 1996-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
1996-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 1996-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 January
30 and July 30 (a "Regular Distribution Date"), commencing July 30, 1996, 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
<PAGE>
3
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>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
UNITED AIRLINES
1996-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>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(n)(1) Exhibit 4(b)(42)
<PAGE>
S&S DRAFT
1/27/96
===============================================
AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
(1995 777 C)
Dated as of January 1, 1996
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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 N767UA
United Air Lines, Inc.
Series 1995 777 C Certificates
===============================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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.................................. 19
2.03. Registrar and Paying Agent.................................... 20
2.04. Transfer and Exchange......................................... 20
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
3.08. Payments to Owner Trustee..................................... 29
ARTICLE 4 COVENANTS OF OWNER TRUSTEE.................................... 29
4.01. Covenants of Owner Trustee.................................... 29
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
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............................................. 34
6.03. Notice of Redemption to Holders............................... 34
6.04. Deposit of Redemption Price................................... 35
6.05. Certificates Payable on Redemption Date....................... 35
ARTICLE 7 MATTERS CONCERNING THE COMPANY................................ 35
7.01. Notice of Monies Held by the Indenture Trustee................ 35
7.02. Change in Registration........................................ 35
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........................ 41
8.03. Other Remedies Available to Indenture Trustee................. 41
8.04. Waiver of Owner Trustee....................................... 48
8.05. Waiver of Existing Defaults................................... 48
8.06. Control by Majority........................................... 48
8.07. Limitation on Suits by Holders................................ 49
8.08. Rights of Holders to Receive Payment.......................... 50
8.09. Indenture Trustee May File Proofs of Claim.................... 50
ARTICLE 9 INDENTURE TRUSTEE............................................. 50
9.01. Duties of Indenture Trustee................................... 50
9.02. Rights of Indenture Trustee................................... 50
9.03. Individual Rights of Indenture Trustee........................ 51
9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments................................................... 51
9.05. Notice of Defaults............................................ 52
9.06. Compensation and Indemnity.................................... 52
9.07. Replacement of Indenture Trustee.............................. 53
9.08. Successor Indenture Trustee, Agents by Merger, etc............ 54
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C>
9.09. Eligibility; Disqualification................................. 54
9.10. Trustee's Liens............................................... 54
9.11. Withholding Taxes; Information Reporting...................... 55
ARTICLE 10 SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS.................................. 55
10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations.................................... 55
10.02. Survival of Certain Obligations............................... 57
10.03. Monies to Be Held in Trust.................................... 57
10.04. Monies to Be Returned to Owner Trustee........................ 57
ARTICLE 11 AMENDMENTS AND WAIVERS........................................ 58
11.01. Amendments to this Indenture Without Consent of Holders....... 58
11.02. Amendments to this Indenture with Consent of Holders.......... 59
11.03. Revocation and Effect of Consents............................. 60
11.04. Notation on or Exchange of Certificates....................... 60
11.05. Indenture Trustee Protected................................... 60
11.06. Amendments, Waivers, etc. of Other Operative Documents........ 60
ARTICLE 12 MISCELLANEOUS................................................. 63
12.01. Notices....................................................... 63
12.02. [Reserved for Potential Future Use]........................... 65
12.03. [Reserved for Potential Future Use]........................... 65
12.04. Rules by Indenture Trustee and Agents......................... 65
12.05. Non-Business Days............................................. 65
12.06. GOVERNING LAW................................................. 66
12.07. No Recourse Against Others.................................... 66
12.08. Execution in Counterparts..................................... 66
ARTICLE 13 ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE................. 66
13.01. Actions to Be Taken upon Termination of Lease................. 66
SIGNATURES............................................................... 71
</TABLE>
Exhibit A-1 Form of Series 1995 777 C Installment Certificates
Exhibit A-2 Form of Series 1995 777 C Serial Certificates
Exhibit B Maturity Dates, Principal Amounts and Interest Rates of Series
1995 777 C Certificates
Exhibit B-1 Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 Issuance of Series 1995 777 C Certificates
<PAGE>
iv
Exhibit C Form of Supplement to the Trust Agreement and the
Amended and Restated Trust Indenture and Mortgage
<PAGE>
AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE (1995 777 C)
This AMENDED AND RESTATED TRUST INDENTURE AND MORTGAGE (1995 777 C), dated
as of January 1, 1996 and effective as of the Effective Date, between STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, 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 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;
WHEREAS, the Owner Trustee and the Indenture Trustee entered into that
certain Trust Indenture and Security Agreement (1995 777 C), dated as of May 1,
1995 (the "Original Indenture"), which Original Indenture was recorded with the
Federal Aviation Administration on May 31, 1995 and was assigned Conveyance No.
P02548;
WHEREAS, the parties desire by this Indenture, among other things, (i) to
amend and restate in its entirety the Original Indenture, (ii) to provide for
the issuance by the Owner Trustee of the Series 1995 777 C 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
<PAGE>
Indenture-2 (1995 777 C)
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 Indenture 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 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 Indenture 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 Indenture and
the Lease;
<PAGE>
Indenture-3 (1995 777 C)
(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; in each case 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
Indenture;
(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; and
(6) all proceeds of the foregoing.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest granted by this
Indenture 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
<PAGE>
Indenture-4 (1995 777 C)
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 and the EBO
Percentage 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 and otherwise
to exercise all rights of "Lessor" under said Section 19 (except with
respect to Section 19(b)(1)) with respect to the retention of the Aircraft
by the "Lessee" or the "Lessee's" renewal or purchase option, (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", (g) to exercise, to the extent necessary to enable it to exercise
its rights under Section 8.03(e)(i), the rights of the "Lessor" under
Section 21 of the Lease and (h) to approve appraisers, reports, filings,
opinions and other documents in each case with respect to matters relating
solely to the Owner Participant's tax position;
(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 parts (as such term is used in Section
5(e) of the Lease) pursuant to such Section 5(3) 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
<PAGE>
Indenture-5 (1995 777 C)
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) of the Participation Agreement, (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
such Section 10(b) and (d) to exercise all rights of the "Lessor" upon the
return of the Aircraft under Section 5 of the Lease; and
(iv) so long as no Indenture Event of Default shall have occurred and
be continuing, the Owner Trustee shall have the right, together with the
Indenture Trustee, to exercise the rights that the Lease specifically
confers on the "Lessor" and that are not otherwise reserved to the
Indenture Trustee in this paragraph (b);
(c) the leasehold interest granted to the Company by the Lease shall
not be subject to the security interest granted by this Indenture, and
nothing in this Indenture shall affect the rights of the 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 Indenture.
1. 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,
<PAGE>
Indenture-6 (1995 777 C)
all in accordance with and pursuant to the terms and provisions thereof, and the
Indenture Trustee, except as herein expressly provided, 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 herein expressly provided,
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.
2. 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 Indenture. 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 Indenture, 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 Indenture.
3. 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. The parties hereto
acknowledge that neither the Owner Trustee nor the Owner Participant shall have
any obligation as to any recording, filing, refiling or rerecording of any
documents or instruments in regard to maintaining the perfection of the security
interests created hereunder, in the Indenture Estate or any security interests
that may be claimed to
<PAGE>
Indenture-7 (1995 777 C)
have been created by the Lease or by the ownership interests of the Owner
Trustee in the Aircraft.
4. 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
Indenture, 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 Indenture,
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 Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(4) all references in this Indenture to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Indenture.
(b) For all purposes of this Indenture, the following capitalized
terms have the following respective meanings:
<PAGE>
Indenture-8 (1995 777 C)
"Actual Knowledge" shall have the meaning specified therefor in the
Lease.
"Affiliate" shall have the meaning specified therefor in the Lease.
"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.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement (1995 777 C), dated as of January 1, 1996, between State
Street and State Street Connecticut.
"Assumption Date" shall have the meaning set forth in Section 7.03.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of
1978, as amended from time to time, 11 U.S.C. (S)(S) 101 et seq.
"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 Indenture, including the Series 1995 777 C Certificates issued hereunder
substantially in the form of Exhibits A-1 and A-2 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.
"Company" means United Air Lines, Inc., a Delaware corporation, and,
subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
<PAGE>
Indenture-9 (1995 777 C)
"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.
"Default" shall have the meaning specified therefor in the Lease.
"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.
"Effective Date" shall have the meaning specified therefor in the
Lease.
"Enforcement Date" shall have the meaning specified therefor in
Section 8.03(e)(i).
"Engine" shall have the meaning specified therefor in the Lease.
"Event of Loss" shall have the meaning specified therefor in the
Lease.
"Excess Payment" shall have the meaning specified therefor in Section
2.09(c).
"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>
Indenture-10 (1995 777 C)
capacity or as Owner Trustee hereunder 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) if the Company has assumed the obligations of the Owner Trustee in respect
of the Certificates in accordance with Section 7.03 hereof and Section 8(l) of
the Participation Agreement, the amount payable as purchase price pursuant to
Section 9(b) or Section 19(b)(1) of the Lease, (vi) Transaction Expenses or
other amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (vii) the respective rights
of the Owner Trustee in its individual capacity or the Owner Participant to the
proceeds of the foregoing and (viii) any right to demand, collect or otherwise
receive and enforce the payment of any amount described in clauses (i) through
(vii) 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 First Security Bank of Utah, National
Association, a national banking association, and each other Person which may
from time to time be acting as Indenture Trustee in accordance with the
provisions of this Indenture.
<PAGE>
Indenture-11 (1995 777 C)
"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
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;
<PAGE>
Indenture-12 (1995 777 C)
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 January 30 and July 30, commencing
July 30, 1996.
"Lease" means (x) with respect to any time prior to the execution and
delivery of the Redemption and Refinancing Agreement, that certain Lease
Agreement (1995 777 C), dated as of May 1, 1995, between State Street
Connecticut (as successor to State Street), as lessor, and the Company, as
lessee, recorded by the FAA on May 31, 1995 and assigned Conveyance No. P02549,
and (y) at the time of the execution and delivery of the Redemption and
Refinancing Agreement and thereafter, such Lease Agreement (1995 777 C), as
amended by the First Amendment to Lease Agreement (1995 777 C), dated February
__, 1996, between State Street Connecticut (as successor to State Street), as
lessor, and the Company, as lessee, recorded by the FAA on February __, 1996 and
assigned Conveyance No. ______ , as such Lease Agreement may from time to time
be further supplemented, amended or modified in accordance with the terms
thereof and this Indenture. 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>
Indenture-13 (1995 777 C)
"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 Indenture, 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, the Trust Supplement, the Assignment and
Assumption Agreement 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.
"Outstanding", when used with respect to Certificates, means, as of
the date of determination, all Certificates theretofore executed and delivered
under this Indenture 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,
<PAGE>
Indenture-14 (1995 777 C)
notice of such redemption has been duly given pursuant to this Indenture 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 Indenture;
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 unless, in case
of the Owner Trustee, the Owner Participant or any Affiliate thereof, all of the
Certificates are owned by or pledged to such Persons, 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(h) of the
Participation Agreement, its assigns.
"Owner Trustee" means (x) with respect to any time prior to the
execution and delivery of the Assignment and Assumption Agreement, State Street,
and (y) at the time of the execution and delivery of the Assignment and
Assumption Agreement and thereafter, State Street Connecticut, 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 Bill of Sale" shall have the meaning specified
therefor in the Lease.
"Owner Trustee's FAA Bill of Sale" shall have the meaning specified
therefor in the Lease.
"Owner Trustee's Purchase Agreement" shall have the meaning specified
therefor in the Lease.
<PAGE>
Indenture-15 (1995 777 C)
"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 and as supplemented by
each of two Pass Through Trust Supplements Nos. 1996-A1 and 1996-A2, each dated
as of January 1, 1996, 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-1 or its equivalent by
Moody's Investors Service, Inc. or at least A-1 or its equivalent by Standard &
Poor's Ratings Services, (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
$750,000,000 which banks or their holding companies have a rating of A or its
equivalent by Moody's Investors Service or Standard & Poor's Ratings Services;
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 and (iv) repurchase agreements with any financial
institution having combined capital and surplus of at least $750,000,000 with
any of the obligations described in clauses (i) through (iii) as collateral.
<PAGE>
Indenture-16 (1995 777 C)
"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.
"Premium" or "premium" shall have the meaning specified in Section
6.01(b).
"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 1995 777 C1
Certificate
Series 1995 777 C2
Certificate
</TABLE>
"Purchase Agreement" 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 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 6.02, as the case may be, as
specified in the notice delivered pursuant to Section 6.03.
"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 6.02, as the case may be.
"Refinancing Amount" shall have the meaning specified therefor in the
Redemption and Refinancing Agreement.
<PAGE>
Indenture-17 (1995 777 C)
"Refinancing Date" shall mean the date designated by the Company 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" means, with respect to the Owner Trustee or the
Indenture Trustee, 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.
"Serial Certificate" shall mean a Certificate substantially in the
form of Exhibit A-2, should any such Certificate be issued hereunder.
"Series 1995 777 C Certificate" means any Certificate issued by the
Owner Trustee under this Indenture substantially in the form of Exhibit A-1 or
A-2, and any and all of the Series 1995 777 C Certificates issued in replacement
or exchange thereof in accordance with the provisions hereof.
<PAGE>
Indenture-18 (1995 777 C)
"State Street" means State Street Bank and Trust Company, a
Massachusetts trust company.
"State Street Connecticut" means State Street Bank and Trust Company
of Connecticut, National Association, a national banking association.
"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 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 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.
<PAGE>
Indenture-19 (1995 777 C)
"Trust Indenture and Mortgage" or "this Indenture" means this Amended
and Restated Trust Indenture and Mortgage (1995 777 C), as the same may from
time to time be supplemented, amended or modified.
"Trust Office" shall mean the principal corporate trust office of the
Owner Trustee located at 750 Main Street, Suite 1114, Hartford, Connecticut
06103, 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
Indenture in the form of Exhibit C.
"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 C 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 shall bear interest
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
<PAGE>
Indenture-20 (1995 777 C)
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 Indenture. 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 Indenture.
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
<PAGE>
Indenture-21 (1995 777 C)
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
Indenture, 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
<PAGE>
Indenture-22 (1995 777 C)
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 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
<PAGE>
Indenture-23 (1995 777 C)
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:
(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,
<PAGE>
Indenture-24 (1995 777 C)
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.
Section 2.09. Payment from Indenture Estate Only; Non-Recourse
Obligations. (a) All amounts payable by the Indenture Trustee and the Owner
Trustee under the Certificates and this Indenture 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 Indenture or, except as expressly provided in this
Indenture in the case of the Owner Trustee and the Indenture Trustee, for any
liability thereunder or hereunder.
(b) State Street Connecticut is entering into this Indenture solely
as Owner Trustee under the Trust Agreement and not in its individual capacity,
and in no case whatsoever shall State Street Connecticut (or any entity acting
as successor trustee under the
<PAGE>
Indenture-25 (1995 777 C)
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 Connecticut 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 Connecticut shall be released
from all further duties and obligations hereunder, without prejudice to any
claims against State Street Connecticut or such predecessor Owner Trustee for
any default by State Street Connecticut or such predecessor Owner Trustee,
respectively, in the performance of its obligations hereunder prior to such
appointment.
(c) 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, (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 the
Holders or to the Indenture Trustee, directly or indirectly, to make payment on
account of the principal of, premium, if any, or interest on the Certificates
and (iii) any Holders or the Indenture Trustee actually receives any Excess
Payment (as hereinafter defined) that reflects any payment by the Owner Trustee,
in its individual capacity, or the Owner Participant on account of (ii) above,
then such Holders 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 2.09(c),
"Excess Payment" means the amount by which such payment exceeds the amount which
would have been received by the Holders of the Certificates 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 (ii)
above. Nothing contained in this Section 2.09(c) shall prevent the holder of a
Certificate 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 the Participation Agreement
or this Indenture (and any exhibits or annexes hereto or thereto).
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 the Refinancing
Amount. Each Certificate shall (except for those issued pursuant to Section
2.04 or 2.06) be dated the date of its issuance.
<PAGE>
Indenture-26 (1995 777 C)
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 of 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;
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Indenture-27 (1995 777 C)
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, to the extent received by the Indenture Trustee from the Company as
Supplemental Rent, 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 Trust Agreement.
Section 3.04. Application of Certain Payments in Case of Requisition
or Event of Loss. Except as otherwise provided in Section 3.02 (but solely with
respect to a redemption or purchase of all of the Outstanding Certificates) or
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 Default or 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.
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
<PAGE>
Indenture-28 (1995 777 C)
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 6.01(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 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
<PAGE>
Indenture-29 (1995 777 C)
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 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 Indenture, 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
Indenture, 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 Indenture 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 (to the extent such
amounts are not obligations of the Company under the Operative
Documents) 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 payments or amounts
remaining thereafter shall be distributed to the Owner Trustee.
Section 3.08. Payments to Owner Trustee. Any amounts distributed
hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the
Owner Trustee by wire transfer of funds of the type received by the Indenture
Trustee at such office and to such account or accounts of such entity or
entities as shall be designated by notice from the Owner Trustee to the
Indenture Trustee from time to time. The Owner Trustee hereby notifies the
Indenture Trustee that unless and until the Indenture Trustee receives notice to
the contrary from the Owner Trustee, all amounts to be distributed to the Owner
Trustee pursuant to this Indenture shall be distributed by wire transfer of
funds of the type received
<PAGE>
Indenture-30 (1995 777 C)
by the Indenture Trustee to the Owner Participant's account specified in
Schedule I to the Participation Agreement.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of Owner Trustee. The Owner Trustee hereby
covenants and agrees that:
(i) 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;
(ii) in the event an officer in the Trust Office of the Owner Trustee
shall have Actual Knowledge of an Indenture Event of Default, the Owner
Trustee will give prompt written notice of such Indenture Event of Default
to the Indenture Trustee;
(iii) 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
(iv) 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:
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Indenture-31 (1995 777 C)
(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 Indenture 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 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
<PAGE>
Indenture-32 (1995 777 C)
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, the Owner Participant
elects to receive payment for such Engine from the Company pursuant to Section
10(b) of the Lease, 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 6.01(a)(ii) and
applied to principal in accordance with Section 3.03) by _________________ shall
be redeemed on such Redemption Date. 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 6.01(a)(ii) and applied to interest in
accordance with Section 3.03); 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.
<PAGE>
Indenture-33 (1995 777 C)
(b) If (i) the Lease shall be terminated by the Company at its option
pursuant to Section 9(a) of the Lease or upon the purchase of the Aircraft by
the Company at its option on July 30, 2008, July 30, 2010, or July 30, 2012
pursuant to Section 9(b) of the Lease or on the EBO Date pursuant to Section
19(b)(1) 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(l) 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 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) 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 Indenture 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(a) thereof, the third Business
<PAGE>
Indenture-34 (1995 777 C)
Day following the Lease Termination Date, if any, or, in the case of purchase of
the Aircraft by the Company pursuant to Section 9(b) or 19(b)(1) of the Lease,
the date specified in the notice given by the Company pursuant to Section
9(a)(3) of the Lease or the 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 shall be redeemed if the Company shall have requested
the Owner Trustee and the Owner Participant to effect a redemption thereof
pursuant to Section 17 or 20 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 or 20 of the Participation Agreement
shall have been satisfied. In such event, each Outstanding Certificate shall 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
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)(i) related to the Company's exercise of its option pursuant to Section
9(a)(2) 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.
<PAGE>
Indenture-35 (1995 777 C)
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 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.
<PAGE>
Indenture-36 (1995 777 C)
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Notice of Monies Held by the Indenture Trustee. In the
event 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, shall remain unclaimed for two years after the due date for such
payment, the Indenture Trustee shall give notice thereof to the Company and the
Owner Trustee.
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 and 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
<PAGE>
Indenture-37 (1995 777 C)
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 Indenture (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 Indenture, respectively,
which laws, however, do not in the opinion of such counsel make the
remedies provided in the Lease and this Indenture, 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 Indenture in respect of
the Certificates in connection with the purchase by the Company of the Aircraft
pursuant to Section 8(l) of the Participation Agreement and, if on or prior to
the EBO Date or the date specified in the notice given by the Company pursuant
to Section 9(a)(3) of the Lease, as the case may be (each such date being an
"Assumption Date"):
(a) the Company shall have delivered to the Indenture Trustee a
certificate, dated the Assumption 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)(1) 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 Indenture 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 Assumption Date, of a Responsible Company Officer to such effect;
(c) the Indenture Trustee shall have received, on or prior to the
Assumption Date, evidence of all filings, recordings and other action
referred to in the Opinion or Opinions of Counsel referred to below;
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Indenture-38 (1995 777 C)
(d) the Indenture Trustee shall have received an Opinion or Opinions of
Counsel for the Company, dated the Assumption Date, which without unusual
qualification shall be to the effect that, after giving effect to the
indenture supplement referred to below:
(i) this Indenture 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 Indenture, which
laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical
realization of the rights and benefits provided for in this Indenture;
(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 Indenture 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 Assumption 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 Assumption Date, the Owner Trustee and the Owner Participant
shall be released from all of its obligations under this Indenture, the
Certificates and the other Operative Documents (other than any obligations or
liabilities of the Owner Trustee in its individual capacity incurred on or prior
to the Assumption Date or arising out of or based upon events occurring on or
prior to the Assumption Date, which obligations and liabilities shall remain the
sole
<PAGE>
Indenture-39 (1995 777 C)
responsibility of the Owner Trustee) and the Indenture Trustee shall execute and
deliver such agreements, documents and instruments as either the Owner Trustee
or the Owner Participant shall reasonably request to evidence such release and
discharge.
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.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following events
shall constitute "Indenture Events of Default" under this Indenture (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 to the Indenture Trustee 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;
(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 clause (i) of
Article 4 hereof or Section 8(b) or 8(g) 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 contained in Section 8(b) or 8(g)
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 11.01 of the Trust Agreement or by 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;
<PAGE>
Indenture-40 (1995 777 C)
(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 Indenture 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 Indenture and such failure is in fact cured within a further
period of 60 days;
(d) any 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;
(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;
<PAGE>
Indenture-41 (1995 777 C)
(f) either the Trust 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; 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 60 days after the earlier of the entering of any such order or the
approval of any such petition.
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; provided that the Certificates will automatically become immediately
due and payable without any action of the Indenture Trustee or of any Holder in
the case of an Indenture Event of Default under Section 8.01(f) or (g). 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 Indenture have been cured or
waived except
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Indenture-42 (1995 777 C)
nonpayment of principal of, or interest on, the Certificates that has become due
solely because of such acceleration.
Any acceleration pursuant to this Section 8.02 shall be automatically
rescinded in the event that the Owner Trustee or the Owner Participant, as the
case may be, shall have cured, in accordance with Section 8.03(e)(i), the
Indenture Event of Default that resulted in 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 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, the Holder or Holders of any Certificates or
any interest therein, the Owner Trustee and the Owner
<PAGE>
Indenture-43 (1995 777 C)
Participant 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 Indenture, 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
<PAGE>
Indenture-44 (1995 777 C)
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 Indenture 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 Indenture, 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 Indenture 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>
Indenture-45 (1995 777 C)
secured by the Lien created under this Indenture 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 that is not also 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, at any time prior
to the 11th day subsequent to the date on which the Indenture Trustee shall have
given written notice to the Owner Trustee and the Owner Participant of the date
on or after which the Indenture Trustee may commence the exercise of any remedy
described in this Indenture, taking into account the restrictions governing such
exercise (the date specified in such notice being the "Enforcement Date"), (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
Article 8 prior to the occurrence of such date), an amount equal to the
Installment Payment Amounts and interest on the Certificates due on the
Installment Payment Date on which such Basic Rent became due, 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 Company'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. It is
understood and agreed that the Owner Trustee or the Owner Participant may,
pursuant to the preceding sentence, exercise the rights specified in such
sentence with respect to Indenture Events of Default under Section 8.01(a) that
result from the failure of the Company to make any payment of Basic Rent or
Supplemental Rent. 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 11th day subsequent to the Enforcement Date (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
Article 8 prior to the occurrence of such 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
<PAGE>
Indenture-46 (1995 777 C)
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 Company'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. Notwithstanding the foregoing, no remedy available to the
Indenture Trustee hereunder may be consummated on or prior to the date that is
twenty days after the Enforcement Date if the result of such consummation would
be to restrict the rights of the Owner Trustee and the Owner Participant to
remedy Lease Events of Default as set forth in this Section 8.03(e)(i). 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 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, 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
<PAGE>
Indenture-47 (1995 777 C)
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 Indenture to the contrary notwithstanding the
Indenture Trustee shall not be entitled to exercise any remedy hereunder to
foreclose the lien of this Indenture 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 has given
the prior written notice of the Enforcement Date as contemplated by Section
8.01(e)(i) and 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 of the Lease to take possession and/or sell 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. References in this subsection (iii) to particular sections of
the Bankruptcy Code as in effect on the date of
<PAGE>
Indenture-48 (1995 777 C)
the amendment and restatement of this Indenture shall include any substantially
similar successor provisions.
(f) Notwithstanding any provision of this Indenture 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 Indenture 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 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 Indenture, all benefit and advantage of any such law or laws,
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Indenture-49 (1995 777 C)
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 Indenture 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 an Indenture
Default or Indenture Event of Default (i) 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
Indenture. However, the Indenture Trustee may refuse to follow any direction
that conflicts with law or this Indenture, 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
<PAGE>
Indenture-50 (1995 777 C)
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture 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 Indenture or thereunder only if:
(1) the Holder gives to the Indenture Trustee written notice of a
continuing Indenture Event of Default under this Indenture;
(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 Indenture 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 Indenture 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.
<PAGE>
Indenture-51 (1995 777 C)
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.
(c) As promptly as possible following, and in any event within two
Business Days of notice or actual knowledge of, any failure of the Company to
make any payment of Basic Rent under the Lease when the same shall become due,
the Indenture Trustee shall provide the notice contemplated by Section
8.03(e)(i).
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.
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Indenture-52 (1995 777 C)
(e) If an Indenture Event of Default under this Indenture has occurred
and is continuing, the Indenture Trustee shall exercise its rights and powers
under this Indenture, 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 or Lease Default of the type described in Section 14(a), 14(b),
14(h) or 14(i) of the Lease 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
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Indenture-53 (1995 777 C)
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 Indenture 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 Indenture. 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 Indenture 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. The Indenture Trustee
shall be entitled to reasonable compensation, including expenses and
disbursements, for all services rendered hereunder and shall have a priority
claim on the Indenture Estate for the payment of such compensation, to the
extent that such compensation shall not be paid by the Company, and shall have
the right to use or apply any monies held by it hereunder in the Indenture
Estate, except those held in trust to pay the principal of, premium, if any, or
interest on the Certificates, toward such payments. The Indenture Trustee
agrees that it shall have no right against the Holders, the Owner Trustee or the
Owner Participant for any fee as compensation for its services as trustee under
this Indenture.
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:
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Indenture-54 (1995 777 C)
(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.
(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
Indenture. 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)(1)
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
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Indenture-55 (1995 777 C)
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 Indenture 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 Indenture.
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
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Indenture-56 (1995 777 C)
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.
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 Indenture 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 of the Owner Trustee, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture 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
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Indenture-57 (1995 777 C)
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(h) or
14(i) 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
Indenture 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;
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Indenture-58 (1995 777 C)
(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 Indenture 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 and 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 Indenture, 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 Indenture 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;
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Indenture-59 (1995 777 C)
(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 Indenture or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subject to the lien of this Indenture or to subject to the lien of this
Indenture 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 Indenture 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 Indenture 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 Indenture 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
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Indenture-60 (1995 777 C)
(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 Indenture except such as are permitted by
this Indenture, or deprive any Holder of the benefit of the Lien on the
Indenture Estate created by this Indenture; 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 Indenture or of
certain defaults hereunder or their consequences) provided for in this
Indenture; or
(5) make any change in Section 8.05 or 8.08 or this 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.
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Indenture-61 (1995 777 C)
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 (in all cases, 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: 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 this 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) (in each case,
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,
Section 9 (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 Lessor's rights
thereunder), Section 13 (except in the case of an assignment by 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),
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Indenture-62 (1995 777 C)
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 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: Section
7 (insofar as such Section 7 relates to the Indenture Trustee and the
Holders), Section 8, Section 9(b), Section 9(c), 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
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Indenture-63 (1995 777 C)
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 Indenture which shall
not be inconsistent with the provisions of this Indenture, provided the
making of any such other provision shall not adversely affect the interests
of the Holders.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease or the Participation
Agreement, whether effected pursuant to subsection (a) or subsection (b) of this
Section 11.06 and anything in such subsections or elsewhere in this Indenture 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 (iv) 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 (iv) 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, 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 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
<PAGE>
Indenture-64 (1995 777 C)
to the Indenture Trustee for its own account or the account of the Holders
(subject in any event to clause (iv) 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 (iv) 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(m) of the Participation Agreement, and except as
provided in the Lease as originally executed.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically provided
for herein, all notices required under the terms and provisions of this
Indenture 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) 952-7117
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Telecopier: (708) 952-7117
<PAGE>
Indenture-65 (1995 777 C)
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 of Connecticut,
National Association
750 Main Street
Suite 1114
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Telecopier: (203) 244-1899
if to the Owner Participant, to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Attention: ----------------------
Telecopier: ----------------------
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Lawrence J. Gannon, Esq.
Telecopier: (212) 354-8113
(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.
<PAGE>
Indenture-66 (1995 777 C)
(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 INDENTURE 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 Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by
<PAGE>
Indenture-67 (1995 777 C)
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 Indenture 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(a)(2) 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,
(b) the purchase of the Aircraft by the Company at its option pursuant
to Section 19(b)(1) of the Lease on the EBO Date or pursuant to Section
9(b) of the Lease on the date specified in the notice given by the Company
pursuant to Section 9(a)(3), 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(l) 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,
(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,
(d) the satisfaction, discharge, defeasance and termination of
obligations under this Indenture 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,
<PAGE>
Indenture-68 (1995 777 C)
the Lien of this Indenture on the Indenture Estate, in the case of (a), (b), (c)
or (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>
Indenture-69 (1995 777 C)
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee have
caused this Amended and Restated Trust Indenture and Mortgage to be duly
executed by their respective officers thereunto duly authorized.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, 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
Amended and Restated
Trust Indenture and
Mortgage
Form of Series 1995 777 C Installment Certificates
--------------------------------------------------
$_______________ (Original Principal Amount)
SERIES 1995 777 C CERTIFICATE
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 C)
Dated as of May 1, 1995
Issued in connection with Aircraft N767UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1996 MATURITY DATE
-------------
_______ ,____
INTEREST RATE PER ANNUM: __%
State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity, but solely as owner trustee (the
"Owner Trustee") under that certain Trust Agreement (1995 777 C), 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 amended
and 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
First Security Bank of Utah, National Association, 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
commencing ________, _____ and ending on the date when the principal amount
hereof shall have been paid in full plus interest at the Interest Rate Per Annum
specified above on the Original Principal Amount specified above from time to
time outstanding on each January 30 and July 30. All amounts payable by the
Owner Trustee hereunder and under the Amended and Restated Trust Indenture and
Mortgage (1995 777 C), dated as of January 1, 1996 (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 between the
<PAGE>
2
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 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 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
<PAGE>
3
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 Percentage for such Installment Payment Date as specified on
Exhibit B-1 thereto (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 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
<PAGE>
4
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
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.
<PAGE>
5
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 OF
CONNECTICUT, NATIONAL ASSOCIATION, 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
<PAGE>
Exhibit A-2 to
Amended and Restated
Trust Indenture and
Mortgage
Form of Series 1995 777 C Serial Certificates
---------------------------------------------
$_________ (Original Principal Amount) No. _____
SERIES 1995 777 C CERTIFICATE
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1995 777 C)
Dated as of May 1, 1995
Issued in connection with Aircraft N767UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1996 MATURITY DATE
-------------
_______ , ____
INTEREST RATE PER ANNUM: ____%
State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity, but solely as owner trustee (the
"Owner Trustee") under that certain Trust Agreement (1995 777 C), 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 First Security Bank
of Utah, National Association, or registered assigns the principal sum in
dollars equal to the Original Principal Amount specified above on the Maturity
Date specified above from time to time outstanding in respect of the period
commencing _________, ____ and ending on the date when the principal amount
hereof shall have been paid in full, payable on each January 30 and July 30 of
each year, commencing _________, 1996. All amounts payable by the Owner Trustee
hereunder and under the Amended and Restated Trust Indenture and
<PAGE>
2
Mortgage (1995 777 C), dated as of January 1, 1996 (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 between 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 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
<PAGE>
3
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, 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 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
<PAGE>
4
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
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.
<PAGE>
5
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.
<PAGE>
6
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 OF
CONNECTICUT, NATIONAL ASSOCIATION, 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 or signatory
<PAGE>
Exhibit B to
Amended and Restated
Trust Indenture and
Mortgage
MATURITY DATES, PRINCIPAL AMOUNTS AND INTEREST
----------------------------------------------
RATES OF SERIES 1995 777 C CERTIFICATES
---------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL INTEREST RATE
DATE AMOUNT PER ANNUM
-------- --------- --------------
<S> <C> <C> <C>
Series 1995 777 C1 $ ___%
Series 1995 777 C2 $ ___%
</TABLE>
<PAGE>
Exhibit B-1 to
Amended and Restated
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 ________% $
</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 %
</TABLE>
<PAGE>
Exhibit B-2 to
Amended and
Restated
Trust Indenture and
Mortgage
Issuance of Series 1995 777 C Certificates
------------------------------------------
The Series 1995 777 C 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:
1996-A1 Trust:
___% Certificate due _____, ____
1996-A2 Trust:
___% Certificate due _____, ____
<PAGE>
[Trust Indenture and Mortgage (1995 777 C)]
Exhibit C to
Amended and Restated
Trust Indenture and
Mortgage
SUPPLEMENT TO THE TRUST AGREEMENT AND
THE AMENDED AND RESTATED TRUST INDENTURE AND MORTGAGE
(1995 777 C)
This SUPPLEMENT TO THE TRUST AGREEMENT AND THE AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE (1995 777 C), dated as of January 1, 1996 (herein
called the "Trust Supplement") of STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as
Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1995 777 C), 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
Indenture referred to below used herein as therein defined) included in the
property covered by the Trust Agreement;
WHEREAS, State Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee (herein called the "Owner Trustee"), and First
Security Bank of Utah, National Association, as Indenture Trustee (herein called
the "Original Indenture Trustee"), have entered into that certain Trust
Indenture and Security Agreement (1995 777 C), dated as of May 1, 1995 (the
"Original Trust Indenture"), which Original Trust Indenture was recorded with
the Federal Aviation Administration on May 31, 1995 under Conveyance No. P02548,
as amended and restated by the Amended and Restated Trust Indenture and Mortgage
(1995 777 C), dated as of January 1, 1996 (the "Indenture"), which 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 the Indenture relates to the
Airframe and Engines described below, and a counterpart of the Indenture is
attached hereto and made a part hereof and this Trust Supplement, together with
such counterpart of the
<PAGE>
C-2
[Trust Indenture and Mortgage (1995 777 C)]
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 Indenture over the Indenture Estate
includes the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
- ------------ ----- ------ -------------
<S> <C> <C> <C>
The Boeing Company 777-222 N767UA 26918
</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.
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 PW4077 P777020
Pratt & Whitney PW4077 P777024
</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 Indenture and hereby, the Owner Trustee hereby confirms that the Lien of
the Indenture over the Indenture Estate includes the Lease Supplement of even
date herewith covering the property described above.
<PAGE>
C-3
[Trust Indenture and Mortgage (1995 777 C)]
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 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 Indenture.
This Trust Supplement shall be construed as Supplemental to the
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Indenture are each hereby incorporated by reference
herein and each is hereby ratified, approved and confirmed.
* * *
<PAGE>
[Trust Indenture and Mortgage (1995 777 C)]
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 OF
CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner Trustee
By:_____________________________________
Title:
<PAGE>
S&S DRAFT
1/27/96
===============================================================================
AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
(1994 747 B)
Dated as of January 1, 1996
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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 747-451 Aircraft N106UA
United Air Lines, Inc.
Series 1994 747 B Certificates
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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............................. 21
2.04. Transfer and Exchange.................................. 22
2.05. Holder Lists; Ownership of Certificates................ 22
2.06. Mutilated, Destroyed, Lost or Stolen Certificates...... 23
2.07. Cancellation........................................... 23
2.08. Payment on Certificates; Defaulted Principal
and Interest.......................................... 23
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
</TABLE>
<PAGE>
ii
ARTICLE 5 DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE.................................... 31
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.................. 35
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.............................. 50
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.............................. 52
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............................... 54
9.07. Replacement of Indenture Trustee......................... 55
9.08. Successor Indenture Trustee, Agents by
Merger, etc............................................. 56
<PAGE>
iii
<TABLE>
<S> <C>
9.09. Eligibility; Disqualification............................ 57
9.10. Trustee's Liens.......................................... 57
9.11. Withholding Taxes; Information Reporting................. 57
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.................. 60
ARTICLE 11 AMENDMENTS AND WAIVERS................................... 60
11.01. Amendments to this Indenture Without
Consent of Holders..................................... 60
11.02. Amendments to this Indenture 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............................. 63
11.06. Amendments, Waivers, etc. of Other
Operative Documents.................................... 63
ARTICLE 12 MISCELLANEOUS............................................ 66
12.01. Notices................................................. 66
12.02. [Reserved for Potential Future Use]..................... 68
12.03. [Reserved for Potential Future Use]..................... 68
12.04. Rules by Indenture Trustee and Agents................... 68
12.05. Non-Business Days....................................... 68
12.06. GOVERNING LAW........................................... 68
12.07. No Recourse Against Others.............................. 68
12.08. Execution in Counterparts............................... 69
ARTICLE 13 ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE............ 69
13.01. Actions to Be Taken upon Termination of Lease........... 69
SIGNATURES........................................................... 71
</TABLE>
<PAGE>
iv
Exhibit A-1 Form of Series 1994 747 B Installment Certificates
Exhibit A-2 Form of Series 1994 747 B Serial Certificates
Exhibit B Maturity Dates, Principal Amounts and Interest Rates of
Series 1994 747 B Certificates
Exhibit B-1 Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 Issuance of Series 1994 747 B Certificates
Exhibit C Form of Supplement to the Trust Agreement and Amended and
Restated Trust Indenture and Mortgage
<PAGE>
AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE (1994 747 B)
This AMENDED AND RESTATED TRUST INDENTURE AND MORTGAGE (1994 747 B), dated
as of January 1, 1996 and effective as of the Effective Date, between STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, 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 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;
WHEREAS, the Owner Trustee and the Indenture Trustee entered into that
certain Trust Indenture and Security Agreement (1994 747 B), dated as of August
1, 1994 (the "Original Indenture"), which Original Indenture was recorded with
the Federal Aviation Administration on August 8, 1994 and was assigned
Conveyance No. Y39808;
WHEREAS, the parties desire by this Indenture, among other things, (i) to
amend and restate in its entirety the Original Indenture, (ii) to provide for
the issuance by the Owner Trustee of the Series 1994 747 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 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
<PAGE>
Indenture-2 (1994 747 B)
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 Indenture 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 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 Indenture 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 Indenture and
the Lease;
<PAGE>
Indenture-3 (1994 747 B)
(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; in each case 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
Indenture;
(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; and
(6) all proceeds of the foregoing.
Notwithstanding the foregoing provisions:
(a) there shall be excluded from the security interest granted by this
Indenture 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
<PAGE>
Indenture-4 (1994 747 B)
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, Supplemental Rent (except
to the extent such Supplemental Rent relates to premium payable on the
Certificates) and the percentages relating to Stipulated Loss Value and
Termination Value and the EBO Percentage 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), 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 Parts 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
<PAGE>
Indenture-5 (1994 747 B)
Agreement, (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 such Section 10(b), (d) the right to exercise all rights of
the "Lessor" upon the return of the Aircraft under Section 5 of the Lease,
and (e) the right to exercise all rights of the Lessor under Section 19 of
the Lease (except with respect to Section 19(b)(1)) with respect to the
retention by the Company of the Aircraft or the exercise by the Company of
the Company''s renewal and purchase options;
(c) the leasehold interest granted to the Company by the Lease shall
not be subject to the security interest granted by this Indenture, and
nothing in this Indenture shall affect the rights of the 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.
[RIDER 5B OPEN]
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 Indenture.
1. The Owner Trustee agrees that this Indenture 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 Indenture and granted to
the Indenture Trustee hereunder in the Indenture Estate other than in the
Aircraft attached upon the delivery of the Original Indenture.
<PAGE>
Indenture-6 (1994 747 B)
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 Indenture. 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 Indenture, 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 Indenture 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
<PAGE>
Indenture-7 (1994 747 B)
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
Indenture, 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 Indenture,
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 Indenture as a whole and not to any particular
Article, Section or other subdivision; and
<PAGE>
Indenture-8 (1994 747 B)
(4) all references in this Indenture to Articles, Sections and
Exhibits refer to Articles, Sections and Exhibits of this Indenture.
(b) For all purposes of this Indenture, the following capitalized
terms have the following respective meanings:
"Actual Knowledge" shall have the meaning specified therefor in the
Lease.
"Affiliate" shall have the meaning specified therefor in the Lease.
"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" means the United States Bankruptcy Reform Act of
1978, as amended from time to time, 11 U.S.C. (S)(S) 101 et seq.
"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 Indenture, including the Series 1994 747 B Certificates issued hereunder
substantially in the form of Exhibits A-1 and A-2 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.
"Company" means United Air Lines, Inc., a Delaware corporation, and,
subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
<PAGE>
Indenture-9 (1994 747 B)
"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.
"Effective 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.
"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
<PAGE>
Indenture-10 (1994 747 B)
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) if the Company has assumed
the obligations of the Owner Trustee in respect of the Certificates in
accordance with Section 7.03 hereof and Section 8(l) of the Participation
Agreement, the amount payable as purchase price pursuant to Section 19(b) of the
Lease, (vi) Transaction Expenses or other amounts or expenses paid or payable
to, or for the benefit of, the Owner Participant pursuant to the Participation
Agreement, (vii) the respective rights of the Owner Trustee in its individual
capacity or the Owner Participant to the proceeds of the foregoing and (viii)
any right to demand, collect or otherwise receive and enforce the payment of any
amount described in clauses (i) through (vii) 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 Indenture Trustee Assignment and Assumption
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 Indenture Trustee Assignment and Assumption
Agreement and thereafter, First Security Bank of Utah, National Association, a
national banking association, and each other Person which may from time to time
be acting as Indenture Trustee in accordance with the provisions of this
Indenture.
"Indenture Trustee Assignment and Assumption Agreement" means the
Indenture Trustee Assignment and Assumption Agreement (1994 747 B), dated as of
January 1, 1996, between First Security Bank of Utah, National Association, and
State Street Bank and Trust Company of Connecticut, National Association.
<PAGE>
Indenture-11 (1994 747 B)
"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;
"Interest Payment Date" means each January 30 and July 30, commencing
July 30, 1996.
"Lease" means (x) with respect to any time prior to the execution and
delivery of the Redemption and Refinancing Agreement, that certain Lease
Agreement (1994 747 B), dated as of August 1, 1994, between the Owner Trustee,
as lessor, and the Company, as lessee, recorded by the FAA on August 8, 1994,
and assigned Conveyance No. Y39809, and (y) at the time of the execution and
delivery of the Redemption and Refinancing Agreement and thereafter, such Lease
Agreement (1994 747 B), as amended by the First Amendment to Lease Agreement
(1994 747 B), dated January 31, 1995, between the Owner Trustee, as
<PAGE>
Indenture-12 (1994 747 B)
lessor, and the Company, as lessee, recorded by the FAA on April 12, 1995 and
assigned Conveyance No. KK19947 [, and as further amended by the Second
Amendment to Lease Agreement (1994 747 B), dated February ___, 1996 and assigned
Conveyance No. _______] and as such Lease Agreement may from time to time be
further supplemented, amended or modified in accordance with the terms thereof
and this Indenture. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Default" shall have the meaning specified for the term
"Default" in 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 Section 10(a) of 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.
"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 Indenture, the Participation
Agreement, the Indenture Trustee Assignment and Assumption Agreement, the Owner
Trustee Assignment and Assumption 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
<PAGE>
Indenture-13 (1994 747 B)
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.
"Outstanding", when used with respect to Certificates, means, as of
the date of determination, all Certificates theretofore executed and delivered
under this Indenture 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 Indenture 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 Indenture;
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.
<PAGE>
Indenture-14 (1994 747 B)
"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 assigns.
"Owner Trustee" means (x) with respect to any time prior to the
execution and delivery of the Owner Trustee Assignment and Assumption Agreement,
First Security Bank of Utah, a national banking association, and (y) at the time
of the execution and delivery of the Owner Trustee Assignment and Assumption
Agreement and thereafter, State Street Bank and Trust Company of Connecticut,
National Association, a national banking association, 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 Assignment and Assumption Agreement" means the Owner
Trustee Assignment and Assumption Agreement (1994 747 B), dated as of January 1,
1996, between First Security Bank of Utah, National Association, and State
Street Bank and Trust Company of Connecticut, National Association.
"Owner Trustee's Bill of Sale" shall have the meaning specified
therefor in the Lease.
"Owner Trustee's FAA Bill of Sale" shall have the meaning specified
therefor in the Lease.
"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 and as supplemented by
each of two Pass Through
<PAGE>
Indenture-15 (1994 747 B)
Trust Supplements Nos. 1996 A1 and 1996 A2, each dated as of January 1, 1996, 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-1 or its equivalent by
Moody's Investors Service, Inc. or at least A-1 or its equivalent by Standard &
Poor's Ratings Services, (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
$750,000,000 which banks or their holding companies have a rating of A or its
equivalent by Moody's Investors Service or Standard & Poor's Ratings Services;
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 $750,000,000 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.
"Premium" or "premium" shall have the meaning specified in Section
6.01(b).
<PAGE>
Indenture-16 (1994 747 B)
"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 1994 747 B
Certificate
Series 1994 747 B
Certificate
</TABLE>
"Purchase Agreement" 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 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 6.02, as the case may be, as
specified in the notice delivered pursuant to Section 6.03.
"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 6.02, as the case may be.
"Refinancing Amount" shall have the meaning specified therefor in the
Redemption and Refinancing Agreement.
"Refinancing Date" shall mean the date designated by the Company 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.
<PAGE>
Indenture-17 (1994 747 B)
"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" means, with respect to the Owner Trustee or the
Indenture Trustee, 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.
"Serial Certificate" shall mean a Certificate substantially in the
form of Exhibit A-2, should any such Certificate be issued hereunder.
"Series 1994 747 B Certificate" means any Certificate issued by the
Owner Trustee under this Indenture substantially in the form of Exhibit A-1 or
A-2, and any and all of the Series 1994 747 B Certificates issued in replacement
or exchange thereof in accordance with the provisions hereof.
"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
<PAGE>
Indenture-18 (1994 747 B)
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 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 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 Indenture" means this Amended
and Restated Trust Indenture and Mortgage (1994 747 B), as the same may from
time to time be supplemented, amended or modified.
"Trust Office" shall mean the principal corporate trust office of the
Owner Trustee located at 750 Main Street, Suite 1114, Hartford, Connecticut
06103, 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
Indenture in the form of Exhibit C.
"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
<PAGE>
Indenture-19 (1994 747 B)
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 1994 747 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 shall bear interest
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 Indenture. 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.
<PAGE>
Indenture-20 (1994 747 B)
(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 Indenture.
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.
<PAGE>
Indenture-21 (1994 747 B)
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
Indenture, 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 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.
<PAGE>
Indenture-22 (1994 747 B)
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 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.
<PAGE>
Indenture-23 (1994 747 B)
(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 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.
<PAGE>
Indenture-24 (1994 747 B)
(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
on, 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 Indenture 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 Indenture or, except as expressly provided in this
Indenture in the case of the Owner Trustee and the Indenture Trustee, for any
liability thereunder.
State Street Bank and Trust Company of Connecticut, National
Association, is entering into this Indenture 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 of Connecticut, National Association
(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 of Connecticut, National
Association, 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 of Connecticut, National Association,
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against State Street Bank and Trust Company of
Connecticut, National Association, or such predecessor Owner Trustee for any
default by State Street Bank and Trust Company of Connecticut, National
Association, or such predecessor Owner Trustee, respectively, in the performance
of its obligations hereunder prior to such appointment.
<PAGE>
Indenture-25 (1994 747 B)
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 the Refinancing
Amount. Each Certificate shall (except for those issued pursuant to Section
2.04 or 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 Lease, Participation
Agreement and 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 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
<PAGE>
Indenture-26 (1994 747 B)
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 Default or 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.
<PAGE>
Indenture-27 (1994 747 B)
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, 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
<PAGE>
Indenture-28 (1994 747 B)
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 Indenture, 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
Indenture, 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 Indenture 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.
<PAGE>
Indenture-29 (1994 747 B)
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, to the extent either the Owner Trustee or the Indenture
Trustee has funds in the Trust Estate for such purposes;
(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 Office 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
<PAGE>
Indenture-30 (1994 747 B)
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 Indenture 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 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
<PAGE>
Indenture-31 (1994 747 B)
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)
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. 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 the EBO Date pursuant to Section 19(b)(1) 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 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 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) 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
<PAGE>
Indenture-32 (1994 747 B)
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 Indenture 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 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 shall 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 may have been satisfied.
In such event, each Outstanding Certificate shall 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
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
<PAGE>
Indenture-33 (1994 747 B)
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)(i) related to the Company'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.
<PAGE>
Indenture-34 (1994 747 B)
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 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:
<PAGE>
Indenture-35 (1994 747 B)
(a) such change in registration complies with the provisions of the
Participation Agreement and 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 Indenture (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 Indenture, respectively,
which laws, however, do not in the opinion of such counsel make the
remedies provided in the Lease and this Indenture, 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.
<PAGE>
Indenture-36 (1994 747 B)
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 Indenture 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 EBO Date:
(a) the Company shall have delivered to the Indenture Trustee a
certificate, dated the EBO 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 Indenture 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 EBO Date, of a Responsible Company Officer to such effect;
(c) the Indenture Trustee shall have received, on or prior to the EBO
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 EBO Date, which without unusual
qualification shall be to the effect that, after giving effect to the
indenture supplement referred to below:
(i) this Indenture 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 Indenture, which
laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical
realization of the rights and benefits provided for in this Indenture;
(ii) the Aircraft is duly registered in compliance with
applicable law;
<PAGE>
Indenture-37 (1994 747 B)
(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 Indenture 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 EBO 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 EBO 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 EBO Date or arising out of or
based upon events occurring on or prior to the EBO 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.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following events
shall constitute "Indenture Events of Default" under this Indenture (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
<PAGE>
Indenture-38 (1994 747 B)
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;
(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 clauses (i) and
(ii) of Article 4 hereof or Section 8(b) or 8(g) 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 contained in Section
8(b) or 8(g) 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 11.01 of the
Trust Agreement or by 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;
(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 Indenture 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 Indenture and such failure is in fact cured within a further
period of 90 days;
<PAGE>
Indenture-39 (1994 747 B)
(d) any 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 thereto, 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;
(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;
(f) either the Trust 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; 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 60 days after the earlier of the entering of any such order or the
approval of any such petition.
<PAGE>
Indenture-40 (1994 747 B)
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; provided that the Certificates will automatically become immediately
due and payable without any action of the Indenture Trustee or of any Holder in
the case of an Indenture Event of Default under Section 8.01(f) or (g). 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 Indenture 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 [8.02(a)], 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>
Indenture-41 (1994 747 B)
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, the Holder or Holders of any Certificates or any interest therein, the
Owner Trustee and the Owner Participant 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 Indenture, 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
<PAGE>
Indenture-42 (1994 747 B)
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, 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 Indenture 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 Indenture, 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
<PAGE>
Indenture-43 (1994 747 B)
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 Indenture 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 Indenture 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 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 Article 8
prior to the occurrence of such 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 Company'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
<PAGE>
Indenture-44 (1994 747 B)
(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 11th day subsequent 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 Article 8 prior to the occurrence of such
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
Company'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(g), but only said Section 15(g),
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 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, the Owner Trustee or the Owner Participant
may, at its option, give at least 30 days' prior irrevocable notice to the
<PAGE>
Indenture-45 (1994 747 B)
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 Indenture to the contrary notwithstanding the
Indenture Trustee shall not be entitled to exercise any remedy hereunder as a
result of an Indenture Event of Default which arises solely by reason of one or
more events or circumstances which constitute a 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 Sections 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
<PAGE>
Indenture-46 (1994 747 B)
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. 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 Indenture 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 Indenture 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 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
<PAGE>
Indenture-47 (1994 747 B)
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
Indenture, 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 Indenture 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 an Indenture
Default or Indenture Event of Default (i) 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
Indenture. However, the Indenture Trustee may refuse to follow any direction
that conflicts with law or this Indenture, 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
<PAGE>
Indenture-48 (1994 747 B)
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 Indenture 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 Indenture or thereunder only if:
(1) the Holder gives to the Indenture Trustee written notice of a
continuing Indenture Event of Default under this Indenture;
(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 Indenture 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 Indenture 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
<PAGE>
Indenture-49 (1994 747 B)
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.
(e) If an Indenture Event of Default under this Indenture has occurred
and is continuing, the Indenture Trustee shall exercise its rights and powers
under this Indenture,
<PAGE>
Indenture-50 (1994 747 B)
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 or Lease Default of the type described in Section 14(a), 14(b),
14(f) or 14(g) of the Lease 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
<PAGE>
Indenture-51 (1994 747 B)
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 Indenture 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 Indenture. 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 Indenture 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. The Indenture Trustee
shall be entitled to reasonable compensation, including expenses and
disbursements, for all services rendered hereunder and shall have a priority
claim on the Indenture Estate for the payment of such compensation, to the
extent that such compensation shall not be paid by the Company, and shall have
the right to use or apply any monies held by it hereunder in the Indenture
Estate, except those held in trust to pay the principal of, premium, if any, or
interest on the Certificates, toward such payments. The Indenture Trustee
agrees that it shall have no right against the Holders, the Owner Trustee or the
Owner Participant for any fee as compensation for its services as trustee under
this Indenture.
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;
<PAGE>
Indenture-52 (1994 747 B)
(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.
(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
Indenture. 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)(1)
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
<PAGE>
Indenture-53 (1994 747 B)
corporation, without any further act, shall be the successor Indenture Trustee
or Agent, as the case may be.
Section 9.09. Eligibility; Disqualification. This Indenture 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 Indenture.
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
<PAGE>
Indenture-54 (1994 747 B)
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.
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 Indenture 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 Indenture 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
<PAGE>
Indenture-55 (1994 747 B)
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;
(B) such deposit will not result in a breach or violation of, or
constitute an Indenture Default or Indenture Event of Default under, this
Indenture 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;
<PAGE>
Indenture-56 (1994 747 B)
(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 Indenture 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 and 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 Indenture, 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 Indenture 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;
<PAGE>
Indenture-57 (1994 747 B)
(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 Indenture or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subject to the lien of this Indenture or to subject to the lien of this
Indenture 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 Indenture 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 Indenture 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 Indenture 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>
Indenture-58 (1994 747 B)
(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 Indenture except such as are permitted by
this Indenture, or deprive any Holder of the benefit of the Lien on the
Indenture Estate created by this Indenture; 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 Indenture or of
certain defaults hereunder or their consequences) provided for in this
Indenture; or
(5) make any change in Section 8.05 or 8.08 or this 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>
Indenture-59 (1994 747 B)
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 (except with respect to the Participation Agreement) 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 Lessor's rights thereunder), Section 13
(except in the case of an assignment by 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
<PAGE>
Indenture-60 (1994 747 B)
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 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: Section
7 (insofar as such Section 7 relates to the Indenture Trustee and the
Holders), Section 8, Section 9(b), Section 9(c), 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
<PAGE>
Indenture-61 (1994 747 B)
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 Indenture which shall
not be inconsistent with the provisions of this Indenture, provided the
making of any such other provision shall not adversely affect the interests
of the Holders.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease or the Participation
Agreement, whether effected pursuant to subsection (a) or subsection (b) of this
Section 11.06 and anything in such subsections or elsewhere in this Indenture 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 (iv) 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 (iv) 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, 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 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
<PAGE>
Indenture-62 (1994 747 B)
to the Indenture Trustee for its own account or the account of the Holders
(subject in any event to clause (iv) 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 (iv) 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(s) of the Participation Agreement, and except as
provided in the Lease as originally executed.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically provided
for herein, all notices required under the terms and provisions of this
Indenture 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) 952-7117
or if by overnight courier, to:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Telecopier: (708) 952-7117
<PAGE>
Indenture-63 (1994 747 B)
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 of Connecticut,
National Association
750 Main Street
Suite 1114
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Telecopier: (203) 244-1899
if to the Owner Participant, to:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
Attention: ---------------------
Telecopier: --------------------
with a copy to:
Hunton & Williams
200 Park Avenue
43rd Floor
New York, New York 10166
Attention: David F. Brandley, Jr., Esq.
Telecopier: (212) 309-1101
(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.
<PAGE>
Indenture-64 (1994 747 B)
(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 INDENTURE 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 Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by
<PAGE>
Indenture-65 (1994 747 B)
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 Indenture 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 the EBO Date (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,
(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,
(d) the satisfaction, discharge, defeasance and termination of
obligations under this Indenture 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,
<PAGE>
Indenture-66 (1994 747 B)
the Lien of this Indenture on the Indenture Estate, in the case of (a), (b), (c)
or (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>
IN WITNESS WHEREOF, the Owner Trustee and the Indenture Trustee have
caused this Amended and Restated Trust Indenture and Mortgage to be duly
executed by their respective officers thereunto duly authorized.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, 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
Amended and
Restated
Trust Indenture and
Mortgage
Form of Series 1994 747 B Installment Certificates
--------------------------------------------------
$____________ (Original Principal Amount)
SERIES 1994 747 B CERTIFICATE
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1994 747 B)
Dated as of August 1, 1994
Issued in connection with Aircraft N106UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1996 MATURITY DATE
-------------
-------, ----
INTEREST RATE PER ANNUM: __%
State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity, but solely as owner trustee (the
"Owner Trustee") under that certain Trust Agreement (1994 747 B), dated as of
August 1, 1994, between the Owner Trustee in its individual capacity and the
institution referred to therein as the "Owner Participant" (herein as amended
and 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
First Security Bank of Utah, National Association, 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
commencing __________, ___ and ending on the date when the principal amount
hereof shall have been paid in full plus interest at the Interest Rate Per Annum
specified above on the Original Principal Amount specified above from time to
time outstanding on each January 30 and July 30. All amounts payable by the
Owner Trustee hereunder and under the Amended and Restated Trust Indenture and
Mortgage (1994 747 B), dated as of January 1, 1996 (as the same may hereafter be
further amended or supplemented from time to time, as the "Indenture", the
<PAGE>
2
defined terms therein not otherwise defined herein being used herein with the
same meanings), by and between 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 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 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
<PAGE>
3
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 Percentage for such Installment Payment Date as specified
on Exhibit B-1 thereto multiplied by the Original Principal Amount of this
Certificate specified above.
As more fully provided in the Indenture, the Certificates are subject
to 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.
<PAGE>
4
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
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,
<PAGE>
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 OF CONNECTICUT,
NATIONAL ASSOCIATION, 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
<PAGE>
Exhibit A-2 to
Amended and
Restated
Trust Indenture and
Mortgage
Form of Series 1994 747 B Serial Certificates
---------------------------------------------
$_________ (Original Principal Amount) No. _____
SERIES 1994 747 B CERTIFICATE
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee Under the
Trust Agreement (1994 747 B)
Dated as of August 1, 1994
Issued in connection with Aircraft N106UA
Leased to
UNITED AIR LINES, INC.
Date of Issuance: _________, 1996 MATURITY DATE
-------------
-------, ----
INTEREST RATE PER ANNUM: ____%
State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity, but solely as owner trustee (the
"Owner Trustee") under that certain Trust Agreement (1994 747 B), dated as of
August 1, 1994, 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 First Security Bank
of Utah, National Association, or registered assigns the principal sum in
dollars equal to the Original Principal Amount specified above on the Maturity
Date specified above from time to time outstanding in respect of the period
commencing _________, ___ and ending on the date when the principal amount
hereof shall have been paid in full, payable on each January 30 and July 30 of
each year, commencing _________, 1996. All
<PAGE>
2
amounts payable by the Owner Trustee hereunder and under the Amended and
Restated Trust Indenture and Mortgage (1994 747 B), dated as of January 1, 1996
(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 between 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 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
<PAGE>
3
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, 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 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
<PAGE>
4
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.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to be
duly executed.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, 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 or signatory
<PAGE>
Exhibit B to
Amended and Restated
Trust Indenture and
Mortgage
MATURITY DATES, PRINCIPAL AMOUNTS AND INTEREST
----------------------------------------------
RATES OF SERIES 1994 747 B CERTIFICATES
---------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL INTEREST RATE
DATE AMOUNT PER ANNUM
-------- --------- -------------
<S> <C> <C> <C>
Series 1994 747 B1 $ %
Series 1994 747 B2 $ %
</TABLE>
<PAGE>
Exhibit B-1 to
Amended and
Restated 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 _____% $
</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 %
</TABLE>
<PAGE>
Exhibit B-2 to
Amended and
Restated Trust
Indenture and
Mortgage
Issuance of Series 1994 747 B Certificates
------------------------------------------
The Series 1994 747 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:
1996 - A1 Trust:
___% Certificate due ______, ____
1996 - A2 Trust:
___% Certificate due ______, ____
<PAGE>
C-1
[Trust Indenture and Mortgage (1994 747 B)]
Exhibit C to
Amended and
Restated Trust
Indenture and
Mortgage
SUPPLEMENT TO THE TRUST AGREEMENT
AND THE AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
(1994 747 B)
This SUPPLEMENT TO THE TRUST AGREEMENT AND THE AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE (1994 747 B), dated as of January 1, 1996 (herein
called the "Trust Supplement") of STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity, but solely as
Owner Trustee (herein called the "Owner Trustee"), under the Trust Agreement
(1994 747 B), dated as of August 1, 1994 (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
Indenture referred to below used herein as therein defined) included in the
property covered by the Trust Agreement;
WHEREAS, State Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee (herein called the "Owner Trustee"), and First
Security Bank of Utah, National Association, as Indenture Trustee (herein called
the "Indenture Trustee"), have entered into that certain Trust Indenture and
Security Agreement (1994 747 B), dated as of August 1, 1994 (the "Original Trust
Indenture"), which Original Trust Indenture was recorded with the Federal
Aviation Administration on August 8, 1994 under Conveyance No. Y39808, as
amended and restated by the Amended and Restated Trust Indenture and Mortgage
(1994 747 B), dated as of January 1, 1996 (the "Indenture"), which 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 the Indenture relates to the
Airframe and Engines described below, and a counterpart of the Indenture is
attached hereto
<PAGE>
C-2
[Trust Indenture and Mortgage (1994 747 B)]
and made a part hereof and this Trust Supplement, together with such counterpart
of the 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 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 747-451 N106UA 26474
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:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ------ --------------
<S> <C> <C>
Pratt & Whitney PW4056 P727348
Pratt & Whitney PW4056 P727349
Pratt & Whitney PW4056 P727350
Pratt & Whitney PW4056 P727351
</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 Indenture and hereby, the Owner Trustee hereby confirms that the Lien of
the Indenture over the Trust Indenture Estate includes the Lease Supplement of
even date herewith covering the property described above.
<PAGE>
C-3
[Trust Indenture and Mortgage (1994 747 B)]
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 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 Indenture.
This Trust Supplement shall be construed as Supplemental to the
Indenture and to the Trust Agreement and shall form a part of each, and the
Trust Agreement and the Indenture are each hereby incorporated by reference
herein and each is hereby ratified, approved and confirmed.
* * *
<PAGE>
[Trust Indenture and Mortgage (1994 747 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 OF
CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner Trustee
By:________________________________________
Title:
<PAGE>
Reg. No. 33-57192 Reg No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(n)(3) Exhibit 4(b)(44)
<PAGE>
*
Doc. No. 1.01
Aircraft N767UA
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1995 777 C)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
___________________________________,
Owner Participant,
THE MITSUBISHI TRUST AND BANKING CORPORATION,
acting through its New York Branch,
Original Loan Participant,
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 C Equipment Trust
One Boeing 777-222 Aircraft
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
------------------
Page
----
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft................................ 2
SECTION 2. Lessee's Notice of Delivery Date................................ 3
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee............................................ 6
SECTION 4. Conditions...................................................... 7
(a) Conditions Precedent to the
Participations in the Aircraft.......................... 7
(b) Conditions Precedent to the
Obligations of Lessee................................... 17
SECTION 5. Confidentiality of Appraisal, Purchase
Agreement, Participation Agreement
and Tax Indemnity Agreement.................................. 19
SECTION 6. Extent of Interest of Holders................................... 20
SECTION 7. Lessee's Representations, Warranties
and Indemnities
(a) In General.............................................. 20
(b) General Tax Indemnity................................... 25
(c) General Indemnity....................................... 36
(d) Withholding............................................. 42
SECTION 8. Representations, Warranties and Covenants....................... 42
SECTION 9. [INTENTIONALLY OMITTED]......................................... 62
SECTION 10. Other Documents; Amendment..................................... 62
SECTION 11. Certain Covenants of Lessee.................................... 63
SECTION 12. Owner for Income Tax Purposes.................................. 64
SECTION 13. Notices; Consent to Jurisdiction............................... 64
SECTION 14. Change of Situs of Owner Trust................................. 65
SECTION 15. Miscellaneous.................................................. 66
SECTION 16. Invoices and Payment of Expenses............................... 68
i
<PAGE>
SECTION 17. Optional Redemption of Loan Certificates....................... 69
SECTION 18. Optimization................................................... 74
SECTION 19. [Intentionally Omitted]........................................ 75
SECTION 20. Refinancing.................................................... 75
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III-1 to III-6 - Legal Opinions
EXHIBIT A - Form of Lease Agreement
EXHIBIT B - Form of Trust Agreement
EXHIBIT C - Form of Trust Indenture and Security Agreement
ii
<PAGE>
PARTICIPATION AGREEMENT
(1995 777 C)
THIS PARTICIPATION AGREEMENT (1995 777 C) dated as of May 1, 1995
(this "Agreement"), among (i) UNITED AIR LINES, INC., a Delaware corporation
(the "Lessee"), (ii) __________________________, a Delaware corporation (the
"Owner Participant"), (iii) THE MITSUBISHI TRUST AND BANKING CORPORATION (the
"Original Loan Participant"), acting through its New York Branch, (iv) 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"), 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 777-222 aircraft, one of which has been recently purchased from
the Manufacturer by Lessee and is the subject of this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Lessee and the Owner Trustee are entering into the Owner Trustee's
Purchase Agreement (1995 777 C) dated May 31, 1995, 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
thereto;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Manufacturer has executed the Consent and Agreement (1995 777 C)
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;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement (1995 777
C) dated as of May 1, 1995, 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;
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Security Agreement
<PAGE>
[Participation Agreement (1995 777 C)]
(1995 777 C) dated as of May 1, 1995 (the "Trust Indenture") pursuant to which
the Owner Trustee agrees, among other things, to issue to the Original Loan
Participant one or more Loan Certificates as evidence of the Owner Trustee's
indebtedness to the Certificate Holders, 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 Indenture;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Trustee and Lessee are entering into the Lease Agreement
(1995 777 C) 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;
WHEREAS, the aforementioned acquisition of the Aircraft by Lessee from
the Manufacturer and the aforementioned sale and leaseback transaction are
integrally related and constitute a series of events designed to provide
financing for such Aircraft and a means of providing the Aircraft to Lessee for
use in its business; 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," "Original Loan
- ------------
Participant," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement (1995 777 C) referred to
above and, except as otherwise defined in this Agreement, terms used herein in
capitalized form but not otherwise defined shall have the meanings attributed
thereto in the Lease Agreement referred to above. The term "Loan Certificate"
shall have the meaning set forth in the Trust Indenture. The term "Owner
Participant Guarantor" shall mean USL Capital Corporation, a Delaware
corporation, in its capacity as "Guarantor" under the Owner Participant
Guaranty. 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.
2
<PAGE>
[Participation Agreement (1995 777 C)]
(b) Subject to the terms and conditions of this Agreement, (i) the
Original Loan Participant 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 the "Loan") on a date to be designated pursuant to
Section 2 hereof but in no event later than June 30, 1995, in the amount in
Dollars equal to the percentage of Lessor's Cost set forth opposite such
Original Loan Participant's name on Schedule II hereto and to receive as
evidence of such Loan, Loan Certificates in an original amount equal to the
amount so financed 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 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 investment in the beneficial ownership of the
Aircraft on a date to be designated pursuant to Section 2 hereof, but in no
event later than June 30, 1995, in an amount in Dollars equal to the percentage
of Lessor's Cost set forth opposite such Owner Participant's name on Schedule II
hereto. 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
the Original Loan Participant, the Original Amount of the Loan Certificates to
be simultaneously issued to it, is hereinafter called such Participant's
"Commitment" for the Aircraft. In case either 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 Participant 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 defaulting Participant shall
remain subject to the terms and conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a) Lessee agrees to
--------- --------------------------------
give the Owner Participant, the Owner Trustee, the Original Loan Participant and
the Indenture Trustee at least three (3) Business Days' written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than June 30, 1995 and which notice shall specify the amount of Lessor's
Cost for the Aircraft 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 Owner 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 Original Loan Participant's Commitment. The closing of the
transactions referred to in this Section 2 shall
3
<PAGE>
[Participation Agreement (1995 777 C)]
take place commencing at 9:00 a.m., local time, on the Delivery Date, at the
offices of Vedder, Price, Kaufman & Kammholz in Chicago, Illinois.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by Lessee of an amount equal to Lessor's Cost on the
Delivery Date pursuant to this Section 2, Lessee shall transfer title to and
deliver the Aircraft to the Owner Trustee, and the Owner Trustee shall purchase
and take title to, and accept delivery of, the Aircraft, and Lessee shall lease
the Aircraft from the Owner Trustee pursuant to the Lease, it being understood
that the transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Loan Certificates which shall be delivered simultaneously to
the Original Loan Participant. 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 following payments shall be made, in each
case in Dollars and in funds immediately available to the recipient: (A) by the
Owner Participant to the Owner Trustee an amount in Dollars equal to the Owner
Participant's Commitment, (B) by the Original Loan Participant to the Owner
Trustee an amount in Dollars equal to such Original Loan Participant's
Commitment and (C) by the Owner Trustee to Lessee the funds made available to it
pursuant to clauses (A) and (B) above, which funds shall aggregate an amount
equal to Lessor's Cost. The payments in clauses (A) and (B) shall be made to
the Owner Trustee's account no. 32198 at First Security Bank of Utah, National
Association and the payments in (C) shall be made to the Lessee's account no.
32187 at First Security Bank of Utah, National Association. In addition, the
Owner Trustee shall, on the Delivery Date, issue to the Original Loan
Participant the Loan Certificates described in Section 1(b) hereof.
Each Participant agrees to make its Commitment available to the Owner
Trustee at or before 11:00 a.m., Chicago 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").
(b) If for any reason whatsoever the closing of the transactions
contemplated hereby is not consummated on the Scheduled Delivery Date, the
Lessee may by telephonic notice given by 5:00 p.m., Chicago time, on the
Scheduled Delivery Date to each Participant and the Indenture Trustee, designate
a delayed date for such closing (the "Delayed Delivery Date"), not later than
the fifth Business Day after the Scheduled Delivery Date and in no event later
than June 30, 1995, in which event each Participant will make its Commitment
available to the Owner
4
<PAGE>
[Participation Agreement (1995 777 C)]
Trustee on such Delayed Delivery Date in the same manner as set forth in Clause
(a) above with respect to the Scheduled Delivery Date. In the event that such
closing does not occur on the Scheduled Delivery Date, such funds of each
Participant shall be returned to it by the Owner Trustee prior to 12:00 noon,
New York time on the next succeeding Business Day.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant (i) a sum equal
to interest on such funds at the Applicable Rate (as defined below) (computed on
the basis of the actual number of days elapsed and a 360 day year) on the amount
of such funds for each calendar day from and including the Scheduled Delivery
Date to but excluding the day such Participant's funds shall be returned to such
Participant in accordance with the preceding paragraph and provided that if such
funds are returned to such Participant after 12:00 noon, New York time, such
period shall end on such next succeeding Business Day and (ii) in the case of
the Original Loan Participant, an amount equal to the Break Amount, if any,
applicable to the Loan Certificates in respect of which such Original Loan
Participant's Commitment is made available, provided that, in the case of this
clause (ii), the failure to consummate the closing does not result from the
Original Loan Participant's gross negligence, wilful misconduct or failure to
negotiate in good faith.
"Applicable Rate" shall mean with respect to the Owner Participant a
rate equal to the rate of interest announced publicly by The First National Bank
of Chicago from time to time as its base rate less any interest earned on the
Owner Participant's funds pursuant to their investment in accordance with the
provisions of the immediately succeeding paragraph, and with respect to the
Original Loan Participant the rate per annum borne by the Loan Certificates in
respect of which such Original Loan Participant's Commitment is made available.
First Security Bank of Utah, National Association, agrees that in the
event it has received telephonic notice (to be confirmed promptly in writing)
from the Lessee on the Scheduled Delivery Date that the closing of the
transactions contemplated hereby will not be consummated on the Scheduled
Delivery Date, it will, if instructed in the notice from the Lessee, use
reasonable efforts to invest, at the risk of the Lessee, the funds received by
it from the Participants in obligations of the United States Government or
obligations guaranteed as to principal and interest by the United States
Government, in either case having a stated maturity not later than one year from
the date of acquisition. Any such investment may be made through a repurchase
agreement in
5
<PAGE>
[Participation Agreement (1995 777 C)]
commercially reasonable form with the Owner Trustee, or a bank or other
financial institution having capital, surplus and undivided profits of at least
$100,000,000, provided that title to the underlying obligations shall pass to
the Indenture Trustee, and that such underlying securities shall be segregated
in a custodial or trust account of or for the benefit of the Indenture Trustee.
Any such obligations purchased by First Security Bank of Utah, National
Association, whether directly or through a repurchase agreement, shall be held
in trust by First Security Bank of Utah, National Association, for the benefit
of the respective Participant. The Lessee shall, on the Delayed Delivery Date
or the date the funds furnished by the Participants are required to be returned
to the Participants, as the case may be, reimburse First Security Bank of Utah,
National Association for the benefit of the respective Participant, for any
losses incurred on such investments. All income and profits on the investment
of such funds on behalf of the Owner Participant not in excess of the Applicable
Rate shall be for the account of the Owner Participant and funds for the account
of the Original Loan Participant not in excess of the Applicable Rate shall be
for the account of the Original Loan Participant (such income and profits to be
credited against the Lessee's obligation to reimburse the Participants for the
loss of use of funds made available to First Security Bank of Utah, National
Association) and all other income and profits and all losses on the investment
of such funds shall be for the account of the Lessee; and First Security Bank of
Utah, National Association, shall not be liable for failure to invest such funds
or for any losses incurred on such investments except for its own willful
misconduct or negligence.
The Owner Participant hereby agrees with and for the benefit of the
Lessee and the Original Loan Participant that, subject to receipt of the notice
as provided in the next succeeding sentence, prior to 12:00 noon (New York City
time) on the Commencement Date, the Owner Participant on behalf of the Owner
Trustee shall pay to the Indenture Trustee in immediately available funds an
amount equal to the Excess Amount due on such date unless a Section 14(a), (b),
(h) or (i) Default or an Event of Default under the Lease shall have occurred
and be continuing. The Lessee shall notify the Owner Participant in writing
three (3) Business Days prior to the Commencement Date of the amount of such
Excess Amount (provided, however, that Lessee's failure to provide such notice
shall not increase Lessee's obligations hereunder or under the Lease or
otherwise constitute a Default or an Event of Default under the Lease).
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
--------- -------------------------------------------------------
Subject to the terms and conditions of this Agreement, the Owner Trustee, upon
its receipt in full of each Participant's Commitment for the Aircraft, as
provided in Section
6
<PAGE>
[Participation Agreement (1995 777 C)]
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:
(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 Indenture Trustee the Loan on behalf of the
Original Loan Participant to finance a portion of Lessor's Cost and to
issue to the Original Loan Participant Loan Certificates in an aggregate
principal amount equal to the amount borrowed pursuant to the Trust
Indenture; 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 make available the amount of its Commitment is 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 Original Loan Participant), (xxv) and (xxvi) shall not be a condition
precedent to the obligation of the Original Loan Participant, and paragraphs
(iv), (vii) (5) (insofar as it relates to the Owner Participant or the Owner
Participant Guarantor), (x) (insofar as it relates to the Owner Participant or
the Owner Participant Guarantor), (xiv), (xix) (insofar as it relates to the
Owner Participant) and (xxviii) shall not be a condition precedent to the
obligation of the Owner Participant,
7
<PAGE>
[Participation Agreement (1995 777 C)]
and by its execution and delivery hereof, each party hereto instructs its
counsel to deliver its legal opinion as described below:
(i) Each Participant 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 Original
Loan Participant, 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 Original Loan Participant or the
Owner Participant to make its respective Commitment available or, in the
case of the Original Loan Participant, to acquire the Loan Certificates or
to realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Original Loan
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Original Loan Participant, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(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
each Participant and its respective counsel, provided that only the
Original Loan Participant shall receive an executed original of its Loan
Certificates, only the Indenture Trustee, acting on behalf of the
Certificate Holders, shall receive the original counterpart of the Lease
and the Lease Supplement, only the Owner Trustee shall receive a copy of
the Purchase Agreement which shall be delivered to and retained by the
Owner Trustee (the Owner Participant and the Original Loan Participant and
their respective counsel may inspect the Purchase Agreement prior to the
Delivery Date, but after the Delivery Date, such copy
8
<PAGE>
[Participation Agreement (1995 777 C)]
shall be retained by the Owner Trustee and may be inspected and reviewed by
the Owner Trustee, the Owner Participant, the Original Loan Participant, or
their respective counsel if and only if there shall occur and be continuing
an Event of Default under the Lease) 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) the Trust Indenture and 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 (herein called 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 Loan Certificates;
(10) the Consent and Agreement;
(11) the Purchase Agreement;
(12) the Manufacturer's FAA Bill of Sale and the Manufacturer's
Bill of Sale; and
(13) the Owner Participant Guaranty.
All of the foregoing documents, together with this Agreement, are sometimes
referred to herein, collectively, as the "Operative Documents" and,
individually, as an "Operative Document."
9
<PAGE>
[Participation Agreement (1995 777 C)]
(vi) A Uniform Commercial Code financing statement or statements
covering all of 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
Original Loan Participant shall have been executed and delivered by Lessee,
the Indenture Trustee or the Owner Trustee and duly filed.
(vii) Each Participant, the Indenture Trustee and the Owner Trustee
shall have received the following, in each case in form and substance
satisfactory to it, provided that only the Owner Trustee shall receive a
copy of the Purchase Agreement which shall be retained by the Owner Trustee
(the Owner Participant and the Original Loan Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date, but after the Delivery Date, such copy shall be retained by the Owner
Trustee and may be inspected and reviewed by the Owner Trustee, the Owner
Participant, the Original Loan Participant or their respective counsel if
and only if there shall occur and be continuing an Event of Default under
the Lease) and only the Owner Trustee shall receive a copy of the detailed
specifications for the Aircraft which shall be delivered to and retained by
the Owner Trustee (the Owner Participant may inspect such detailed
specifications prior to the Delivery Date, but after the Delivery Date,
such copy shall be retained by the Owner Trustee and may be inspected and
reviewed by the Owner Participant only at the office of the Owner Trustee
unless an Event of Default shall have occurred and be continuing under the
Lease, in which case a copy thereof may be provided to the Owner
Participant; provided that from and after the fifth anniversary of the
Commencement Date, the Owner Trustee shall, upon request from the Owner
Participant, deliver a copy of such detailed specifications to the Owner
Participant):
(1) a certified copy of the Restated 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 other Lessee Documents and each other document required to be
executed and delivered by Lessee on the Delivery Date in accordance
with the provisions hereof and thereof;
10
<PAGE>
[Participation Agreement (1995 777 C)]
(2) such other documents and evidence with respect to Lessee,
the Manufacturer, the Owner Trustee, the Indenture Trustee, and the
Participants as the Original Loan Participant 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 and the taking of all
corporate proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee 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;
(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 detailed specifications for the Aircraft; and
(6) 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
Owner Participant Guarantor and the Owner Participant, certified as of
the Delivery Date by the Secretary or an Assistant Secretary of the
Indenture Trustee, the Owner Trustee, the Owner Participant Guarantor
and the Owner Participant, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee, the
Owner Trustee, the Owner Participant Guarantor and the Owner
Participant, 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 Owner Participant Guarantor
and the Owner Participant as either the Original Loan Participant (or
its counsel) or the Owner Participant (or its counsel) may reasonably
request in order to establish the consummation of the transactions
contemplated by this
11
<PAGE>
[Participation Agreement (1995 777 C)]
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.
(viii) All appropriate action required to have been taken prior to
the Delivery Date by the Federal Aviation Administration, or any
governmental or political agency, subdivision or instrumentality of the
United States 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 Liens permitted by clause (iii) (solely
for Taxes not yet due) of Section 6 of the Lease;
(2) 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. certificate of airworthiness issued by the FAA;
(3) the application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) has been
duly filed with the FAA;
(4) upon registration of the Aircraft in the name of the Owner
Trustee with the FAA, Lessee shall have
12
<PAGE>
[Participation Agreement (1995 777 C)]
temporary or permanent authority to operate such Aircraft;
(5) the Manufacturer's FAA Bill of Sale, the Owner Trustee's FAA
Bill of Sale, the Trust Agreement, the Trust Indenture, the Trust
Supplement, the Lease and the Lease Supplement have been duly filed
with the FAA for recordation; and
(6) the Owner Trustee, as lessor under the Lease Agreement, and
the Indenture Trustee, as assignee thereof, is entitled to the
protection of Section 1110 of the United States Bankruptcy Code in
connection with its right 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
(7) the Airframe and Engines were manufactured in the United
States by persons or entities that were not Foreign Sales Corporations
as defined in Section 922 of the Code, and less than 50% of the fair
market value of the Airframe and each Engine is attributable to
articles that were imported into the United States. For purposes of
the preceding sentence, the fair market value of any article imported
into the United States shall be the full dutiable value of that
article at the time such article was imported into the United States,
determined pursuant to Section 1401a of Title 19 of the United States
Code.
(x) On the Delivery Date, (A) the respective 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 of the Owner Participant Guarantor in the Owner Participant 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 be
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 March 31,
13
<PAGE>
[Participation Agreement (1995 777 C)]
1995 or to perform its obligations under the Operative Documents.
(xi) Each Participant 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
Lessee, in substantially the form of Schedule III-1(b) hereto.
(xii) Each Participant shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee from
counsel to the Manufacturer, in substantially the form of Schedule III-2
hereto.
(xiii) Each Participant 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 Original Loan Participant shall have received an opinion
addressed to the Indenture Trustee, the Original Loan Participant, the
Owner Trustee and Lessee from (a) White & Case, special counsel to the
Owner Participant and the Owner Participant Guarantor, in substantially the
form of Schedule III-4(a) hereto and (b) a senior attorney of the Owner
Participant Guarantor, in substantially the form of Schedule III-4(b)
hereto.
(xv) Each Participant 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) Each Participant shall have received an opinion addressed to
the Participants, the Owner Trustee and Lessee from Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee, in substantially the form of
Schedule III-6 hereto.
(xvii) [Intentionally Omitted].
(xviii) Each Participant, the Owner Trustee 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, the Indenture
14
<PAGE>
[Participation Agreement (1995 777 C)]
Trustee and the Owner 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 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 paying over to Lessee the funds made available
to it by the Loan Participants and (c) the Owner Trustee shall, by
accepting the Owner Trustee's Bill of Sale and the Owner Trustee's FAA Bill
of Sale, 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 appraisal dated the
Delivery Date, in form and substance satisfactory to the Owner Participant,
from B.K. Associates, independent aircraft appraisers, or such other
recognized aircraft appraiser selected by the Owner Participant.
(xxi) Each Participant, the Owner Trustee 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 there has not occurred any event which
constitutes a Default or Event of Default under the Lease which is
continuing and 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
shall have occurred.
(xxiii) No action or proceeding shall have been instituted nor shall
any 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.
15
<PAGE>
[Participation Agreement (1995 777 C)]
(xxiv) The respective representations and warranties of the Indenture
Trustee and the Original Loan Participant 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 certifying as to the
foregoing matters with respect to the Indenture Trustee; by making
available its Commitment, the Original Loan Participant shall be deemed to
have reaffirmed the representations and warranties made by it in such
Section 8.
(xxv) The Owner Participant shall have received from White & Case,
special counsel to the Owner Participant, a favorable opinion, in form and
substance satisfactory to the Owner Participant, with respect to certain
federal income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, there shall have been, since May 1, 1995, no amendment,
modification, addition, or change in or to the provisions of the Internal
Revenue Code of 1986, as amended (including for this purpose, any non-
Internal Revenue Code of 1986, as amended, provisions of legislation
affecting the Internal Revenue Code of 1986, as amended, such as transition
rules or effective date provisions) and the regulations promulgated under
the Internal Revenue Code of 1986, as amended (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or Executive Orders of the President of the United
States, the effect of which might preclude the Owner Participant from
obtaining any of the income tax benefits and consequences assumed to be
available to the Owner Participant as set forth in Section 2 of the Tax
Indemnity Agreement.
(xxvii) All approvals and consents of any trustee or holders of any
indebtedness or obligations of Lessee which are required in connection with
any of the transactions contemplated by this Agreement shall have been duly
obtained, and copies thereof, in form and substance satisfactory to the
Participants, certified by the secretary
16
<PAGE>
[Participation Agreement (1995 777 C)]
or assistant secretary of Lessee, shall have been delivered to the
Participants.
(xxviii) The Original Loan Participant shall have received a copy of
the appraisal referred to in paragraph (xx) above (without regard to the
form and substance thereof) to the effect that the fair market value of the
Aircraft on the Delivery Date is at least equal to Lessor's Cost.
(xxix) If the Original Loan Participant is required to execute any
form or document in order for payments to it to qualify for exemption from,
or reduction of, withholding tax imposed by the United States Government in
respect to such payments, such Original Loan Participant shall have
executed such form or document (including, without limitation, United
States Internal Revenue Forms 1001, W-8 and/or 4224) and delivered it to
the Indenture Trustee in accordance with applicable regulations to qualify
for such exemption or reduction.
Promptly upon the registration of the Aircraft and the recording of
the Manufacturer's FAA Bill of Sale, the Owner Trustee's FAA Bill of Sale, 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 each Participant, the Owner Trustee, the Indenture
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
Manufacturer's FAA Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Lease
Supplement, the Trust Indenture, 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 Lessee 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 Sections 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and 4(a)(xxix) hereof shall have been
satisfied, unless such nonsatisfaction is the result of action or inaction
by Lessee.
17
<PAGE>
[Participation Agreement (1995 777 C)]
(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 Purchase Agreement and 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 Owner Participant Guarantor and the Owner Participant,
certified as of the Delivery Date by the Secretary or an Assistant
Secretary of the Indenture Trustee, the Owner Trustee, the Owner
Participant Guarantor and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture Trustee,
the Owner Trustee, the Owner Participant Guarantor and the Owner
Participant of all 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 Owner Participant Guarantor and the Owner
Participant 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 respective representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof and of the Owner Participant Guarantor in the Owner
Participant 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 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.
18
<PAGE>
[Participation Agreement (1995 777 C)]
(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) In the opinion of Lessee and its counsel, there shall have
been, since May 1, 1995, no amendment, modification, addition or change in
or to the Internal Revenue Code of 1986, as amended (including for this
purpose, any non-Internal Revenue Code of 1986, as amended, provisions of
legislation affecting the Internal Revenue Code of 1986, as amended, such
as transition rules or effective date provisions) and the regulations
promulgated under the Internal Revenue Code of 1986, as amended (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative interpretations,
applicable judicial precedents or Executive Orders of the President of the
United States which might give rise to an indemnity obligation under any of
the Operative Documents.
(viii) Each Participant shall have made available the amount of its
Commitment for the Aircraft in accordance with Section 1 hereof.
(ix) The Aircraft shall have been ready for delivery by the
Manufacturer on or before June 30, 1995.
(x) Lessee shall have received a copy of the appraisal set forth in
Section 4(a)(xx).
SECTION 5. Confidentiality of Appraisal, Purchase Agreement,
--------- -------------------------------------------------
Participation Agreement and Tax Indemnity Agreement. The Owner Trustee, the
- ---------------------------------------------------
Participants, the Indenture Trustee and the Lessee, shall keep the appraisal
referred to in Section 4(a)(xx) hereof, the Purchase Agreement and Participation
Agreement and the Owner Trustee and the Owner Participant shall keep the Tax
Indemnity Agreement and the detailed specifications for the Aircraft,
confidential and shall not disclose, or cause to be disclosed, the same to any
Person, except (A) to prospective and permitted transferees of Owner Trustee's,
such Participant's, the Indenture Trustee's or the Lessee's interest
19
<PAGE>
[Participation Agreement (1995 777 C)]
who agree to hold such information confidential, (B) to the Owner Trustee's,
such Participant's, the Indenture Trustee's or the Lessee'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
insurance regulatory bodies or Federal or state banking examiners or Internal
Revenue Service auditors or (D) such other Persons as reasonably deemed
necessary by the Owner Trustee, such Participant, the Indenture Trustee and the
Lessee in order to protect the interests of any of such parties or for the
purposes of enforcing such documents; provided, however, that any and all
disclosures of all or any part of the appraisal referred to in Section 4(a)(xx)
hereof, the Purchase Agreement, Participation Agreement, the detailed
specifications for the Aircraft and Tax Indemnity 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; and provided further that this Section 5 shall not apply to
the Owner Participant with respect to the appraisal referred to in Section
4(a)(xx) hereof.
SECTION 6. Extent of Interest of 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, Break Amount, if any, and interest on all Loan Certificates held by
such Certificate Holder and all other sums payable to such 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 2.03 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 Break Amount, if any), 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 to the Participants, the Indenture
- ----------
Trustee and the Owner Trustee 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
20
<PAGE>
[Participation Agreement (1995 777 C)]
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 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 or by the Delivery Date will
have been duly obtained, and the Lessee Documents have been duly executed
and delivered by Lessee, and neither the execution and delivery thereof by
Lessee nor the consummation by Lessee of the transactions contemplated
thereby nor compliance by Lessee with any of the terms and provisions
thereof contravenes any United States federal or state 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 by-laws or any indenture, mortgage, contract or other
agreement to which Lessee is a party or by which it or any of 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, approval or authorization 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 or will on or prior to
the Delivery Date be
21
<PAGE>
[Participation Agreement (1995 777 C)]
duly obtained, and will on the Delivery Date be in full force and effect,
(B) the registration of the Aircraft referred to in Section 4(a)(ix)(4),
(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, (D) the recordings with the
FAA described in the opinion referred to in Section 4(a)(xv), and (E) such
federal and state securities law approvals that will be required in
connection with the public offering, if any, of any Loan Certificates;
(iv) each of the Lessee Documents will, upon execution thereof,
constitute 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 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, Trust Indenture and the Trust Supplement attached
thereto and made a part thereof, the Lease with the Lease Supplement
covering the Aircraft, the Manufacturer's FAA Bill of Sale and the Owner
Trustee's FAA Bill of Sale and (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, (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 the giving of any notice or 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 the Aircraft as against the
Owner Trustee, and in each case, as against any
22
<PAGE>
[Participation Agreement (1995 777 C)]
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 of Loss (or event which, with the passage of
time or the giving of notice, or both, would constitute an Event of Loss)
with respect to the Airframe or any Engine;
(viii) the statements of financial position of Lessee as of December
31, 1994 and March 31, 1995 and the related statements of earnings and cash
flow of Lessee for the year and three months then ended, copies of which
have been furnished to the Participants, fairly present the financial
condition of Lessee as at such dates and the results of operations and cash
flow of Lessee for the periods ended on such dates, in accordance with
generally accepted accounting principles consistently applied (except as
may be stated in the notes thereto) and subject in the case of the March
31, 1995 statements to normal year-end audit adjustments, and since March
31, 1995, 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, to the extent that copies have been
provided to the Participants, 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,
to the extent that copies have been provided to the Participants;
(ix) the Owner Trustee will receive good and marketable title to the
Aircraft from Lessee 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, T, U or X 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
23
<PAGE>
[Participation Agreement (1995 777 C)]
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
35 other institutions believed capable of evaluating and bearing the risks
of investment in the transactions contemplated hereby, (B) directly or
indirectly offered any Loan Certificates or any similar security for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Original Loan Participant and not more than 25 other institutions
believed capable of evaluating and bearing the risks of investment in the
transactions contemplated hereby, (C) taken any action which would require
the Loan Certificates to be registered pursuant to the Securities Act of
1933, as amended or (D) filed or published, or caused to be filed or
published, any financing statement or similar statement or notice under the
Uniform Commercial Code in effect in any jurisdiction or any state or local
fraudulent conveyance or analogous statute or ordinance describing any
portion of the Trust Estate, other than filings referred to in Section
4(a)(vi) hereof and such other filings, notices or publications as shall
have been approved by counsel to the Owner Participant and the Certificate
Holders prior to the filing or publication thereof;
(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 Indenture Trustee or Owner
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) Lessee, (b) the nature of the Aircraft,
or (c) Lessee's proposed operation 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 (and for which Lessee shall have established
adequate reserves) so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Aircraft;
(xv) Lessee is solvent and will not be rendered insolvent by the sale
of the Aircraft to the Owner Trustee;
24
<PAGE>
[Participation Agreement (1995 777 C)]
after such sale of the Aircraft the capital of Lessee will not be
unreasonably small for the conduct of the business in which Lessee is
engaged or is about to engage; Lessee has no intention or belief that it is
about to incur debts beyond its ability to pay as they mature; and Lessee's
sale of the Aircraft to the Owner Trustee is made without any intent to
hinder, delay or defraud either present or future creditors of the Lessee;
(xvi) Lessee is in compliance with all laws, ordinances or
governmental rules and regulations to which Lessee is subject, including
without limitation, the Federal Aviation Act, the Occupation Safety and
Health Act of 1970, the Employee Retirement Income Security Act of 1974 and
all laws, ordinances, governmental rules and regulations relating to
environmental protection in all applicable jurisdictions, the violation of
which would materially and adversely affect the properties, business,
prospects, profits or condition of the Lessee; and
(xvii) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee thereof, are entitled to the protection of Section
1110 of the Bankruptcy Code in connection with its 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.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
--------------------- ---------
Section 7(b)(ii) hereof, Lessee shall pay, protect, save and on written demand
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
other than (A) the Original Loan Participant and (B) any Person who has
purchased a participation in the Loan Certificates from the Original Loan
Participant) (whether or not the transactions contemplated herein or any of the
other Operative Documents are consummated) from and against (x) any and all
Taxes howsoever imposed upon or against any Indemnitee, Lessee or all or any
part of the Aircraft, the Airframe, the Engines, the Parts or any part thereof
or interest therein 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, construction,
importation, improvement, manufacture, location, conditioning, installation,
financing, refinancing, purchase, acquisition, acceptance, delivery, rejection,
non-delivery, transport, ownership, registration, reregistration, possession,
repossession, operation, use, maintenance, repair, sale, return,
25
<PAGE>
[Participation Agreement (1995 777 C)]
abandonment, storage, preparation, redelivery, leasing, subleasing,
modification, rebuilding of, transfer of title to, transfer of registration of,
exportation or other application or disposition of, or the imposition of any
Lien (or the incurrence of any liability to refund or pay over any amount as the
result of any Lien) on, the Aircraft, the Airframe, the Engines, the Parts or
any part thereof or interest therein, (B) the rentals, receipts or earnings from
the Aircraft, the Airframe, the Engines, the Parts or any part thereof or
interest therein, (C) any amount paid or payable pursuant to any Operative
Documents 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, (D) the Aircraft, the Airframe, the Engines, the Parts
or any part thereof or interest therein, (E) any or all of the Operative
Documents, or the issuance of the Loan Certificates (or the refinancing thereof)
and any other documents contemplated hereby or thereby and amendments and
supplements hereto and thereto or the execution, delivery or performance of any
thereof or the issuance, acquisition, holding or subsequent transfer thereof,
(F) the payment of the Original Amount of, or interest, Break Amount on, or
other amounts payable with respect to the Loan 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(e) 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 jurisdictions or authorities in the
United States or (C) any foreign government or any political
subdivision or taxing authority thereof or any territory or possession
of the United States or by any international authority, (a "Foreign
Jurisdiction") except to the extent such Income Tax exceeds the Income
Taxes that are imposed by such Foreign Jurisdiction by reason of, or
that would not have been imposed but for the nexus created by, (x) the
registration, location, operation or use to or in such Foreign
Jurisdiction of the Aircraft, the Airframe, the Engines, the Parts or
any part thereof, (y) the operations of the Lessee to or in such
Foreign
26
<PAGE>
[Participation Agreement (1995 777 C)]
Jurisdiction, or (z) the making of any payments from such Foreign
Jurisdiction by the Lessee pursuant to the Operative Documents;
(2) in the case of an Indemnitee which is a Certificate Holder or
any successor, assign or Affiliate thereof, to Income Taxes or
transfer taxes relating to any payments of principal, interest or
Break Amount, if any, on the Loan Certificates, or to a Certificate
Holder, imposed by any government or taxing authority;
(3) 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 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, unless such transfer or disposition shall
occur, (A) upon 15 days prior notice during a period when an Event of
Default has occurred and is continuing under the Lease at the time of
transfer or disposition provided, however, that the notice requirement
shall not apply unless the Owner Participant shall have actual
knowledge of such disposition, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7(b)(i), (ii), (v), or (vi), 8 (but only to the extent of
such disposition), 9, 10 or 19 thereof;
(4) to any Tax imposed on any Indemnitee which is a Certificate
Holder, the Indenture Trustee or the Trust Indenture Estate 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
unless, in each case, such transfer or disposition shall occur (A)
during a period when a Default or 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 as a result of such Default or
Event of Default, or (B) in connection with the termination of the
Lease or action
27
<PAGE>
[Participation Agreement (1995 777 C)]
or direction of the Lessee pursuant to Section 7, 8, 9, 10 or 19
thereof;
(5) to any Tax imposed on the Owner Participant, Trust Estate or
Owner Trustee which results from the willful misconduct or gross
negligence of the Owner Participant or Owner Trustee;
(6) to any Tax imposed on an Indemnitee which is a Certificate
Holder, the Indenture Trustee or the Trust Indenture Estate which
results from the willful misconduct or gross negligence of such
Indemnitee;
(7) to any Tax based on or measured by any fees received by the
Owner Trustee or the Indenture Trustee in connection with any
transaction contemplated by the Operative Documents;
(8) 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
any period after (A) the expiration of the Term and return of
possession of the Aircraft to the Owner Trustee or its designee
pursuant to the terms of the Lease, (B) 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 and
transfer of title to the Aircraft or (C) placement in storage 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 occurring or matters arising upon or prior to such
expiration, discharge, storage or parking, or (y) imposed on or with
respect to any payments indemnified hereunder which are due after such
expiration, discharge, storage or parking until after such payments
have been made;
(9) in the case of an Indemnitee which is the Trust Indenture
Estate or any Certificate Holder, or any successor, assign or
Affiliate of either 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 such Certificate Holder, as the case may
be, in any of the Loan Certificates imposed by any government or
taxing authority;
28
<PAGE>
[Participation Agreement (1995 777 C)]
(10) to any Tax imposed on or with respect to a transferee (or
subsequent transferee) of an original Indemnitee to the extent such
Tax would not have been required to be withheld or imposed on or with
respect to such original Indemnitee; provided, that the exception in
this Section 7(b)(ii)(10) shall not apply to any transferee (or
subsequent transferee) where such transfer shall have occurred at any
time after a declaration of Default in accordance with Section 15 of
the Lease and while an Event of Default shall be continuing under the
Lease at the time of transfer;
(11) 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 attributable to it (including for this purpose Liens
that would be Lessor Liens but for the proviso to the definition of
Lessor Liens);
(12) to any Tax which has been included in the Lessor's Cost; and
(13) to any Tax for which Lessee is obligated to pay the Owner
Participant under the Tax Indemnity Agreement.
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;
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.
(iii) Calculation of General Tax Indemnity Payments. Any payment
---------------------------------------------
which Lessee shall be required to make to or for the account of any
Indemnitee with respect to 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.
29
<PAGE>
[Participation Agreement (1995 777 C)]
If, by reason of any Tax payment made by Lessee pursuant to this
Section 7(b) to or for the account of an Indemnitee which is not the
Original Loan Participant or a Person who has purchased a participation in
the Loan Certificate from the Original Loan Participant, such Indemnitee
subsequently realizes a tax deduction or credit (including foreign tax
credit and any reduction in Taxes) not previously taken into account in
computing such payment, such Indemnitee shall promptly pay to Lessee but
only if Lessee shall have made all payments then due and owing to such
Indemnitee under the Operative Documents and, provided an Event of Default
shall not have occurred and be continuing, 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 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
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 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 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.
In determining the order in which any Indemnitee utilizes any
foreign taxes as a credit against such Indemnitee's United States income
taxes, such Indemnitee shall be deemed to utilize (A) first, all foreign
taxes other than those described in clause (B) below; and (B) then, on a
pro rata basis, all foreign taxes with respect to which such Indemnitee is
entitled to obtain indemnification pursuant to an indemnification provision
contained in any lease, loan agreement, financing document, participation
agreement, or indemnification agreement (including this Agreement) (except
for any such agreement entered into prior to the date hereof in which a
specific priority has been granted for the ordering of foreign tax
credits).
Any Taxes that are imposed on any Indemnitee which is not the
Original Loan Participant or a Person who has purchased a participation in
the Loan Certificate from the Original Loan Participant as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made a payment to Lessee as required hereby
(or as to which such Indemnitee would have made a payment but for Section
7(b)(vii) hereof), in a
30
<PAGE>
[Participation Agreement (1995 777 C)]
taxable year subsequent to the utilization by such Indemnitee (including
subsequent recharacterization of the utilization of foreign taxes as a
result of a foreign tax liability arising in a subsequent year or 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) determined without regard to the exclusions contained
in Section 7(b)(ii)(1) or (8) hereof.
(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 of such claim and shall provide Lessee such information
regarding such claim as Lessee may reasonably request other than
information deemed privileged or confidential in the reasonable judgment of
the Indemnitee, but the failure to give such notice or to provide such
information shall not diminish Lessee's obligation hereunder unless such
failure materially and adversely affects Lessee's ability to (A) require
such Indemnitee to contest the Tax or (B) contest the Tax itself.
If a written claim shall be made for any Tax, other than a Tax
the contest of which or the return on which such Tax is reported involves
Taxes for which Lessee does not indemnify under this Section 7(b), 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 in its own name, then the Lessee shall be permitted, at
its expense and in its own name, to contest the imposition of such Tax.
If requested by Lessee (A) in writing 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 not described in the
preceding paragraph, such Indemnitee shall in good faith at Lessee's
expense contest the imposition of any such Tax. Indemnitee shall consult
in good faith with Lessee concerning the method of any contest controlled
by Indemnitee including the forum in which the adjustment is most likely to
be favorably resolved, provided, however, that 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.
31
<PAGE>
[Participation Agreement (1995 777 C)]
In no event shall such Indemnitee be requested to contest, and in the
case of items (II) and (VII) below shall Lessee be permitted 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, expenses, losses and liabilities that such Indemnitee actually
incurs in connection with contesting such claim (including, without
limitation, all reasonable costs, expenses, losses, 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 any Tax of an Indemnitee which is the Owner
Participant or the Owner Trustee or the Original Loan Participant, or a
successor, assign or Affiliate of the Owner Participant or the Owner
Trustee or the Original Loan Participant, independent tax counsel selected
by the Lessee and reasonably satisfactory to such Indemnitee shall furnish
an opinion, prepared at the Lessee's expense, to the effect that there is a
"realistic possibility of success" (as set forth in American Bar
Association Formal Opinion 85-352) to contest such claim and (V) in the
case of an Indemnitee which is the Owner Participant or the Owner Trustee
or the Original Loan Participant, or a successor, assign or Affiliate of
the Owner Participant or the Owner Trustee or the Original Loan
Participant, prior to the commencement of an administrative appeal 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 is ultimately resolved on an articulated basis
32
<PAGE>
[Participation Agreement (1995 777 C)]
which clearly demonstrates that Lessee is not otherwise liable under this
Section 7(b) with respect to such Tax, (VI) if the contest of which or the
return on which such Tax is reported involves Taxes for which the Lessee
has not indemnified such Indemnitee under this Section 7(b), then the
amount of indemnified Tax in issue must exceed $25,000, and (VII) if an
Event of Default shall have occurred and be continuing, the Lessee shall
have provided security for its obligations hereunder to the Owner
Participant by placing in escrow in a manner reasonably satisfactory to the
Owner Participant sufficient funds to cover any such contested Tax or shall
have paid such Tax.
Anything herein to the contrary notwithstanding, if the contest
of any Tax also involves other Taxes which are not required to be
indemnified by Lessee pursuant to this Section 7(b), then such contest
shall be controlled solely by such Indemnitee, without the participation of
Lessee.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee but not before Lessee
shall have made all payments theretofore due to such Indemnitee pursuant to
this Section 7(b) and any other payments theretofore due under any of the
Operative Documents and, provided no Event of Default shall have occurred
and be continuing, 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 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 such amount attributable to (I) above shall not be in excess
of the amount of such Tax 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 Tax payment, 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).
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.
33
<PAGE>
[Participation Agreement (1995 777 C)]
(v) General Tax Indemnity -- Reports. Lessee will provide such
--------------------------------
information as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing 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 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, (ii) in the case of a return, statement or report required 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 20 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 and file such return, statement or report, and (iii)
in the case of a return, statement or report required to reflect items in
addition to Taxes imposed on or indemnified against by the Lessee under
this Section 7(b), Lessee shall, upon the written request of such
Indemnitee, provide such Indemnitee with such information as is within
Lessee's reasonable control. 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) hereof regarding the Lessee's right to contest, 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
34
<PAGE>
[Participation Agreement (1995 777 C)]
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 in
the nature of a notice or bill 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 Event of Default or
---------------------------------------------------------------
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 or if any amounts required to be
paid by the Lessee hereunder are due and have not been paid in full. At
such time as there shall not be continuing any such Default or Event of
Default and any amounts which are due hereunder have been paid in full,
such amount shall be paid to the Lessee to the extent not previously
applied against Lessee's obligations hereunder as and when due.
(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 at an annual interest rate equal to the Base Rate plus one
percent.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
-----------
time to time, at the Lessee's request and
35
<PAGE>
[Participation Agreement (1995 777 C)]
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, which reduction or exemption may be available to such
Indemnitee.
(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.
(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 gross or net
income (including, without limitation, capital gains taxes, minimum taxes,
income taxes collected by withholding and taxes on tax preference items) or
receipts (including in each case other than sales, use, rental, license,
value added, ad valorem or property Taxes) 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.
(xiii) Withholdings. All payments by the Lessee to Lessor in
------------
connection with the Operative Documents shall be free of withholdings
attributable to any Foreign Jurisdiction (as defined in Section
7(b)(ii)(1)) of any nature whatsoever (and at the time that the Lessee is
required to make any payment upon which any withholding is required the
Lessee shall pay an additional amount such that the net amount actually
received by the Owner Participant, the Owner Trustee (in its individual
capacity and as trustee under the Trust Agreement) or the Trust Estate
will, after such withholding, equal the full amount of the payment then
due) and shall be free of expense for collection or other charges.
(c) General Indemnity. Lessee hereby agrees to indemnify each
-----------------
Indemnitee against, and agrees to protect, save and keep harmless each of them
from (whether or not the
36
<PAGE>
[Participation Agreement (1995 777 C)]
transactions contemplated herein or in any of the other Operative Documents are
consummated), any and all Expenses imposed on, incurred by or asserted against
any Indemnitee, in any way relating to or arising out of or which would not have
occurred but for (A) the Operative Documents or any sublease of the Aircraft or
the enforcement of any of the terms thereof; (B) the manufacture, purchase,
acceptance or rejection of the Airframe or any Engine or Parts; (C) the Aircraft
(or any portion thereof) or any engine installed on the Airframe or any airframe
on which an Engine is installed whether or not arising out of the manufacture,
purchase, registration, financing, ownership, delivery, nondelivery, lease,
sublease, possession, use or non-use, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale, return or other
disposition of the Aircraft including, without limitation, latent or other
defects, whether or not discoverable, strict tort liability and any claim for
patent, trademark or copyright infringement; (D) the offer or sale of any
interest in the Trust Estate or the Trust Agreement or any similar interest on
or prior to the Delivery Date; or (E) the offer or sale of any interest in the
Loan Certificate (or other evidence of the debt relating to the Aircraft);
provided, that the foregoing indemnity shall not extend to an Indemnitee with
respect to any Expense resulting from or arising out of or which would not have
occurred but for one or more of the following: (1) any representation or
warranty by such Indemnitee in the Operative Documents being incorrect in any
material respect, or (2) the failure by such Indemnitee to perform or observe in
any material respect any agreement, covenant or condition in any of the
Operative Documents 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 any Indemnitee, a disposition (voluntary or
involuntary) by such Indemnitee of all or any part of its interest in the
Airframe or any Engine (other than as contemplated by the Lease), (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, other than, in
each of (A), (B) and (C), during the continuance of a Default or an Event of
Default under the Lease, or (5) any Tax 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 exclusively provide for
Lessee's liability with respect to Taxes), or (6) the offer or sale by the Owner
Participant
37
<PAGE>
[Participation Agreement (1995 777 C)]
after the Delivery Date of any interest in the Trust Estate or the Trust
Agreement or any similar interest other than during the continuance of a Default
or an Event of Default under the Lease, or (7) in the case of the Owner Trustee
in its individual and trust capacities, and the Affiliates, successors and
assigns thereof, 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 the Indenture Trustee, failure on the part of the
Indenture Trustee to distribute in accordance with the Trust Indenture any
amounts received and distributable by it thereunder, or (8) other than during
the continuation of a Section 14(a), (b), (h) or (i) 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 which amendments, supplements, waivers or consents (a) do
not require or receive the approval of Lessee and (b) are not occasioned by a
specific requirement of the Operative Documents, or (9) 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
exclusively provide for Lessee's liability with respect to Taxes), or (10)
except to the extent fairly attributable to acts or events occurring prior
thereto, acts or events which occur after the earlier of: (I) the commencement
of storage of the Aircraft pursuant to Section 5(d) of the Lease, other than
storage in connection with the exercise of remedies pursuant to Section 15 of
the Lease, (II) the return of possession of the Aircraft 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 Lessor shall be entitled to exercise remedies under such
Section 15), (III) the termination of the Term in accordance with Section 9 of
the Lease, (IV) the 30th day beyond the end of the Term if Lessor shall have
furnished the notice referred to in Section 10(d) of the Lease and Lessee shall
have failed to return possession to Lessor on such day, (V) the payment by
Lessee of all amounts required to be paid under the Lease following an Event of
Loss or (VI) termination of the Lease and payment by Lessee of all amounts
required to be paid by Lessee pursuant to the terms of the Operative Documents.
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
38
<PAGE>
[Participation Agreement (1995 777 C)]
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 required to be paid by such
recipient resulting from the accrual or payment of such Expense.
If, by reason of any Expense payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(c), such Indemnitee subsequently
realizes a tax deduction or credit (including foreign tax credit and any
reduction in Taxes) not previously taken into account in computing such payment,
such Indemnitee shall promptly pay to Lessee, but only if Lessee shall have made
all payments then due and owing to such Indemnitee under the Operative
Documents, 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 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 such Indemnitee shall not be obligated to make any
payment pursuant to this Section 7(c) to the extent that the amount calculated
pursuant to (I) above would exceed (x) the amount of all prior Expense payments
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 amounts received by such
Indemnitee from Lessee pursuant to this Section 7(c), less (y) the portion of
all prior payments computed pursuant to (I) above by such Indemnitee to Lessee
hereunder.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan 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, 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. 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
39
<PAGE>
[Participation Agreement (1995 777 C)]
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 its best
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, or participate in or be
consulted with respect to any such judicial or administrative proceedings if (i)
a Section 14(a), (b), (h) or (i) Default or an Event of Default shall have
occurred and be continuing or (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 Estate, the Trust Indenture Estate
or any part thereof unless in such an event Lessee shall have posted a bond or
other security satisfactory to the relevant Indemnitees in respect to such risk
or (iii) if such proceedings could, in the good faith opinion of the Indemnitee,
either have a material adverse effect on the business of the Indemnitee other
than the ownership, leasing or financing of the Aircraft or entail any risk of
criminal liability. 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.
The Indemnitee shall supply Lessee 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 without the prior written consent of Lessee (except
during the continuance of an Event of Default when such consent shall not be
required if the Indemnitee has given the Lessee at least 60 days prior written
notice of the nature and scope of 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
40
<PAGE>
[Participation Agreement (1995 777 C)]
claims under Section 5.03 or 7.01 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 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 refund 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 the Original Loan Participant or any successor, assign or
Affiliate of the Owner Participant or the Original Loan Participant or any
Person who purchases a participation in the Loan Certificates from the Original
Loan 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 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), for acting as such, other than such fees and expenses which constitute
Transaction Expenses. 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 an Event of Default or a Section 14(a),
(b), (h) or (i) Default
41
<PAGE>
[Participation Agreement (1995 777 C)]
under the Lease shall have occurred and be continuing or if any payment is due
and owing by Lessee to such Person under the Lease or any other Operative
Document. Any such amount shall be held by such Person (the Lessee hereby
granting a security interest in such amount to 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 Event of Default or 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 the Loan
Certificates held by such Certificate Holder 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 2.04(b) of the
Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
--------- -----------------------------------------
Participant represents to the other parties to this Agreement 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 it has authorized to act on its behalf (it being understood that Capstar
Partners, Inc. is not acting on behalf of the Owner Participant) has directly or
indirectly offered any interest in the Trust Estate or any Loan 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. The Owner Participant agrees not to take
any action to cause the Owner Trustee to take any action which the Owner Trustee
is not permitted to take pursuant to the terms of the Operative Documents.
(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 on the date hereof, and on the Delivery
Date will be, a Citizen of the United States. The Owner Participant agrees,
solely for the benefit of Lessee, that if during such time as the Aircraft is
registered in the United States (or if Lessee desires to register
42
<PAGE>
[Participation Agreement (1995 777 C)]
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 60 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 and any Certificate Holder for any damages which may
be incurred by Lessee or such Certificate Holder as a result of the Owner
Participant's failure to comply with its obligations pursuant to the second
sentence of this Section 8(b). Each party hereto agrees, upon the request and
at the sole expense of the Owner Participant, to cooperate with the Owner
Participant in complying with its obligations (such cooperation shall not
include any restriction on the use of the Aircraft) 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.
43
<PAGE>
[Participation Agreement (1995 777 C)]
(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 its 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 the Commonwealth of Massachusetts, without prior
written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) The Owner Trustee and Lessee agree (but neither covenanting as to
the other) that neither the Owner Trustee nor the Lessee nor anyone acting on
behalf of either or both of the Owner Trustee and Lessee will offer the Owner
Participant's interest in the Trust Estate or any part thereof for issue or sale
to, or solicit any offer to acquire any thereof from anyone so as to bring the
issuance and sale of the Owner Participant's interest within the provisions of
Section 5 of the Securities Act of 1933, as amended.
(e) Each of the Owner Participant and so long as the Original Loan
Participant is a Certificate Holder, the Original Loan Participant, agree that,
if, at any time after the Tax Attribute Period, 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) in a country listed in Exhibit G to the
Lease with which the United States maintains normal diplomatic relations or (ii)
in any other country with which the United States maintains normal diplomatic
relations and the Owner Participant and the Original Loan Participant (but in
regard to the Original Loan Participant, only so long as the Original Loan
Participant is a Certificate Holder) have not determined, acting reasonably,
that such other country would not provide substantially equivalent protection
(including the right to take possession of the Aircraft in the event of the
bankruptcy of any such Sublessee) for the rights of owner participants, lessors
or lenders in similar transactions as provided under United States law, the
Owner Participant and the Original Loan Participant (but in regard to the
Original Loan Participant only so long as the Original Loan Participant is a
Certificate Holder) will not, in the case of either (i) or (ii), unreasonably
withhold its consent to such change of registration (it being agreed that the
inability to deliver an opinion (reasonably satisfactory in form and substance
to the Owner
44
<PAGE>
[Participation Agreement (1995 777 C)]
Participant and, so long as the Original Loan Participant is a Certificate
Holder, the Original Loan Participant) of counsel reasonably acceptable to the
Owner Participant and, so long as the Original Loan Participant is a Certificate
Holder, the Original Loan Participant in such proposed country of registry to
the effect that the courts of such country would give effect to the Owner
Trustee's interests in 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 aforesaid, shall constitute the sole
reasonable grounds to withhold such consent), and if said opinion is delivered,
the Owner Participant and the Original Loan Participant (but in regard to the
Original Loan Participant, only so long as the Original Loan Participant is a
Certificate Holder) will instruct the Owner Trustee and the Indenture Trustee,
respectively, to make such change of registration; provided, however, that prior
to any such change in the country of registry of the Aircraft, the Owner
Participant, the Owner Trustee in its individual capacity and, so long as the
Original Loan Participant is a Certificate Holder, the Original Loan Participant
shall have received:
(i) assurances reasonably satisfactory to them (A) to the effect that
the insurance or self-insurance provisions of the Lease have been complied
with after giving effect to such change of registry, (B) of the payment by
Lessee of any expenses of the Owner Participant, the Owner Trustee, the
Indenture Trustee and the Original Loan Participant (but in regard to the
Original Loan Participant, only so long as the Original Loan Participant is
a Certificate Holder) 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), the
Indenture Trustee and the Original Loan Participant (but in regard to the
Original Loan Participant, only so long as the Original Loan Participant is
a Certificate Holder), 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) 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, the Owner
Participant, the Owner Trustee (in its individual capacity and as trustee
under the Trust Agreement), the Indenture Trustee and the Original Loan
Participant (but in regard to the Original Loan Participant, only so long
as the Original Loan
45
<PAGE>
[Participation Agreement (1995 777 C)]
Participant is a Certificate Holder), or the Trust Estate pursuant to
Section 7(b) hereof and (E) that such new country of registry imposes
aircraft maintenance standards not materially less stringent than those of
the FAA; and
(ii) a favorable opinion of counsel (reasonably satisfactory to the
Owner Trustee, in its individual capacity and, so long as the Original Loan
Participant is a Certificate Holder the Indenture Trustee, and to the Owner
Participant) to the Owner Participant and the Indenture Trustee 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,
the Indenture Trustee or the Original Loan Participant (but in regard to
the Original Loan Participant, only so long as the Original Loan
Participant is a Certificate Holder) 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 the Owner Participant and the Owner
Trustee, in its individual capacity, is available to cover such risk), (D)
(unless Lessee shall have agreed to provide insurance covering the risk of
requisition of use 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
United States Dollars for the loss of use of the Aircraft in the event of
the requisition by such government of such use, and (E) to such further
effect with respect to such other matters as the Owner Trustee in its
individual capacity or the Owner Participant or so long as the Original
Loan Participant is a Certificate Holder, the Indenture Trustee may
reasonably request.
Upon receipt of the foregoing opinion of counsel by the Owner
Participant, Exhibit G to the Lease shall be amended to add such country.
46
<PAGE>
[Participation Agreement (1995 777 C)]
Notwithstanding the foregoing, in the event that any such change of
registry is to a country listed on Exhibit G to the Lease, only clauses (i)(B),
(i)(C) and (i)(D) of this Section 8(e) shall be conditions to the obligations of
the Owner Participant, the Original Loan Participant, the Indenture Trustee and
the Owner Trustee under this Section 8(e).
(f) The Owner Participant represents and warrants to Lessee, the
Original Loan Participant, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity, that as of the Delivery Date:
(i) the Owner Participant is a corporation duly organized and validly
existing in good standing under the laws of its jurisdiction of
organization and is in good standing in the state in which its principal
business operations are located, 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
47
<PAGE>
[Participation Agreement (1995 777 C)]
instrument to which the Owner Participant is a party or by which it or its
properties may be bound or affected;
(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;
(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, if determined
adversely to the Owner Participant, would materially adversely affect the
financial condition of the Owner Participant or the ability of the Owner
Participant to perform its obligations under the Owner Participant
Documents;
(v) on the Delivery Date, there will be 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; and
(vi) no authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery or performance by the Owner
Participant of the Owner Participant Documents, other than approval by the
FAA of the Owner Participant's affidavit of United States citizenship.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees that it will
promptly, at its own expense, take such action as may be necessary duly to
discharge any Lessor Lien attributable to or caused by it with respect to the
Aircraft or any other portion of the Trust Estate.
(h) So long as the Aircraft shall be leased to Lessee under the Lease,
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 or any proceeds therefrom to any Person or entity, unless (i)
the proposed transferee is a "Transferee" (as defined below), (ii) the Owner
Participant shall have delivered to the Owner Trustee, the Lessee and the
Indenture Trustee an opinion (in form, scope and substance reasonably
satisfactory to the Indenture Trustee and Lessee) of counsel reasonably
satisfactory to the Indenture Trustee and Lessee (which may be the Owner
Participant's General Counsel, provided such counsel need not be reasonably
satisfactory to Lessee during the continuance of an Event of
48
<PAGE>
[Participation Agreement (1995 777 C)]
Default under the Lease) to the effect that the agreement referred to in clause
(O) below and any guaranty required by clause (C) below, if any, are the legal,
valid, binding and enforceable obligation of the Transferee and the guarantor,
if any, as the case may be (subject to the normal bankruptcy and equitable
remedies exceptions contained in an opinion on such matters), and (iii) Lessee
shall have (1) received an opinion (in form and substance reasonably
satisfactory to Lessee) of counsel to the Owner Participant (who shall be
reasonably satisfactory to Lessee, provided such counsel need not be reasonably
satisfactory to Lessee during the continuance of an Event of Default under the
Lease) to the effect that such transfer will not result in an increase in the
tax liability of Lessee or (2) received from the Owner Participant so seeking to
transfer such right, title or interest, indemnification, pursuant to an
agreement reasonably satisfactory to Lessee, for any increase in the tax
liability of 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, Indenture Trustee and Lessee a guaranty satisfactory to them
(except that such guaranty need not be satisfactory to Lessee during the
continuance of an Event of Default under the Lease) 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, (C) any other entity, provided such
obligations are guaranteed by the transferor Owner Participant and, if the
obligations of such Owner Participant are guaranteed as provided in the
foregoing provisions of this Section 8(h), the related guarantor, or (D) any
other entity approved by the Lessee, Owner Trustee and Indenture Trustee
provided that the approval of the Lessee shall not be required so long as a
Section 14(a), (b), (h) or (i) Default or an Event of Default under the Lease
shall have occurred and be continuing; provided, however, that any Transferee
shall not 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, (N) the Transferee has the requisite power and
authority to enter into and carry out the transactions contemplated hereby, (O)
the Transferee enters into an agreement or agreements, in form and
49
<PAGE>
[Participation Agreement (1995 777 C)]
substance reasonably satisfactory to the Owner Trustee, the Indenture Trustee
and Lessee whereby Transferee confirms that it shall be deemed a party to this
Agreement and a party to the Trust Agreement and agrees to be bound by all the
terms of, and to undertake all of the obligations of the transferor Owner
Participant contained in the Owner Participant's Documents and makes
representations of the scope provided for as to the Owner Participant in each of
the Operative Documents, (P) such transfer does not violate any applicable law
including, without limitation, the Federal Aviation Act, or any rules or
regulations promulgated thereunder, or the Securities Act of 1933, as amended,
(Q) the transferor Owner Participant assumes the risk of any loss of FSC
Benefits, Amortization Deductions, Interest Deductions, State Tax Deductions and
MACRS Deductions 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 two Owner Participants at that time (it
being understood that the original Owner Participant and any Affiliate (as
defined in the Lease) of the original Owner Participant shall, for the purpose
of counting Owner Participants, be deemed to be one Owner Participant) and (S)
such transfer will not give rise to a Default or Event of Default under the
Trust Indenture; and Lessee may request such Transferee to provide an opinion of
counsel (who shall be reasonably satisfactory to Lessee, provided such counsel
need not be reasonably satisfactory to Lessee during the continuance of an Event
of Default under the Lease) in form and substance reasonably satisfactory to
Lessee as to any matter set forth in clauses (N) or (P) and as to such other
matters as Lessee may reasonably request (it being understood that counsel may
rely on an opinion of Lessee's counsel as to matters relating to Lessee). Upon
any such transfer by the Owner Participant as above provided, 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).
If the Owner Participant intends to transfer any of its interests hereunder, it
shall give 10 Business Days (2 Business Days during the continuance of an Event
of Default under the Lease) prior written notice thereof to the Owner Trustee,
the Indenture Trustee and Lessee, specifying the name and address of the
proposed Transferee and providing financial statements of the proposed
Transferee. The Owner Participant shall pay all of its costs of any such
transfer and shall reimburse Lessee, Indenture
50
<PAGE>
[Participation Agreement (1995 777 C)]
Trustee, any Certificate Holder and the Owner Trustee for all reasonable costs
and Expenses of any such transfer, except that Lessee shall be responsible for
its own costs and Expenses and shall reimburse the Owner Participant for all
other costs and Expenses if such transfer shall occur during the continuation of
an Event of Default under the Lease. For purposes of this paragraph, "Net
Worth" shall mean the excess of total assets over total liabilities, each to be
determined in accordance with generally accepted accounting principles
(applicable to such Transferee) consistently applied.
(i) 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 ERISA (an "ERISA
Plan"). The Original Loan Participant represents and warrants that no part of
the funds used by it to acquire the Loan Certificates or any interest therein
(including any participation in such certificates) constitutes assets of an
ERISA Plan. Lessee represents and warrants that the execution and delivery of
this Agreement and the other Operative Documents and the consummation of the
transactions contemplated hereby and thereby will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code (such representation being made solely in reliance upon and subject to the
accuracy of the representations contained in the preceding sentences of this
subsection).
(j) State Street Bank and Trust Company both in its individual
capacity (except with respect to subsection (vii) below) and as Owner Trustee
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 State Street Bank and Trust Company in its individual capacity, and
there are no Liens attributable to State Street Bank and Trust Company in
its individual capacity affecting the title of the Owner Trustee to the
Aircraft or resulting from any act or claim against State Street Bank and
Trust Company in its individual capacity 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
51
<PAGE>
[Participation Agreement (1995 777 C)]
resulting from the nonpayment by State Street Bank and Trust Company in its
individual capacity of any Taxes imposed or measured by its net income;
(iii) it is a banking corporation duly organized and validly existing
in good standing under the laws of the jurisdiction of its incorporation
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
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;
(iv) 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 or compliance with any of the terms
and provisions thereof 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 agreement to
which it is a party or by which it or its properties may be bound or
affected;
(v) 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 the Trust Agreement is a legal,
valid and binding obligation of State Street Bank and Trust Company in its
individual capacity and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vi) 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;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft was conveyed to it by Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or any similar securities for sale to, or solicited any
offer to acquire the same
52
<PAGE>
[Participation Agreement (1995 777 C)]
from, anyone, and no responsible officer or responsible employee of State
Street Bank and Trust Company has knowledge of any such offer or
solicitation, except as set forth in Section 7(a)(xi);
(ix) there are no proceedings pending, or to the knowledge of State
Street Bank and Trust Company threatened, against State Street Bank and
Trust Company in any court or before any governmental authority or
arbitration board or tribunal which, if adversely determined, would
materially and adversely affect the right, power and authority of State
Street Bank and Trust Company to enter into or perform its obligations
under the Owner Trustee Documents;
(x) neither the due execution and delivery of the Owner Trustee
Documents by State Street Bank and Trust Company, 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 governmental authority or
agency pursuant to any federal or Massachusetts law governing the banking
or trust powers of State Street Bank and Trust Company; and
(xi) 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 State Street Bank and
Trust Company in its individual capacity and which is presently continuing.
(k) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any undertaking delivered by it as contemplated in
Section 9(c) of the Lease and shall indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any additional rents paid by Lessee and
the reasonable fees and expenses of lawyers, appraisers, brokers or accountants)
incurred as a consequence of such failure to comply with such undertaking. 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 Exhibit E to the Lease and all costs and expenses that are for the
account of the Owner Trustee pursuant to Sections 3(f), 5(d) and 5(e) of the
Lease.
(l) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner Participant, the Owner Trustee and the
Indenture Trustee
53
<PAGE>
[Participation Agreement (1995 777 C)]
covenants and agrees that (i) if Lessee elects to terminate the Lease pursuant
to Section 9(a)(1) of the Lease and to purchase the Aircraft pursuant to Section
9(b) or 19(b)(1) of the Lease, then each of the 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, may, provided no Section 14(a), (b), (h) or (i) Default or Event of
Default shall have occurred and be continuing (unless such Section 14(a), (b),
(h) or (i) Default or Event of Default is waived by the Indenture Trustee),
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
9(b) or 19(b)(1) of the Lease, as applicable) the obligations of the Owner
Trustee pursuant to Section 2.15 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.
(m) Lessee will 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:
(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;
54
<PAGE>
[Participation Agreement (1995 777 C)]
(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 and the
Owner Participant 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 payment of the Rent due and to become due
under the Lease and the due and punctual performance and observance of each
covenant and condition of the Operative Documents 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 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(m) and
that all conditions precedent herein provided for relating to such
transaction have been complied with;
(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(m), 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 with the same
effect as if such successor corporation or Person had been named as Lessee
herein. 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
55
<PAGE>
[Participation Agreement (1995 777 C)]
corporation or Person which shall theretofore have become such in the manner
prescribed in this Section 8(m) from its liability in respect of any Operative
Document to which it is a party.
(n) 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 Manufacturer's FAA Bill of Sale, the Owner
Trustee's FAA Bill of Sale, 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 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.
(o) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Stipulated Loss Value percentages and Termination Value percentages, 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.
(p) The Owner Participant shall pay an amount which on an after-tax
basis shall be equal to all of the Expenses of all parties to any adjustment of
Basic Rent pursuant to Section 3(c)(ii) of the Lease, including without
limitation the reasonable fees and expenses of such parties' counsel and
advisors, it being agreed by the parties hereto that such expenses shall not
constitute "Transaction Expenses" pursuant to Section 16 hereof, shall not be
taken into consideration in any adjustment to Basic Rent, Stipulated Loss Value
percentages or Termination Value percentages pursuant to the Lease and shall not
be subject to the indemnity contained in Section 7(c) hereof.
(q) The Original Loan Participant represents and warrants and, by
acceptance of its Loan Certificate, each other Certificate Holder shall be
deemed to have represented and warranted, that neither it nor anyone acting on
its behalf has offered any Loan Certificates or any similar securities relating
to the Aircraft for sale to, or solicited any offer to buy any Loan Certificates
or any similar securities relating to the Aircraft from, any person or entity
other than in a manner permitted by the Securities Act of 1933, as amended, and
the
56
<PAGE>
[Participation Agreement (1995 777 C)]
rules and regulations promulgated thereunder and the securities laws, rules and
regulations of any state.
(r) 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
Indenture 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 hereof 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 IV or V of the Trust Indenture, or (B) 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.
(s) The Original Loan Participant represents, warrants and covenants
that:
(i) it is a bank duly organized and validly existing in good standing
under the laws of its jurisdiction of organization and has full power,
authority and legal right to execute, deliver and carry out the terms of
this Agreement;
(ii) this Agreement has been duly authorized, executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Original Loan Participant enforceable against it in accordance with its
terms; and
(iii) the Loan Certificates to be issued to it pursuant to the Trust
Indenture are being acquired by it with no present intent to make any
resale or distribution thereof which would require registration under the
Securities Act of 1933, as amended, and it will not offer or sell any Loan
Certificates in violation of the Securities Act of 1933, provided that the
disposition of its property shall at all times be and remain within its
control.
57
<PAGE>
[Participation Agreement (1995 777 C)]
(t) The Indenture Trustee, and by its acceptance of the Loan
Certificates, each Certificate Holder 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, Break Amount, 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 Reform Act of 1978 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 any Certificate Holder 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, Break Amount, if any, or interest on the Loan Certificates and
(iii) a Certificate Holder 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 or the Indenture Trustee shall (except in
the case of the Indenture Trustee, to the extent that such Excess Payment has
theretofore been distributed) 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(t), "Excess Payment" means the amount by which such
payment exceeds the amount which would have been received by such Certificate
Holder 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(t) shall prevent any Certificate Holder 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).
(u) The Indenture Trustee represents, in its individual capacity, 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 8.02 of the Trust
58
<PAGE>
[Participation Agreement (1995 777 C)]
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association under the laws of the
United States of America and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Loan Certificates;
(iii) the Indenture Trustee Documents and the authentication of the
Loan Certificates have been duly authorized by all necessary corporate
action on its part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or Utah law or regulation relating to its 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; and
(iv) each of the Indenture Trustee Documents has been duly executed
and delivered by it and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto, is the legal,
valid and binding obligation of the Indenture Trustee, enforceable against
it in accordance with its terms.
(v) First Security Bank of Utah, National Association and State Street
Bank and Trust Company, each in its individual capacity, agrees for the
benefit of Lessee and the Owner Participant to comply with the terms of the
Trust Indenture which it is required to comply with in its individual
capacity.
(w) The Original Loan Participant and each subsequent Certificate
Holder represents, warrants and covenants that it will not sell, assign, grant
participations in or otherwise transfer its Loan Certificate or Loan
Certificates to any other Person unless such Person represents and warrants, in
writing, to the Original Loan Participant or such Certificate Holder, for the
benefit of the Original Loan Participant or said Certificate Holder, Owner
Participant and Lessee that at least one of the following statements is an
accurate representation as to such Person and/or the source of funds to be used
by such Person to acquire the Loan Certificate or Loan Certificates or
participation therein:
(i) no part of such funds directly or indirectly constitutes or may
be deemed under the Code, ERISA or any
59
<PAGE>
[Participation Agreement (1995 777 C)]
applicable state law or any rulings or regulations thereunder to be assets
of an ERISA Plan, and the Loan Certificate (or participations therein)
shall neither directly or indirectly constitute, nor be deemed to
constitute, the assets of any ERISA Plan; or
(ii) such Person is an insurance company and such funds constitute
assets allocated to a separate account maintained by it which is a "pooled
separate account" (within the meaning of Section 3(17) of ERISA and
Prohibited Transaction Class Exemption 90-1 issued by the Department of
Labor ("PTE 90-1")) in which an ERISA Plan has an interest and the
acquisition is, and the subsequent holding of Loan Certificates shall at
all times thereafter be, entitled to full relief under the prohibited
transaction exemption granted by PTE 90-1; or
(iii) such Person is a bank and such funds constitute assets
allocated to a bank collective investment vehicle maintained by it as a
"collective investment fund" (as defined in Prohibited Transaction Class
Exemption 91-38 issued by the Department of Labor ("PTE 91-38")) in which
an ERISA Plan has an interest and the acquisition is, and the subsequent
holding of Loan Certificates shall at all times thereafter be, entitled to
full relief under the prohibited transaction exemption granted by PTE 91-
38; or
(iv) such funds constitute assets of an "investment fund" in which an
ERISA Plan has an interest and which is managed by a "qualified
professional asset manager" or "QPAM" (as such terms are defined in Part V
of Prohibited Transaction Class Exemption 84-14 issued by the Department of
Labor ("PTE 84-14") and the acquisition is, and the subsequent holding of
the Loan Certificates shall at all times thereafter be, entitled to full
relief under the prohibited transaction exemption granted by PTE 84-14; or
(v) such funds constitute assets of one or more ERISA Plans, each of
which is a "governmental plan" (as such term is defined in Section 3(32) of
ERISA and in Section 414(d) of the Code) or a "church plan" (as such term
is defined in Section 3(33) of ERISA and in Section 414(e) of the Code) and
the acquisition and subsequent holding of the Loan Certificates will not
result in, arise from, constitute or involve a transaction that is
prohibited transaction under ERISA, the Code or any applicable state law;
provided, that the Original Loan Participant and any subsequent Certificate
Holder may grant participations in any Loan Certificates held by it only in
accordance with
60
<PAGE>
[Participation Agreement (1995 777 C)]
Section 8(y) hereof. Any such Person shall also represent and warrant that
it will require any transferee of its interest in any Loan Certificates to
make the representations and warranties set forth in the preceding sentence
of this Section 8(w) and this sentence in writing, to such Person for the
benefit of such Person, the Owner Participant and Lessee.
In the event that there is a change of law that, in the reasonable
judgment of Lessee, establishes a clear standard under which a prohibited
transaction in connection with, arising out of, or resulting from the use of
assets of an insurance company general account ("General Account Assets") would
be exempt from excise tax under Section 4975 of the Code, and the restrictions
imposed by Section 406 and 407 of ERISA and any penalty under Section 502(i) of
ERISA ("ERISA Change of Law"), the Lessee and the Original Loan Participant
and/or the Certificate Holders shall negotiate in good faith in order to agree
upon a representation, reasonably satisfactory to the Lessee and a Majority in
Interest of Certificate Holders (as defined in the Trust Indenture), which may
be made by Persons pursuant to this Section 8(w) with respect to use of General
Account Assets to acquire the Loan Certificate or participation therein, in lieu
of making one or more of the representations set forth in paragraphs (i) through
(v) above. Such representation shall, to the extent consistent with the ERISA
Change of Law, (A) permit such Person to represent that the General Account
Assets are the type of assets covered by the ERISA Change of Law and that such
Person and assets comply with the requirements necessary to afford the parties
hereto the protection of the ERISA Change of Law, and (B) be drafted in a manner
analogous to the representations set forth in Section 8(w)(ii) so that each of
the Lessee and Owner Participant shall not have to engage in any diligence to
ensure the applicability of the ERISA Change of Law.
(x) The Original Loan Participant represents and each subsequent
Certificate Holder by its acceptance of such Loan Certificate shall be deemed to
represent that it is exempt from United States withholding taxes, and each
Certificate Holder covenants that, if required to obtain or renew such
exemption, it will, upon request and to the extent it remains lawfully able to
do so, properly prepare and promptly furnish to each of the Owner Trustee, the
Indenture Trustee and the Lessee Internal Revenue Service Form 1001, Form 4224
(with respect to each tax year) or Form W-8, whichever is applicable. Each
Certificate Holder shall indemnify (on an after-tax basis) and hold harmless the
Indenture Trustee, the Owner Trustee, Lessee and the Owner Participant against
any United States withholding taxes (and related interest and penalties) which
the Indenture Trustee fails to withhold on payments to it as a result of its
failure to provide the required
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[Participation Agreement (1995 777 C)]
certificate or form or the invalidity of any certificate or form provided by it
pursuant to this Section 8(x). Any amount payable hereunder by any Certificate
Holder shall be paid within 30 days after receipt by such Certificate Holder of
a written demand therefor.
(y) The Original Loan Participant covenants that it will not grant
participations in its Loan Certificates to any Person unless such Person
represents and warrants, in writing, to the Original Loan Participant and for
the benefit of the Original Loan Participant, Owner Participant and Lessee that
no part of the funds used by it to acquire its interest in the Loan Certificates
constitutes assets of an ERISA Plan. Any such Person shall require any
transferee of its interest in the Loan Certificates to make the representation
in the preceding sentence, in writing, to such person for its benefit and the
benefit of the Original Loan Participant, Owner Participant and Lessee.
SECTION 9. [INTENTIONALLY OMITTED].
---------
SECTION 10. Other Documents; Amendment. Each of the Owner
---------- --------------------------
Participant and the Owner Trustee hereby (A) agrees with Lessee 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 (so long as no Event
of Default under the Lease shall have occurred and be continuing) 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 a Section
14(a), (b), (h) or (i) Default or an Event of Default shall have occurred and be
continuing, 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. The Certificate Holders
agree that they 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.
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[Participation Agreement (1995 777 C)]
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
---------- ---------------------------
with the Owner Participant, 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 Indenture
Trustee, the Owner 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
execution and delivery of the Owner Trustee's FAA Bill of Sale, 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).
(b) Lessee, at its expense, will cause the Manufacturer's FAA Bill of
Sale, the Owner Trustee's FAA Bill of Sale, the Trust Agreement, the Trust
Indenture and all supplements and amendments to the Trust Indenture, the Lease,
all Lease Supplements and all amendments to the Lease, to be promptly filed and
recorded, or filed for recording, to the extent required under the Federal
Aviation Act or under any other applicable law. Upon the execution and delivery
of the Manufacturer's FAA Bill of Sale, the Owner Trustee's FAA Bill of Sale,
the Lease Supplement covering the Aircraft, the Trust Indenture and the Trust
Supplement, the Lessee shall cause the Lease, the Lease Supplement, the Trust
Indenture and Trust Supplement to be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
-----
Manufacturer's FAA Bill of Sale, second, the Owner Trustee's FAA Bill of Sale,
------
third, the FAA registration application, fourth, the Trust Indenture with Trust
- ----- ------
Agreement and the Trust Supplement attached and fifth, 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
63
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[Participation Agreement (1995 777 C)]
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
prepaid telex, TWX or telegram (with messenger delivery specified in the case of
a telegram), 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 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 telex, TWX
or telecopier numbers) as follows: (A) if to Lessee, the Owner Trustee, the
Original Loan Participant, the Indenture Trustee 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 2.07 of the Trust Indenture.
(b) Each party to this Agreement and, by acceptance of its Loan
Certificate, each subsequent Certificate Holder (individually a "Party" and
collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises out of or relates 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 their right to
64
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[Participation Agreement (1995 777 C)]
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 should 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 adversely 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, (D) the Owner Participant 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 result in any Loss of MACRS
Deductions, Interest Deductions, FSC Benefits, State Tax Deductions or
Amortization Deductions, or result in an Inclusion Event (as such terms are
defined in the
65
<PAGE>
[Participation Agreement (1995 777 C)]
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 described
in 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. The Owner
Participant agrees with Lessee that it will not consent to or direct a change in
the situs of the Trust Estate without the prior written consent of Lessee unless
(i) the Owner Participant, the Owner Trustee, the Indenture Trustee, the
Certificate Holders and the Trust Estate each waives its rights to any indemnity
payable by the Lessee pursuant to Section 7(b) as a result of such change in
situs or (ii) such change shall occur during the continuation of an Event of
Default.
SECTION 15. Miscellaneous. (a) Each of the Owner Participant and
---------- -------------
each Certificate Holder 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 hereof or 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 Original Loan Participant
and the Owner Participant provided for in this Agreement, and Lessee's, the
Owner Trustee's, the Indenture Trustee's, Original Loan Participant's and the
Owner Participant's 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 or the Trust Indenture Estate and the
expiration or other termination of this Agreement or any other Operative
Document.
(c) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed
66
<PAGE>
[Participation Agreement (1995 777 C)]
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, Lessee, the
Participants, the Indenture Trustee 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 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
and the other Operative Documents.
(e) This Agreement shall be binding upon and shall inure to the
benefit of, and shall be enforceable by, the parties hereto and their respective
successors and permitted assigns including each successive holder of the Owner
Participant's
67
<PAGE>
[Participation Agreement (1995 777 C)]
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 any such holder of rights and obligations under this Agreement has
been made.
(f) 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.
(g) The parties to this Agreement hereby acknowledge that they have
irrevocably instructed their respective counsel to deliver, to and for the
benefit of the addressees thereof, the opinions of such counsel referred to in
and required by Sections 4(a)(xi), 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv),
4(a)(xvi) and 4(b)(v), as the case may be, of this Agreement.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
---------- --------------------------------
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly (but
in any event, no later than the Commencement Date or, in the case of Transaction
Expenses incurred in connection with a refinancing pursuant to Section 20
hereof, within 90 days after such refinancing) submit to the Owner Trustee and
Lessee for their joint approval copies of invoices of the Transaction Expenses
as they are received. The Owner Participant agrees to promptly 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 (i) the Owner Participant's expenses (including the fees, expenses
and disbursements of counsel for the Owner Participant) shall be borne by the
Owner Participant if such failure to consummate the transactions results from
the Owner Participant's gross
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<PAGE>
[Participation Agreement (1995 777 C)]
negligence, willful misconduct or failure to negotiate in good faith and (ii)
the Original Loan Participant's expenses (including the fees, expenses and
disbursements of counsel for the Owner Participant) shall be borne by the
Original Loan Participant if such failure to consummate the transactions results
from the Original Loan Participant's gross negligence, willful misconduct or
failure to negotiate in good faith. In addition, upon such failure to
consummate, Lessee (unless such failure to consummate results from the fault of
the Original Loan Participant) shall pay the Original Loan Participant any
applicable Break Amount.
SECTION 17. Optional Redemption of Loan Certificates. (a) 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 (pursuant to
Section 2.11 of the Trust Indenture) by the Owner Trustee as part of a refunding
or refinancing transaction, the Owner Participant agrees to negotiate promptly
in good faith 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 good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) 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) (based on information provided by Lessee
and on the agreement reached between the Lessee and the Owner Participant)
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 and EBO Percentage. Within ten (10) 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 clause
(ii)(B) above. Upon the acceptance by Lessee of the accuracy of the
information set forth in clause (ii)(B) above or the determination pursuant
to such verification procedures of
69
<PAGE>
[Participation Agreement (1995 777 C)]
the revised Basic Rent, Excess Amount, debt amortization, Stipulated Loss
Value Percentages, 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 subparagraphs (2)
through (8) 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
subject to the approval of the Owner Trustee, in its sole discretion, 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 and the Excess Amount 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,
Termination Value and EBO Percentage 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;
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<PAGE>
[Participation Agreement (1995 777 C)]
(5) whether or not such refunding or refinancing transaction is
consummated, Lessee shall pay all of the Expenses of all parties to such
refunding or refinancing, including without limitation, the fees and
expenses of such parties' counsel and any related loan or commitment fees
and including payment of Break Amount; and
(6) the parties hereto agree that, on the day immediately preceding
the closing date of such refunding or refinancing transaction (such closing
date, the "Section 17 Refinancing Date"), an amount equal to all accrued
and unpaid interest on the Loan Certificates (for purposes of this Section
17, the "Interest Amount") shall be paid as follows: (i)if such Section 17
Refinancing Date is to occur on or prior to the Commencement Date, the
Owner Participant on behalf of the Owner Trustee shall pay to the Indenture
Trustee an amount equal to the lesser of the Interest Amount payable on the
Section 17 Refinancing Date and the product of (A) the Excess Amount
multiplied by (B) a fraction, the numerator of which is the number of days
elapsed from the Delivery Date until the Section 17 Refinancing Date and
the denominator of which is the number of days in the period from the
Delivery Date until the Commencement Date (which payment shall be treated
as a prepayment of the Excess Amount and shall satisfy in full the
obligations of the Owner Participant pursuant to the last paragraph of
Section 2(b) hereof) and the Lessee shall pay to the Indenture Trustee (on
behalf of the Owner Trustee) an amount equal to the excess, if any, of the
Interest Amount payable on the Section 17 Refinancing Date over the amount
payable hereunder by the Owner Participant on such date (which payment
shall be treated as a payment of Supplemental Rent in full satisfaction of
the Lessee's obligations set forth in the penultimate sentence of Section
3(d) of the Lease), or (ii) if such Section 17 Refinancing Date occurs
after the Commencement Date, the Lessee shall make a prepayment of Rent on
the day immediately preceding the Section 17 Refinancing Date equal to the
Interest Amount payable on such date provided that, in either case, Rent
shall be adjusted in connection with such refunding or refinancing to
reflect such prepayment of accrued and unpaid interest on the Loan
Certificates and the prepayment, if any, by Lessee of Rent in connection
therewith. Any payment to the Indenture Trustee made in accordance with
this Section 17(a)(6) shall be applied on the Section 17 Refinancing Date
to pay any such accrued and unpaid interest;
(7) subject to compliance by the Owner Trustee with all applicable
terms and conditions for voluntary redemption under the Trust Indenture and
this Agreement, each
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<PAGE>
[Participation Agreement (1995 777 C)]
Certificate Holder being refinanced or refunded will transfer on the
applicable Refinancing Date to the Owner Trustee the Loan Certificates held
by it immediately prior to such refunding or refinancing for cancellation
in accordance with the terms of the Trust Indenture (and the Owner Trustee
shall cancel the same), against simultaneous receipt by such Certificate
Holder of the then outstanding principal amount of such Certificates,
accrued and unpaid interest thereon, plus Break Amount, 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 Loan Certificates
or the Trust Indenture; and
(8) the appropriate parties will execute and deliver appropriate
closing documents in form and substance satisfactory to the Owner
Participant, Indenture Trustee, Lessee and new Certificate Holder, execute
and deliver appropriate closing certificates and deliver appropriate
opinions of counsel.
(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. Any
public offering of the New Debt shall not (i) contain the name of the Owner
Participant or any of its Affiliates in any prospectus distributed in connection
therewith (unless the Owner Participant shall consent in writing) and (ii)
except as requested by Lessee or except to the extent a prohibited transaction
tax or penalty could be imposed under the Code or ERISA contain any restrictions
on the sale to Certificate Holders who may use ERISA funding sources. 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 increases its or any of its Affiliates' exposure to either (x) (i)
regulation under state or federal securities laws or (ii) the need to publicly
disclose information that is not generally available to the public, or (y)
adversely affects its or any of its Affiliates respective ability to engage in
any other financing transaction, in each case to a level unacceptable to it in
its reasonable, good faith judgment. 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 in connection with such refunding or
refinancing Lessee shall have agreed to indemnify the Owner Participant with
respect to such right in a manner reasonably satisfactory to the Owner
Participant and, in any event, Lessee shall only be entitled to purchase such
debt in an amount not exceeding the equivalent to the next two succeeding
installments
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<PAGE>
[Participation Agreement (1995 777 C)]
of Basic Rent under the Lease. 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, Salt Lake City, Utah
or Boston, Massachusetts and having a combined capital and surplus of at least
$100,000,000 (or, if less, then its obligations shall be guaranteed by an entity
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 Owner Participant, the Owner Trustee and the
Indenture Trustee at least twenty-five (25) days irrevocable written notice of
the proposed date of the refunding or refinancing.
(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 reasonable, good faith judgment,
there is a risk that such transaction would have an adverse tax or ERISA
consequence on it and Lessee is promptly notified in writing of the nature
of such risk of an adverse tax or ERISA consequence; provided, however,
that the Owner Participant will be obligated to proceed with such refunding
or refinancing if (1) Lessee provides adequate remuneration to Owner
Participant if the Owner Participant's counsel cannot provide an opinion
that with regard to such identified risk there is a Realistic Possibility
of Success (as defined in the Tax Indemnity Agreement) that no adverse tax
consequence shall result from such transaction, or (2) Owner Participant is
indemnified by Lessee in a manner acceptable to the Owner Participant in
its reasonable discretion if the Owner Participant's counsel can provide an
opinion that with regard to such identified risk there is a Realistic
Possibility of Success that no adverse tax consequence shall result from
such transaction. The Owner Participant and the Lessee agree that the
existence of the right to cause a refunding or refinancing hereunder shall
not be considered to result in any risk of an adverse tax consequence;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the
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; or
73
<PAGE>
[Participation Agreement (1995 777 C)]
(iii) unless Lessee indemnifies Owner Trustee and Owner Participant for
any cost or expense (including, without limitation, reasonable attorneys'
fees) related to or arising out of any such refunding or refinancing
transaction.
(e) There shall be no more than two optional redemptions or refundings
under this Section 17.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
------------
Date occurs other than on May 31, 1995 or (ii) Transaction Expenses paid by
Lessor are determined to be other than .75% 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, request the Owner Participant to optimize the Basic Rent,
Excess Amount, Stipulated Loss Value Percentages, Termination Value Percentages
and EBO Percentage. 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 and EBO Percentage. Within fifteen (15) 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 Owner Trustee to execute an amendment to the Lease
setting forth the optimized Basic Rent, Excess Amount, Stipulated Loss Value
Percentages, Termination Value Percentages and EBO Percentage, and the Lessee
will execute such amendment to the Lease and the Indenture Trustee will execute
any amendments to the Trust Indenture necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value Percentages, Termination Value Percentages and
EBO Percentage pursuant to this Section 18 and Section 3(c) of the Lease, (M)
the Certificate Holders will agree to changes in the amortization schedule of
the Loan Certificates, and (N) each Certificate Holder will exchange the Loan
Certificates held by it immediately prior to such optimization for new Loan
Certificates containing optimized amortization schedules; provided, that such
changes do not (X) increase or decrease the principal amount of the Loan
Certificates outstanding as of the time of such exchange, (Y) change the final
maturity date of any Loan Certificate, or (Z) increase or decrease by more than
six months the original
74
<PAGE>
[Participation Agreement (1995 777 C)]
Weighted Average Life to Maturity (determined as of the Delivery Date) of the
Loan Certificates.
(c) There shall be no material adverse impact to the Owner Participant
by reason of such optimization (including, without limitation, the risk of an
adverse tax consequence).
(d) Lessee shall pay (i) all of the reasonable Expenses of all parties
to such optimization, including, without limitation, the reasonable fees and
expenses of such parties' counsel, and (ii) any Break Amount resulting from such
optimization.
(e) No optimization shall occur pursuant to this Section 18 prior to a
refinancing of the Loan Certificates pursuant to either Section 17 or Section 20
hereof.
SECTION 19. [Intentionally Omitted].
SECTION 20. Refinancing. (a) In addition to the provisions set
-----------
forth in Section 17, whether or not a refunding or refinancing pursuant to such
Section 17 shall have previously occurred, at any time the Lessee shall have the
right to request the Owner Participant and the Owner Trustee to effect a
voluntary prepayment of all of the outstanding Loan Certificates (in compliance
with Section 2.11 of the Trust Indenture) in connection with a refunding or
refinancing transaction with refinancing indebtedness (such refinancing
hereinafter referred to as the "Section 20 Refinancing"). Promptly on receipt
of such request (which request shall specifically designate such refinancing as
the Section 20 Refinancing), the Owner Participant will negotiate in good faith
with the Lessee as to the terms of such Section 20 Refinancing and if after such
good faith negotiation the Lessee and the Owner Participant shall have concluded
an agreement with respect to such terms:
(1) within seven (7) 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 "Section 20
Refinancing Certificate") setting forth (i) (based on information provided
by Lessee and on the agreement reached between the Lessee and the Owner
Participant) 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 "Section 20 Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Section 20 Refinancing Date, and (B) the proposed revised
schedules of Excess
75
<PAGE>
[Participation Agreement (1995 777 C)]
Amount, Basic Rent, debt amortization, Stipulated Loss Value Percentages,
Termination Value Percentages and EBO Percentage. The principal amount of
debt to be issued by the Owner Trustee on the Section 20 Refinancing Date
may exceed the aggregate principal amount of the Loan Certificates (plus
accrued interest thereon) outstanding on such date by up to 5.5% or such
other amount as the Owner Participant may agree, and the term of debt to be
issued by the Owner Trustee on the Section 20 Refinancing Date may exceed
the remaining term on the Loan Certificates by more than six months;
provided that the foregoing shall be applicable to only one refinancing
pursuant to this Section 20 notwithstanding that Lessee is requesting or
has requested a refinancing of the Loan Certificates with debt constituting
interim debt as contemplated by the parenthetical contained in Section
20(b) hereof. Within seven (7) Business Days of its receipt of the Section
20 Refinancing Certificate, Lessee may demand a verification pursuant to
Exhibit E to the Lease of the information set forth in clause (ii)(B)
above. Upon the acceptance by Lessee of the accuracy of the information
set forth in clause (ii)(B) above or the determination pursuant to such
verification procedures of the revised Excess Amount, Basic Rent, debt
amortization, Stipulated Loss Value Percentages, Termination Value
Percentages and EBO Percentage (such information, the "Section 20
Refinancing Information") the appropriate parties will take the actions
specified in paragraphs (2) through (11) 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 a public
offering of such debt or the purchase of such debt by a publicly funded
entity (or entities)) with the institution or institutions to be named
therein providing for (i) the issuance and sale by the Owner Trustee to
such institution or institutions on the Section 20 Refinancing Date of debt
securities in an aggregate principal amount specified in the Section 20
Refinancing Information (such debt securities, the "Section 20 New Debt"),
and (ii) the application of the proceeds of the sale of the Section 20 New
Debt to the prepayment of all the Loan Certificates outstanding on the
Section 20 Refinancing Date and (iii) the payment of the excess of such
proceeds over the amount necessary to effect such prepayment to the Owner
Trustee for payment to the Owner Participant (which shall Dollar for Dollar
reduce the Owner Participant's Commitment);
76
<PAGE>
[Participation Agreement (1995 777 C)]
(3) Lessee and the Owner Trustee will amend the Lease to provide that
(i) Basic Rent and Excess Amount payable in respect of the period from and
after the Section 20 Refinancing Date shall be as provided in the Section
20 Refinancing Information and (ii) amounts payable in respect of
Stipulated Loss Value, Termination Value and the EBO Percentage from and
after the Section 20 Refinancing Date shall be as provided in the Section
20 Refinancing Information;
(4) the Owner Trustee will enter into an agreement to provide for the
securing thereunder of the Section 20 New Debt in like manner as the
outstanding 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;
(5) upon the closing of such refunding or refinancing (and as
indemnification for the loss resulting therefrom), the Lessee on behalf of
the Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (without duplication of other
amounts, if any, payable pursuant to any other provision of the Operative
Documents);
(6) except as provided in paragraph (5) above, the Owner Trustee shall
pay all of the costs of such refunding or refinancing, such costs shall be
considered as Transaction Expenses and such additional Transaction Expenses
shall be appropriately considered in calculating the proposed revised
schedules of Excess Amount, Basic Rent, debt amortization, Stipulated Loss
Value Percentages, Termination Value Percentages and EBO Percentage [;
provided that if, pursuant to the parenthetical contained in Section 20(b)
hereof, the Lessee is requesting a refinancing of the Loan Certificates
with debt constituting interim debt, the Lessee shall pay all such costs if
the effect of such refinancing when compared to the existing debt is not to
extend the term and increase the aggregate outstanding principal amount in
the manner contemplated by Section 20(a)(1) hereof.];
(7) the Original Loan Participant will deliver to the Owner Trustee
the Loan Certificates held by it concurrently with such refunding or
refinancing for cancellation (and the Owner Trustee shall cancel the same
in accordance with the terms of the Trust Indenture), against simultaneous
receipt by the Original Loan Participant of the then outstanding principal
amount of such Loan Certificates, accrued and
77
<PAGE>
[Participation Agreement (1995 777 C)]
unpaid interest, if any, thereon, plus Break Amount, if any, together with
payment in full of all other amounts then payable to the Original Loan
Participant hereunder or under the Loan Certificates or the Trust
Indenture;
(8) the appropriate parties will amend such of the Operative Documents
in such respects as shall be necessary to reflect any amendments agreed
upon by the parties thereto;
(9) the parties hereto agree that, on the day immediately preceding
the Section 20 Refinancing Date, an amount equal to all accrued and unpaid
interest on the Loan Certificates (for purposes of this Section 20, the
"Interest Amount") shall be paid as follows: (i) if such Section 20
Refinancing Date is to occur on or prior to the Commencement Date, the
Owner Participant on behalf of the Owner Trustee shall pay to the Indenture
Trustee an amount equal to the lesser of the Interest Amount payable on the
Section 20 Refinancing Date and the product of (A) the Excess Amount
multiplied by (B) a fraction, the numerator of which is the number of days
elapsed from the Delivery Date until the Section 20 Refinancing Date and
the denominator of which is the number of days in the period from the
Delivery Date until the Commencement Date (which payment shall be treated
as a prepayment of the Excess Amount and shall satisfy in full the
obligations of the Owner Participant pursuant to the last paragraph of
Section 2(b) hereof) and the Lessee shall pay to the Indenture Trustee (on
behalf of the Owner Trustee) an amount equal to the excess, if any, of the
Interest Amount payable on the Section 20 Refinancing Date over the amount
payable hereunder by the Owner Participant on such date (which payment
shall be treated as a payment of Supplemental Rent in full satisfaction of
the Lessee's obligations set forth in the penultimate sentence of Section
3(d) of the Lease), or (ii) if the Section 20 Refinancing Date is to occur
after the Commencement Date, the Lessee shall make a prepayment of Rent on
the day immediately preceding the Section 20 Refinancing Date equal to the
Interest Amount payable on such date provided that, in either case, Rent
shall be adjusted in connection with such refunding or refinancing to
reflect such prepayment of accrued and unpaid interest on the Loan
Certificates and the prepayment, if any, by Lessee of Rent in connection
therewith. Any payment to the Indenture Trustee hereunder shall be applied
on the Section 20 Refinancing Date to pay any such accrued and unpaid
interest;
(10) the appropriate parties will execute and deliver appropriate
closing documents in form and substance
78
<PAGE>
[Participation Agreement (1995 777 C)]
satisfactory to the Owner Participant, Indenture Trustee, Lessee and new
Certificate Holder, execute and deliver appropriate closing certificates
and deliver appropriate opinions of counsel; and
(11) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 20:
(i) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that the Owner Participant shall have
no obligation to locate any such party or parties; or
(ii) if the rights and obligations of the Owner Participant under
the trust indenture to be executed in connection with such Section 20
Refinancing would when taken as a whole be adverse to Owner
Participant, as determined in Owner Participant's reasonable judgment;
or
(iii) if in the Owner Participant's reasonable, good faith
judgment, there is a risk that such transaction would have an adverse
tax consequence on it and Lessee is promptly notified in writing of
the nature of such risk of an adverse tax consequence; provided,
however, that the Owner Participant will be obligated to proceed with
such refinancing if (1) Lessee provides adequate remuneration to Owner
Participant if the Owner Participant's counsel cannot provide an
opinion that with regard to such identified risk there is a Realistic
Possibility of Success (as defined in the Tax Indemnity Agreement)
that no adverse tax consequence shall result from such transaction, or
(2) Owner Participant is indemnified by Lessee in a manner acceptable
to the Owner Participant in its reasonable discretion if the Owner
Participant's counsel can provide an opinion that with regard to such
identified risk there is a Realistic Possibility of Success that no
adverse tax consequence shall result from such transaction. The Owner
Participant and the Lessee agree that the existence of the right to
cause a refinancing hereunder shall not be considered to result in any
risk of an adverse tax consequence.
79
<PAGE>
[Participation Agreement (1995 777 C)]
(b) Only one (excluding for this purpose any refinancing or refunding
of the Loan Certificates occurring prior to May 31, 1998 with debt constituting
interim debt) such optional refunding or refinancing pursuant to this Section 20
shall be permitted during the Term and, notwithstanding the fact that a
refinancing or refunding which utilizes interim debt is permitted under this
Section 20, only one refinancing or refunding under this Section 20 may increase
the outstanding principal amount of the Loan Certificates or increase the term
of such debt as contemplated by Section 20(a)(1) hereof. In the event of any
refinancing under this Section 20 with debt constituting interim debt,
references in this Section 20 to the Original Loan Participant and the Loan
Certificates held by the Original Loan Participant shall be deemed to be
reference to the new interim Certificate Holder and the Loan Certificates
payable to such Certificate Holder. Notwithstanding anything contained in any
Operative Document to the contrary, the Lessee is hereby required to request a
Section 20 Refinancing and such Section 20 Refinancing and the issuance of the
related Section 20 New Debt shall be accomplished on or before May 29, 2011.
(c) Any refinancing or refunding pursuant to this Section 20 shall be
of all the Loan Certificates then outstanding.
(d) Any public refinancing pursuant to this Section 20 shall comply
with all the restrictions, limitations and conditions applicable in the case of
a public refinancing pursuant to Section 17(b) hereof. The Lessee and the Owner
Participant agree that they have reviewed Section 20(e) Refinancing Information
for United Air Lines, Inc. 1995 777 C Equipment Trust (Referenced FMCC-UAL-R2)
and that the same describes, based on certain assumptions that the Lessee and
the Owner Participant have found satisfactory, an example of Section 20
Refinancing Information that the Lessee and the Owner Participant have found
satisfactory. Consequently, any Section 20 Refinancing Information that is
consistent with such sample Section 20 Refinancing Information will be
acceptable to the parties hereto.
* * *
80
<PAGE>
[Participation Agreement (1995 777 C)]
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:______________________________________
Title: Vice President and Treasurer
_______________________________
Owner Participant
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, Indenture Trustee
By:______________________________________
Title:___________________________________
THE MITSUBISHI TRUST AND BANKING
CORPORATION, acting through its NEW YORK
BRANCH, Original Loan Participant
By:______________________________________
Title:___________________________________
81
<PAGE>
[Participation Agreement (1995 777 C)]
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 Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
Owner Participant: Payments to Owner Participant
- ----------------- should be by bank wire to:
_____________________
_____________________ Citibank, N.A.
_____________________ New York, New York
_____________________ ABA No. __________________
_____________________ For the Account of: _________
_____________________ _______________________
_____________________ Account No: _______________
For Further Credit To:
Attn: _______________ _______________________
Telephone: __________ Further Credit Account
Telecopy: __________ Number: ______________
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: Corporate Trust Department
Telecopy: (617) 664-5367
1
<PAGE>
[Participation Agreement (1995 777 C)]
SCHEDULE II
Commitments
-----------
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant Lessor's Cost Dollar Amount
- ---------------- ------------- -------------
<S> <C> <C>
The Mitsubishi Trust and ____________ $______________
Banking Corporation
Owner Participant:
- -----------------
____________________ ____________ $_______________
Total Commitments: 100.00000% $
================= =========== ================
</TABLE>
2
<PAGE>
[Participation Agreement (1995 777 C)]
Aircraft N767UA
________________________________________________________________________________
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1995 777 C)
Dated February __, 1996
Among
UNITED AIR LINES, INC.,
Lessee,
_________________________________,
Owner Participant,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Capacity as Pass Through Trustee under
each of the two separate Pass Through Trust Agreements
and as Certificate Holder
___________________________
United Air Lines, Inc.
1995 777 C Equipment Trust
One Boeing 777-222 Aircraft
_____________________________
________________________________________________________________________________
<PAGE>
[Participation Agreement (1995 777 C)]
TABLE OF CONTENTS
-----------------
SECTION 1. Amendment to Schedules I and II....................... 2
SECTION 2. Amendment to Section 5................................ 2
SECTION 3. Amendment to Section 6................................ 3
SECTION 4. Amendments to Section 7(b)............................ 3
SECTION 5. Amendments to Section 7(c)............................ 4
SECTION 6. Amendments to Section 8............................... 5
SECTION 7. Amendments to Section 13.............................. 12
SECTION 8. Amendments to Section 15.............................. 13
SECTION 9. Amendments to Section 17.............................. 13
SECTION 10. Amendments to Section 18............................. 14
SECTION 11. Ratification; References to Participation Agreement.. 15
SECTION 12. Miscellaneous........................................ 15
SECTION 13. Authorization to Execute Amendments.................. 15
SECTION 14. Pass Through Trustee a Party......................... 16
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
i
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1995 777 C)
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (1995 777 C) dated
February __, 1996 (this "Amendment") by and among (i) UNITED AIR LINES, INC., a
Delaware corporation (the "Lessee"), (ii) _______________________________, a
Delaware corporation (the "Owner Participant"), (iii) STATE STREET BANK AND
TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, as assignee of the Original Owner Trustee (as defined below), 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, in
its individual capacity and as Indenture Trustee under the Trust Indenture (the
"Indenture Trustee"), and (v) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
a national banking association, in its capacity as Pass Through Trustee (the
"Pass Through Trustee") under each of the two separate Pass Through Trust
Agreements and as Certificate Holder, amends that certain Participation
Agreement (1995 777 C) dated as of May 1, 1995 (the "Participation Agreement")
by and among Lessee, the Owner Participant, The Mitsubishi Trust and Banking
Corporation, acting through its New York Branch (the "Original Loan
Participant"), State Street Bank and Trust Company, as the original owner
trustee (the "Original Owner Trustee") and the Indenture Trustee.
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1995 777 C) dated January 16, 1996, between the Owner Trustee and the Original
Owner Trustee, the Original Owner Trustee assigned to the Owner Trustee, and the
Owner Trustee assumed, all of the obligations of the Original Owner Trustee
under the Operative Documents, which obligations are guaranteed by the Owner
Trustee Parent pursuant to the terms of the Owner Trustee Parent Guaranty;
WHEREAS, concurrently with the execution of this Amendment, the Loan
Certificate held by the Original Loan Participant is being refinanced by the
issuance of new Loan Certificates issued to the Pass Through Trustees under each
of the two separate Pass Through Trust Agreements, as Certificate Holders; and
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
WHEREAS, as contemplated by Section 20 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Amendment to Schedules I and II. Schedules I and II to
-------------------------------
the Participation Agreement are hereby deleted in their entirety and replaced
with Schedules I and II, respectively, to this Amendment.
SECTION 2. Amendment to Section 5. Section 5 of the Participation
----------------------
Agreement is hereby amended to be and read in its entirety as follows:
"SECTION 5. Confidentiality of Appraisal, Purchase Agreement,
-------------------------------------------------
Participation Agreement and Tax Indemnity Agreement. The Owner Trustee,
---------------------------------------------------
the Participants, the Indenture Trustee, the Pass Through Trustees and the
Lessee shall keep the appraisal referred to in Section 4(a)(xx) hereof, the
Purchase Agreement and this Participation Agreement, and the Owner Trustee
and the Owner Participant shall keep the Tax Indemnity Agreement and the
detailed specifications for the Aircraft, confidential and shall not
disclose, or cause to be disclosed, the same to any Person, except (A) to
prospective and permitted transferees of Owner Trustee's, such
Participant's, the Indenture Trustee's, a Pass Through Trustee's or the
Lessee's interest who agree to hold such information confidential, (B) to
the Owner Trustee's, such Participant's, the Indenture Trustee's, a Pass
Through Trustee's or the Lessee'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 insurance regulatory bodies or Federal or state banking examiners
or Internal Revenue Service auditors or (D) such other Persons as
reasonably deemed necessary by the Owner Trustee, such Participant, the
Indenture Trustee, any Pass Through Trustee and the Lessee in order to
protect the interests of any of such parties or for the purposes of
enforcing such documents; provided, however, that any and all disclosure of
all or any part of the appraisal referred to in Section 4(a)(xx) hereof,
the Purchase Agreement, Participation Agreement, the detailed
specifications
2
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
for the Aircraft and Tax Indemnity 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; and provided further that this Section 5 shall not apply to the
Owner Participant with respect to the appraisal referred to in Section
4(a)(xx) hereof."
SECTION 3. Amendment to Section 6. Section 6 of the Participation
----------------------
Agreement is hereby amended to be and read in its entirety as follows:
"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 4. Amendments to Section 7(b). Section 7(b) of the
--------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 7(b) is hereby amended such that wherever the phrase
"Operative Documents" is used, such phrase is hereby amended to be and read
in its entirety as follows:
"Operative Documents or any Pass Through Trust Agreement"
(b) Clause (C) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
3
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
"(C) any amount paid or payable pursuant to any Operative Document 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 any Pass Through Trustee under the respective
Pass Through Trust Agreement,"
(c) Clause (E) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
"(E) any or all of the Operative Documents, any Pass Through Trust
Agreement 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 or performance of any thereof or the issuance, acquisition,
holding or subsequent transfer thereof,"
(d) Clause (F) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
"(F) the payment of the Original Amount of, or interest or Premium on,
or other amounts payable with respect to, the Loan Certificates or the
payment of principal of, interest or Premium on or any other amounts
payable with respect to the Pass Through Certificates,"
SECTION 5. Amendments to Section 7(c). Section 7(c) of the
--------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 7(c) is hereby amended such that wherever the phrase
"Operative Documents" is used, such phrase is hereby amended to be and read
in its entirety as follows:
"Operative Documents or any Pass Through Trust Agreement"
(b) Clause (E) of the first paragraph of Section 7(c) is hereby
amended to be and read in its entirety as follows:
"(E) the offer or sale of the Loan Certificates or the Pass Through
Certificates (or other evidence of the debt relating to the
Aircraft);"
4
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
(c) Clause (7) of the proviso to the first paragraph of Section 7(c)
is hereby amended to be and read in its entirety as follows:
"(7) in the case of the Owner Trustee in its individual and trust
capacities, and the Affiliates, successors and assigns thereof, 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 the Indenture Trustee, failure on the
part of the Indenture Trustee to distribute in accordance with the
Trust Indenture any amounts received and distributable by it
thereunder or, in the case of each Pass Through Trustee, a failure on
the part of a 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"
(d) The first sentence of the eighth paragraph of Section 7(c) is
hereby amended by deleting the words "Sections 5.03 or 7.01 of the Trust
Indenture" which appear therein and inserting the words "Section 9.06 of
the Trust Indenture" in lieu thereof.
(e) The first sentence of the tenth paragraph of Section 7(c) is
hereby amended to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee and the 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) for acting as such, other than such fees
and expenses which constitute Transaction Expenses."
(f) Section 7(d) is hereby amended by deleting the reference to
"Section 2.04(b)" which appears therein and inserting a reference to
"Section 9.11" in lieu thereof.
SECTION 6. Amendments to Section 8. Section 8 of the Participation
-----------------------
Agreement is hereby amended in the following manner:
5
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
(a) Section 8(e) is hereby amended to be and read in its entirety as
follows:
"(e) The Owner Participant agrees that, if, at any time after
the Tax Attribute Period, 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) in a country listed in Exhibit
G to the Lease with which the United States maintains normal
diplomatic relations or (ii) in any other country with which the
United States maintains normal diplomatic relations and the Owner
Participant has not determined, acting reasonably, that such other
country would not provide substantially equivalent protection
(including the right to take possession of the Aircraft in the event
of the bankruptcy of any such Sublessee) for the rights of owner
participants, lessors or lenders in similar transactions as provided
under United States law, the Owner Participant will not, in the case
of either (i) or (ii), unreasonably withhold its consent to such
change of registration (it being agreed that the inability to deliver
an opinion (reasonably satisfactory in form and substance to the Owner
Participant) of counsel reasonably acceptable to the Owner Participant
in such proposed country of registry to the effect that the courts of
such country would give effect to the Owner Trustee's interests in 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 aforesaid, shall constitute the
sole reasonable grounds to withhold such consent), and if said opinion
is delivered, the Owner Participant will instruct the Owner Trustee to
make such change of registration and the Indenture Trustee, subject
only to compliance with the provisions of Section 7.02 of the Trust
Indenture, shall cooperate, to make such change of registration;
provided, however, that prior to any such change in the country of
registry of the Aircraft, the Owner Participant, the Owner Trustee
and, so long as the Lien of the Trust Indenture has not been released,
the Indenture Trustee, in each case in its individual capacity, shall
have received:
(i) assurances reasonably satisfactory to them (A) to the effect
that the insurance or self-insurance provisions of the Lease have been
complied with after
6
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
giving effect to such change of registry, (B) of the payment by Lessee
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) 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, the Owner Participant, the Owner Trustee (in its
individual capacity and as trustee under the Trust Agreement) and the
Indenture Trustee, or the Trust Estate pursuant to Section 7(b) hereof
and (E) that such new country of registry imposes aircraft maintenance
standards not materially less stringent than those of the FAA; and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity and the Owner
Participant) to the Owner Participant and the Indenture Trustee 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 the Owner Participant
and the Owner Trustee, in its individual capacity, is available to
cover such risk), (D) (unless Lessee shall have agreed to provide
7
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
insurance covering the risk of requisition of use 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 United States
Dollars for the loss of use of the Aircraft in the event of the
requisition by such government of such use, 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 of the foregoing opinion of counsel by the Owner
Participant and the Indenture Trustee, for any country not then listed
on Exhibit G, Exhibit G to the Lease shall be amended to add such
country.
Notwithstanding the foregoing, in the event that any such change
of registry is to a country listed on Exhibit G to the Lease, only
clauses (i)(B), (i)(C) and (i)(D) of this Section 8(e) shall be
conditions to the obligations of the Owner Participant, the Indenture
Trustee and the Owner Trustee under this Section 8(e)."
(b) Clause (ii) of Section 8(l) is hereby amended by deleting the
words "Section 2.15" which appear therein and inserting the words "Section
7.03" in lieu thereof.
(c) Clause (ii) of Section 8(m) is hereby amended by inserting the
words "and the Pass Through Trust Agreements" immediately after the words
"the Operative Documents" and before the words "to be performed" which
appear in such clause.
(d) Clause (iv) of Section 8(m) is hereby amended to be and read in
its entirety as follows:
"(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, each Pass Through Trustee 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 subparagraph (ii) above comply with
this Section 8(m) and that all
8
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
conditions precedent herein provided for relating to such transaction
have been complied with; and"
(e) The last paragraph of Section 8(m) is hereby amended to be and
read in its entirety as follows:
"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(m), 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(m) from its liability in respect of any
Operative Document to which it is a party or the Pass Through Trust
Agreements."
(f) Section 8(r) is hereby amended by deleting the phrase "Article IV
or V" which appear therein and inserting the phrase "Article 5 or 8" in
lieu thereof.
(g) Section 8(t) is hereby amended to be and read in its entirety as
follows:
"(t) The Indenture Trustee and, by the acceptance of a Loan
Certificate, each Certificate Holder (including each Pass Through
Trustee, so long as it is a Certificate Holder), 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
9
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
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 (including each Pass Through Trustee so long as it is a
Certificate Holder) 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 (including each Pass
Through Trustee so long as it is a Certificate Holder) 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 (including each Pass Through
Trustee so long as it is a Certificate Holder) 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 except to the extent that, in the case of
the Indenture Trustee, such Excess Payment has theretofore been
distributed to the Certificate Holders and, in the case of such Pass
Through Certificates, such Excess Payment has been distributed to the
holders of the applicable Pass Through Trustees. For purposes of this
Section 8(t), "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(t) 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)."
(h) Clause (i) of Section 8(u) is hereby amended by deleting the
reference to "Section 8.02" which appears therein and inserting a reference
to "Section 9.07" in lieu thereof.
10
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
(i) Section 8 is hereby amended by deleting in their entirety Sections
8(w), 8(x) and 8(y) and inserting the following Sections 8(w), 8(x) and
8(y) in lieu thereof, which Sections shall be and read in their entirety as
follows:
"(w) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other
out-of-pocket expenses 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 discharge except upon
the request of the Lessee made pursuant to this Section 8(w).
(x) 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 the 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.
11
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
(y) 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(y), 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(y) and
not previously applied to the payment of the Loan Certificates, after
deducting therefrom any portion of such fee then due and unpaid."
SECTION 7. Amendments to Section 13. Section 13 of the Participation
------------------------
Agreement is hereby amended in the following manner:
(a) Clause (A) of Section 13(a) is amended by deleting the words
"the Original Loan Participant" which appear therein and inserting the
words "the Pass Through Trustees" in lieu thereof.
12
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
(b) Clause (C) of the second sentence of Section 13(a) of the
Participation Agreement is hereby amended by deleting the reference to
"Section 2.07" which appears therein and inserting a reference to
"Section 2.03" in lieu thereof.
SECTION 8. Amendments to Section 15. Section 15 of the Participation
------------------------
Agreement is hereby amended in the following manner:
(a) Section 15(b) is hereby amended by adding the words "or any of the
Pass Through Trust Agreements" immediately after the words "or any other
Operative Document" and before the period which appears at the end thereof.
(b) The last sentence of Section 15(d) is hereby amended to be and
read in its entirety as follows:
"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."
SECTION 9. Amendments to Section 17. Section 17 of the Participation
------------------------
Agreement is hereby amended in the following manner:
(a) The introductory sentence of Clause (a) of Section 17 is hereby
amended by deleting in its entirety the parenthetical "(pursuant to Section
2.11 of the Trust Indenture)" which appears therein.
(b) Clause (7) of Section 17(a) is hereby amended to be and read in
its entirety as follows:
"(7) 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 simultaneous 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
13
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
Holder and the Indenture Trustee hereunder or under the Loan
Certificates or the Trust Indenture;"
(c) Section 17 is hereby amended by adding a new Section 17(f) which
shall be and read in its entirety as follows:
"(f) No voluntary redemption shall occur pursuant to this Section
17 prior to February __, 2001."
SECTION 10. Amendments to Section 18. Section 18 of the
------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 18(a) is hereby amended to be and read in its entirety as
follows:
"In the event that: (i) the Delivery Date occurs other than on
May 31, 1995 or (ii) Transaction Expenses paid by Lessor are
determined to be other than [1.414]% of Lessor's Cost, Lessee may,
pursuant to this Section 18 and in accordance with the requirements of
Section 3(c) of the Lease, request that the Owner Participant optimize
the Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages and EBO Percentage. 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 and EBO Percentage. Within
fifteen (15) 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 Owner Trustee to execute an amendment to the Lease
setting forth the optimized Basic Rent, Excess Amount, Stipulated Loss
Value percentages, Termination Value percentages and EBO Percentage
and the Lessee will execute such amended Lease."
(b) Section 18(b) is hereby amended to be and read in its entirety as
follows:
14
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
"(b) In connection with optimization adjustments of Basic Rent,
Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage pursuant to this Section 18 and Section
3(c) of the Lease, none of the debt amortization schedules, principal
amounts and interest rate associated with the Loan Certificates shall
be altered."
SECTION 11. Ratification; References to Participation Agreement.
---------------------------------------------------
Except as amended hereby, the Participation Agreement continues and shall remain
in full force and effect in all respects. From and after the date of this
Amendment, each and every reference in the Participation Agreement, as amended
hereby, to "this Agreement," "herein," "hereof" or similar words and phrases
referring to the Participation Agreement or any word or phrase referring to a
section or provision of the Participation Agreement is deemed for all purposes
to be a reference to the Participation Agreement or such section or provision as
amended pursuant to this Amendment.
SECTION 12. Miscellaneous. This Amendment 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 Amendment 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
Amendment shall be binding upon, and inure to the benefit of and shall be
enforceable by, the Lessee, the Owner Participant, the Indenture Trustee, the
Certificate Holders and the Owner Trustee. This Amendment 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 Amendment is being delivered in the State of Illinois.
SECTION 13. Authorization to Execute Amendments. By execution of
-----------------------------------
this Amendment, the Owner Participant hereby authorizes, directs and instructs
the Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary in a result of the
refinancing contemplated hereby and by Section 20 of the Participation
Agreement. By their execution of this Amendment, the Lessee and the Indenture
Trustee hereby consent to the
15
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
execution and delivery of the First Amendment to Trust Agreement (1995 777 C)
dated February __, 1996 between Owner Participant and State Street Bank and
Trust Company of Connecticut, National Association.
SECTION 14. Pass Through Trustee a Party. Effective as of the date
----------------------------
hereof, each Pass Through Trustee shall be a party to the Participation
Agreement and each Pass Through Trustee shall have the rights and obligations of
the Certificate Holders as set forth in the Participation Agreement, as amended
hereby.
* * *
16
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to 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:_________________________________________
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity, except as
expressly provided herein, but solely as
Owner Trustee, Owner Trustee
By:_________________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION,
Indenture Trustee
By:_________________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION,
in its capacity as Pass Through Trustee
under each of two separate Pass Through
Trust Agreements and as Certificate
Holder
By:_________________________________________
17
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
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: __________________
Telephone: _____________
Telecopy: _____________
Owner Trustee:
- -------------
State Street Bank and Trust
Company of Connecticut,
National Association
750 Main Street
Suite 1114
Hartford, Connecticut 06103
Attn: Corporate Trust Department
Telecopy: (203) 244-1899
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
Overnight Delivery Service
- --------------------------
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and
Treasurer
Payment Address
- ---------------
Payments to Owner Participant should be by bank wire to:
_______________________
_______________________
_______________________
_______________________
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
Certificate Holder and 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
I-2
<PAGE>
[First Amendment To Participation Agreement (1995 777 C)]
SCHEDULE II
Commitments
-----------
<TABLE>
<CAPTION>
Certificate Holder: Lessor's Cost Dollar Amount
- ------------------- ------------- -------------
<S> <C> <C>
FIRST SECURITY BANK OF 77.19% $68,700,000
UTAH, NATIONAL
ASSOCIATION, in its
capacity as Pass Through
Trustee under each of
two separate Pass
Through Trust Agreements
and as Certificate
Holder
Owner Participant:
- ------------------
_____________________ 22.81% $20,300,000
Total Commitments: 100.00% $89,000,000
</TABLE>
<PAGE>
*
Doc. No. 1.01
Aircraft N106UA
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1994 747 B)
Dated as of August 1, 1994
Among
UNITED AIR LINES, INC.,
Lessee,
__________________________,
Owner Participant,
THE MITSUBISHI TRUST AND BANKING CORPORATION,
NEW YORK BRANCH,
Original Loan Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1994 747 B Equipment Trust
One Boeing Model 747-451 Aircraft
Manufacturer's Serial No. 26474
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft................................. 2
SECTION 2. Lessee's Notice of Delivery Date............................... 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee........ 6
SECTION 4. Conditions..................................................... 7
(a) Conditions Precedent to the
Participations in the Aircraft........................... 7
(b) Conditions Precedent to the
Obligations of Lessee.................................... 16
SECTION 5. Confidentiality................................................ 18
SECTION 6. Extent of Interest of Holders.................................. 18
SECTION 7. Lessee's Representations, Warranties and Indemnities
(a) In General............................................... 19
(b) General Tax Indemnity.................................... 23
(c) General Indemnity........................................ 35
(d) Withholding.............................................. 40
SECTION 8. Representations, Warranties and Covenants
SECTION 9. [Intentionally Omitted]........................................ 62
SECTION 10. Other Documents; Amendment..................................... 62
SECTION 11. Certain Covenants of Lessee.................................... 62
SECTION 12. Owner for Income Tax Purposes.................................. 63
SECTION 13. Notices; Consent to Jurisdiction............................... 64
SECTION 14. Change of Situs of Owner Trust................................. 65
SECTION 15. Miscellaneous.................................................. 66
SECTION 16. Transaction Expenses; Invoices and Payment of Expenses......... 68
SECTION 17. Optional Redemption of Loan Certificates....................... 69
i
<PAGE>
SECTION 18. Optimization................................................... 73
SECTION 19. [Intentionally Omitted]........................................ 75
SECTION 20. Initial Debt Refinancing....................................... 75
SCHEDULES AND EXHIBITS
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III - Legal Opinions
EXHIBIT A - Form of Lease Agreement
EXHIBIT B - Form of Trust Agreement
EXHIBIT C - Form of Trust Indenture and Security Agreement
ii
<PAGE>
PARTICIPATION AGREEMENT
(1994 747 B)
THIS PARTICIPATION AGREEMENT (1994 747 B) dated as of August 1, 1994
among (i) United Air Lines, Inc., a Delaware corporation (the "Lessee"), (ii)
______________________, a Delaware corporation (the "Owner Participant"), (iii)
First Security Bank of Utah, National Association, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee under the Trust Agreement (the "Owner
Trustee"), (iv) The Mitsubishi Trust and Banking Corporation, New York Branch,
as Original Loan Participant, and (v) State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, in its
individual capacity and as Indenture Trustee under the Trust Indenture (the
"Indenture Trustee") (this "Agreement").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer (as hereinafter defined), the Manufacturer has agreed to sell to
Lessee, among other things, certain Boeing 747-451 aircraft, one of which has
been recently purchased 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 (1994 747
B) 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,
(i) Lessee and the Owner Trustee are entering into the Owner
Trustee's Purchase Agreement (1994 747 B) dated as of August 1, 1994 (the
"Owner Trustee's Purchase Agreement"), whereby Lessee agrees to sell the
Aircraft to the Owner Trustee pursuant to the Owner Trustee's Bill of Sale
(as defined herein) and assign to the Owner Trustee certain rights and
interests of Lessee under the Purchase Agreement with respect to the
Aircraft;
(ii) the Manufacturer has executed the Consent and Agreement (1994
747 B) dated as of August 1, 1994 substantially in the form attached to the
Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
<PAGE>
[Participation Agreement (1994 747 B)]
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Security Agreement (1994 747 B) dated as of August 1, 1994 (the
"Trust Indenture") pursuant to which the Owner Trustee agrees, among other
things, to issue to the Original Loan Participant one or more Loan Certificates
as evidence of the Owner Trustee's indebtedness to the Certificate Holders,
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 Indenture;
and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1994 747 B) dated as of August 1,
1994 (the "Lease Agreement" or the "Lease") 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, 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 "Owner Participant," "Original Loan Participant,"
- ------------
"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 but
not otherwise defined herein shall have the meanings attributed thereto in the
Lease Agreement referred to above. The terms "Trust Office" and "Loan
Certificate" shall have the respective meanings set forth in the Trust
Indenture. 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) the
Original Loan Participant 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 the "Loan") on a date to be designated pursuant to
Section 2 hereof, but in no event later than September 30, 1994, in the amount
in Dollars equal to the percentage of Lessor's Cost set
2
<PAGE>
[Participation Agreement (1994 747 B)]
forth opposite such Original Loan Participant's name on Schedule II hereto and
to receive as evidence of such Loan, Loan Certificates in an original amount
equal to the amount so financed 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 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 pursuant to Section 2
hereof, but in no event later than September 30, 1994, in an amount in Dollars
equal to the percentage of Lessor's Cost set forth opposite such Owner
Participant's name on Schedule II hereto. 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 the Original Loan Participant, the Original
Amount of the Loan Certificates to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either 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 Participant 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 non-defaulting Participant shall remain subject to the terms and
conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a) Lessee agrees to
--------------------------------
give the Owner Participant, the Owner Trustee, the Original Loan Participant and
the Indenture Trustee at least two (2) Business Days' written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than September 30, 1994, 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 Owner 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 Original Loan
Participant's Commitment. The closing of the transactions referred to in this
Section 2 shall take place commencing at 9:00 a.m., local time, on the Delivery
Date, at the offices of Vedder, Price, Kaufman & Kammholz in Chicago, Illinois.
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
3
<PAGE>
[Participation Agreement (1994 747 B)]
Section 2, 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. The Owner Trustee shall issue and the
Indenture Trustee shall authenticate the Loan Certificates which shall be
delivered simultaneously to the Original Loan Participant. 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 following payments shall be made, in each case in Dollars and in funds
immediately available to the recipient: (A) by the Owner Participant to the
Owner Trustee an amount in Dollars equal to the Owner Participant's Commitment,
(B) by the Original Loan Participant to the Owner Trustee an amount in Dollars
equal to such Original Loan Participant's Commitment and (C) by the Owner
Trustee to Lessee the funds made available to it pursuant to clauses (A) and (B)
above, which funds shall aggregate an amount equal to Lessor's Cost. The
payments in clauses (A) and (B) shall be made to the Owner Trustee's account no.
99003147 at State Street Bank and Trust Company (Boston, Massachusetts) and the
payments in (C) shall be made to the Lessee's account no. HT0688 at State Street
Bank and Trust Company (Boston, Massachusetts). In addition, the Owner Trustee
shall, on the Delivery Date, issue to the Original Loan Participant the Loan
Certificates described in Section 1(b) hereof.
Each Participant agrees to make its Commitment available to the Owner
Trustee at or before 12:00 noon, Hartford, Connecticut 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").
(b) If for any reason whatsoever the closing of the transactions
contemplated hereby is not consummated on the Scheduled Delivery Date, Lessee
may by telephonic notice given by 5:00 p.m., Hartford, Connecticut time, on the
Scheduled Delivery Date to each Participant and the Indenture Trustee designate
a delayed date for such closing (the "Delayed Delivery Date"), not later than
the fifth Business Day after the Scheduled Delivery Date and in no event later
than September 30, 1994, in which event each Participant will keep its funds
available pursuant to this Section 2. In the event that no Delayed Delivery
Date is designated or, if designated, such closing does not occur on the Delayed
Delivery Date, such funds of each Participant shall be promptly returned to it
by the Owner Trustee.
4
<PAGE>
[Participation Agreement (1994 747 B)]
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant (i) a sum equal
to interest on such funds at the Applicable Rate (as defined below) on the
amount of such funds for each calendar day from and including the Scheduled
Delivery Date to and including the earlier of (A) the day next preceding the
Delayed Delivery Date or (B) the fifth Business Day after such Scheduled
Delivery Date, after which day such Participant's funds shall be returned to
such Participant by 12:00 noon (New York City time) on the next succeeding
Business Day and provided that if such funds are returned to such Participant
after 12:00 noon, New York time, such period shall end on such next succeeding
Business Day and (ii) in the case of the Original Loan Participant, an amount
equal to the Break Amount, if any, applicable to the Loan Certificates in
respect of which such Original Loan Participant's Commitment is made available.
"Applicable Rate" shall mean with respect to the Owner Participant a
rate equal to the rate of interest announced publicly by The First National Bank
of Chicago from time to time as its base rate less any interest earned on the
Owner Participant's funds pursuant to their investment in accordance with the
provisions of the immediately succeeding paragraph, and with respect to the
Original Loan Participant the rate per annum borne by the Loan Certificates in
respect of which such Original Loan Participant's Commitment is made available.
First Security Bank of Utah, National Association agrees that in the
event it has received telephonic notice (to be confirmed promptly in writing)
from Lessee on the Scheduled Delivery Date that the closing of the transactions
contemplated hereby will not be consummated on the Scheduled Delivery Date, it
will, if instructed in the notice from Lessee in regard to the funds received by
it from the Participants, use reasonable efforts to invest, at the risk of
Lessee, the funds received by it from the Participants in obligations of the
United States Government or obligations guaranteed as to principal and interest
by the United States Government, in any such case having a stated maturity not
later than one year from the date of acquisition. Any such investment may be
made through a repurchase agreement in commercially reasonable form with the
Owner Trustee or a bank or other financial institution having capital, surplus
and undivided profits of at least $100,000,000, provided that title to the
underlying obligations shall pass to the Indenture Trustee and that such
underlying securities shall be segregated in a custodial or trust account of or
for the benefit of the Indenture Trustee. Any such obligations purchased by
First Security Bank
5
<PAGE>
[Participation Agreement (1994 747 B)]
of Utah, National Association whether directly or through a repurchase
agreement, shall be held in trust by First Security Bank of Utah, National
Association for the benefit of the respective Participant. The Lessee shall, on
the Delayed Delivery Date or the date the funds furnished by the Participants
are required to be returned to the Participants, as the case may be, reimburse
First Security Bank of Utah, National Association for the benefit of the
respective Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds on behalf of
the Owner Participant shall be for the account of the Owner Participant and
funds for the account of the Original Loan Participant not in excess of the
Applicable Rate shall be for the account of the Original Loan Participant (such
income and profits to be credited against Lessee's obligation to reimburse the
Participants for the loss of use of funds made available to First Security Bank
of Utah, National Association) and all other income and profits (in regard
solely to the funds provided by the Original Loan Participant) and all losses on
the investment of such funds shall be for the account of Lessee; and First
Security Bank of Utah, National Association shall not be liable for failure to
invest such funds or for any losses incurred on such investments except for its
own willful misconduct or negligence.
The Owner Participant hereby agrees with and for the benefit of the
Lessee and the Original Loan Participant that prior to 12:00 noon (New York City
time) on the Commencement Date, the Owner Participant on behalf of the Owner
Trustee shall pay to the Indenture Trustee in immediately available funds an
amount equal to the Excess Amount due on such date unless an Event of Default or
a Section 14(f) or (g) Default under the Lease shall have occurred and be
continuing.
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
-------------------------------------------------------
Subject to the terms and conditions of this Agreement, the Owner Trustee, upon
its receipt in full of each Participant's Commitment 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:
(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
6
<PAGE>
[Participation Agreement (1994 747 B)]
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 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 Indenture Trustee the Loan on behalf of the
Original Loan Participant to finance a portion of Lessor's Cost and to issue to
the Original Loan Participant Loan Certificates in a principal amount equal to
the amount borrowed pursuant to the Trust Indenture; 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 Original Loan Participant), (xxv) and (xxvi) shall not be a condition
precedent to the obligation of the Original Loan Participant, and paragraphs
(iv), (x) (insofar as it relates to the Owner Participant), (xiv), (xvii), (xix)
(insofar as it relates to the Owner Participant) and (xxvii) shall not be a
condition precedent to the obligation of the Owner Participant, and by its
execution and delivery hereof, each party hereto instructs its counsel to
deliver its legal opinion as described below:
(i) Each Participant 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 Original
Loan Participant, as the case may be, would make it a violation of law or
regulations for (x) the Lessee, the
7
<PAGE>
[Participation Agreement (1994 747 B)]
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 Original Loan Participant or the Owner Participant to make its
respective Commitment available or, in the case of the Original Loan
Participant, to acquire the Loan Certificates or to realize the benefits of
the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Original Loan
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Original Loan Participant, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(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 each Participant and its respective counsel, provided that
only the Original Loan Participant shall receive an executed original of
its Loan Certificates, only the Indenture Trustee, acting on behalf of the
Certificate Holders, shall receive the original counterpart of the Lease
and the Lease Supplement, only the Owner Trustee shall receive a copy of
the Purchase Agreement which shall be delivered to and retained by the
Owner Trustee (the Owner Participant and the Original Loan Participant and
their respective counsel may inspect the Purchase Agreement prior to the
Delivery Date but thereafter shall not have access to the same unless a
Section 14(a), (b), (f) or (g) Default or an 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;
8
<PAGE>
[Participation Agreement (1994 747 B)]
(5) [Intentionally Omitted];
(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 and Trust Supplement covering the
Aircraft and dated the Delivery Date;
(10) the Loan Certificates;
(11) the Consent and Agreement;
(12) the Purchase Agreement; and
(13) the Indenture Trustee Parent Guarantee.
(vi) A Uniform Commercial Code financing statement or statements
covering all of 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
Original Loan Participant 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 Trustee shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Participant and the Original Loan Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same unless a Section
14(a), (b), (f) or (g) Default or an Event of Default shall have occurred
and be continuing):
9
<PAGE>
[Participation Agreement (1994 747 B)]
(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 Lessee
Documents and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
(2) such other documents and evidence with respect to Lessee, the
Manufacturer, the Owner Trustee, the Indenture Trustee, the Indenture
Trustee Parent and the Participants, as the Original Loan Participant
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 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;
(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
Purchase Agreement assigned by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Purchase Agreement; and
(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 Indenture Trustee
Parent, the Owner Trustee and the Owner Participant certified as of
the Delivery Date by the Secretary or an Assistant Secretary of the
Indenture Trustee, the Indenture Trustee Parent, the Owner Trustee and
the Owner Participant, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee, the Indenture
Trustee Parent, the Owner Trustee and the Owner Participant of all of
the
10
<PAGE>
[Participation Agreement (1994 747 B)]
Operative Documents to which it is a party, together with such other
documents and evidence with respect to the Indenture Trustee, the
Indenture Trustee Parent, the Owner Trustee and the Owner Participant
as either the Original Loan Participant (or its 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.
(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, 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 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 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;
(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement, the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
11
<PAGE>
[Participation Agreement (1994 747 B)]
(4) the Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee thereof, is entitled to the protection
of Section 1110 of the Bankruptcy Code in connection with its 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. certificate of airworthiness issued by the FAA.
(x) On the Delivery Date, (A) the respective representations and
warranties of Lessee, the Owner Participant and the Owner Trustee contained
in Sections 7 and 8 hereof and in the Tax Indemnity Agreement 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 be 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 March 31,
1994 or to perform its obligations under the Operative Documents.
(xi) Each Participant shall have received an opinion addressed to
the Participants, the Indenture Trustee and the Owner Trustee from (a)
Francesca M. Maher, Vice President - Law 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.
(xii) Each Participant 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) Each Participant shall have received an opinion addressed
to the Participants, the Indenture Trustee, the Owner Trustee and Lessee,
from Ray, Quinney &
12
<PAGE>
[Participation Agreement (1994 747 B)]
Nebeker, special counsel for the Owner Trustee, in substantially the form
of Schedule III-3 hereto.
(xiv) The Original Loan Participant shall have received an
opinion addressed to the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee from Hunton & Williams, special counsel to the
Owner Participant, in substantially the form of Schedule III-4 hereto.
(xv) Each Participant 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) Each Participant shall have received an opinion addressed
to the Participants, the Owner Trustee and Lessee from Bingham, Dana &
Gould, special counsel for the Indenture Trustee and the Indenture Trustee
Parent, in substantially the form of Schedule III-6 hereto.
(xvii) [Intentionally Omitted].
(xviii) Each Participant 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 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 paying over to Lessee the funds made available
to it by the Loan Participants and (c) the Owner Trustee shall, by
accepting the Owner Trustee's Bill of Sale and the Owner Trustee's FAA Bill
of Sale, 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 appraisal dated
the Delivery Date, in form and substance reasonably satisfactory to the
Owner Participant, from Aero
13
<PAGE>
[Participation Agreement (1994 747 B)]
Economics, Inc., independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) the Aircraft will have, at the end of the Basic Term and Fixed Renewal
Term, (i) at least 20% of its originally estimated economic life as of the
Delivery Date remaining and (ii) a fair market value of at least 20% of
Lessor's Cost (without taking into account any increase or decrease for
inflation or deflation during the Interim Term and the Basic Term and
assuming the Aircraft is in compliance with the provisions of Section 5 of
the Lease); (B) the fair market value of the Aircraft on the Delivery Date
is equal to Lessor's Cost; (C) the EBO Percentage equals or exceeds a
reasonable current estimate of the fair market value (taking into account
inflation and deflation) of the Aircraft on the EBO Date; and (D) the
Aircraft is not "limited use property."
(xxi) Each Participant, the Owner Trustee 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 there has not occurred any event
which constitutes a Default or Event of Default under the Lease which is
continuing and 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) with
respect to the Airframe or any Engine has occurred.
(xxiii) No action or proceeding shall have been instituted nor
shall any 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 any other Operative
Document or the transactions contemplated hereby or thereby.
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Original Loan Participant contained in Section 8
hereof and of the Indenture Trustee Parent in the Indenture Trustee Parent
Guarantee 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
14
<PAGE>
[Participation Agreement (1994 747 B)]
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 certifying as to the foregoing
matters with respect to the Indenture Trustee; by making available its
Commitment, the Original Loan Participant shall be deemed to have
reaffirmed the representations and warranties made by it in such Section 8.
(xxv) The Owner Participant shall have received from Hunton &
Williams, 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, there shall have been, since July 15, 1994, no actual or proposed
amendment, modification, addition, or change in or to (A) the provisions of
the Code (including for this purpose, any non-Code provisions of
legislation affecting the Code such as transition rules or effective date
provisions), (B) the regulations promulgated under the Code (including
temporary regulations), (C) Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, (D) applicable
judicial precedents or (E) Executive Orders of the President of the United
States, the effect of which might adversely affect the Owner Participant's
Net Economic Return.
(xxvii) The Original Loan Participant shall have received a copy
of the appraisal referred to in paragraph (xx) above (without regard to the
form and substance thereof) to the effect that the fair market value of the
Aircraft on the Delivery Date is at least equal to Lessor's Cost.
(xxviii) If the Original Loan Participant is required to execute
any form or document in order for payments to it to qualify for exemption
from, or reduction of, withholding tax imposed by the United States
Government in respect to such payments, such Original Loan Participant
shall have executed such form or document (including, without limitation,
United States Internal Revenue Forms 1001, W-8 and/or 4224) and delivered
it to the Indenture Trustee in accordance with applicable regulations to
qualify for such exemption or reduction.
15
<PAGE>
[Participation Agreement (1994 747 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
Original Loan Participant, 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 participate in the sale of the Aircraft to
the Owner Trustee, (B) to accept delivery of the Aircraft under the Lease and
(C) to enter into the other Lessee 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 Sections 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and 4(a)(xxviii) 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 of 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 and the Owner Participant, certified
as of the Delivery Date by the Secretary or an Assistant Secretary of the
Indenture Trustee, the Owner Trustee and the Owner Participant,
respectively, which authorize the execution, delivery and performance by
the Indenture Trustee, the Owner Trustee and the Owner Participant of all
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 and the Owner Participant as Lessee or its counsel
16
<PAGE>
[Participation Agreement (1994 747 B)]
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 respective representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof and of the Indenture Trustee Parent contained in the
Indenture Trustee Parent Guarantee 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 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) In the opinion of Lessee and its counsel, there shall have
been, since July 15, 1994, no actual or proposed amendment, modification,
addition or change in or to the Code, (including for this purpose, any non-
Code provisions of legislation affecting the Code such as transition rules
or effective date provisions) and the regulations promulgated under the
Code (including temporary regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative interpretations,
applicable judicial precedents or Executive Orders of the President of the
United States which might give rise to an indemnity obligation under any of
the Operative Documents, or as a result of which any adjustments to the
Lease
17
<PAGE>
[Participation Agreement (1994 747 B)]
payments are requested by the Owner Participant which, in the Lessee's
opinion, make the Lease become uneconomic to the Lessee.
(viii) The Aircraft shall have been ready for delivery by the
Manufacturer on or before September 30, 1994.
SECTION 5. Confidentiality. Lessor, the Participants, and the
---------------
Indenture Trustee shall keep the Purchase Agreement confidential and shall not
disclose or cause to be disclosed the same to any Person, except (A) to
prospective and permitted transferees of Lessor's, the Original Loan
Participant'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, the Original Loan
Participant's, 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 (including in connection with discovery
proceedings) 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 Lessor, 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 clause (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. Each party hereto agrees that it will not,
and that it will use its best efforts to cause its agents and advisors not to,
issue or release for external publication any article or advertising or
publicity matter mentioning or implying the identity of the Owner Participant
without the Owner Participant's prior written consent.
SECTION 6. Extent of Interest of 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, Break Amount, if any, and interest on all Loan Certificates held by
such Certificate Holder and all other sums payable to such 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 2.03 of the Trust Indenture and that neither the
Owner Participant nor the Owner
18
<PAGE>
[Participation Agreement (1994 747 B)]
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
Break Amount, if any), 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 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; has the corporate power and authority to conduct
its business as presently conducted and to own or hold under lease its
properties; is a "citizen of the United States" and an "air carrier" within
the meaning of the Federal Aviation Act operating under certificates issued
under Section 401 of such Act; 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 will, on the Delivery Date, 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 or by the Delivery Date will have been duly obtained, and the
Lessee Documents have been duly executed and delivered by Lessee, and
neither the execution and delivery thereof by Lessee nor the consummation
by Lessee of the transactions contemplated thereby nor compliance by Lessee
with any of the terms and provisions thereof contravenes any United States
federal or state law,
19
<PAGE>
[Participation Agreement (1994 747 B)]
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 by-laws, 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 or will on or prior to
the Delivery Date be duly obtained, and will on the Delivery Date be in
full force and effect, (B) the registration of the Aircraft referred to in
Section 4(a)(ix)(2) hereof, (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 and
(D) such federal and state securities law approvals that will be required
in connection with the public offering, if any, of any Loan Certificates;
(iv) each of the Lessee Documents will, upon execution thereof,
constitute 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, governmental authority, arbitration board, tribunal or
administrative agency which individually (or in the aggregate in the case
of any group of related lawsuits) affects the Aircraft or 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) (I) except for (A) the registration of the Aircraft pursuant
to the Federal Aviation Act and (B) the filing for recording pursuant to
said Act of the Trust Agreement and the Owner Trustee's FAA Bill of Sale,
no
20
<PAGE>
[Participation Agreement (1994 747 B)]
further action, including any filing or recording of any document, is
necessary or advisable to establish and perfect the Owner Trustee's title
to and interest in the Aircraft as against Lessee and as against third
parties (other than creditors of the Owner Trustee), and (II) except for
the actions described in clauses (I) (A) and (B) above and (x) the filing
for recording pursuant to said Act of the Lease, the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
covering the Aircraft, (y) 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, Utah and such other states as may be specified in the
opinions furnished pursuant to Section 4(a)(xi) hereof, which financing
statements Lessee caused, or will prior to the Delivery Date cause, to be
presented in due form for filing with the appropriate filing office in the
State of Illinois, Utah and such other states as may be specified in the
opinions furnished pursuant to Section 4(a)(xi) hereof and (z) 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 Indenture Trustee's first priority 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 of Loss (or event which, with the passage
of time or the giving of notice, or both, would constitute an Event of
Loss) with respect to the Airframe or any Engine;
(viii) the statements of financial position of Lessee as of
December 31, 1993 and March 31, 1994 and the related statements of earnings
and cash flow of Lessee for the year and three months then ended, copies of
which have been furnished to the Participants, fairly present the financial
condition of Lessee as at such dates and the results of operations and cash
flow of Lessee for the periods ended on such dates, in accordance with
generally accepted accounting principles consistently applied (except as
may be stated in the notes thereto) and subject in the case of the March
31, 1994 statements to normal year-end
21
<PAGE>
[Participation Agreement (1994 747 B)]
audit adjustments, and since March 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 receive good and marketable title to
the Aircraft from Lessee 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 Participant, and not more than twenty (20) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, (B) directly or
indirectly offered any Loan Certificates or any similar security for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Original Loan 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, (C) taken any action
which would require the Loan Certificates to be registered pursuant to the
Securities Act of 1933, as amended or (D) filed or published, or caused to
be filed or published, any financing statement or similar statement or
notice under the Uniform Commercial Code in effect in any jurisdiction or
any state or local fraudulent conveyance or analogous statute or ordinance
describing any portion of the Trust Estate, other than filings referred to
in Section 4(a)(vi) hereof and such other filings, notices or publications
as shall have been approved by counsel to the Owner Participant and the
Certificate Holders prior to the filing or publication thereof;
22
<PAGE>
[Participation Agreement (1994 747 B)]
(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 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 operation or use of the Aircraft;
(xiv) all sales or use tax then due 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;
(xv) the Aircraft has been duly certified by the FAA as to type
and airworthiness; and
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee thereof, are entitled to the protection of Section
1110 of the Bankruptcy Code in connection with its 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.
(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 other than the Original Loan Participant and any Person who
has purchased a participation in the Loan Certificates) 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,
23
<PAGE>
[Participation Agreement (1994 747 B)]
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 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, (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, or the issuance of the Loan 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, Break Amount on, or other amounts
payable with respect to, the Loan 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 Section 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 (other than with respect to any Income Taxes imposed by any
such tax authority or jurisdiction solely as a result of the location,
use, subleasing, registration or operation of the Aircraft, any
Engine, or any Part or part thereof to or in 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
24
<PAGE>
[Participation Agreement (1994 747 B)]
any international authority other than, in the case of this clause
(C), Income Taxes imposed which would not have been imposed by such
jurisdiction but for the location, use, operation, registration or
subleasing of the Aircraft, any Engine, or any Part or part thereof to
or in such jurisdiction;
(2) in the case of an Indemnitee which is a Certificate Holder or
any successor, assign, or Affiliate thereof, to Income Taxes or
transfer taxes relating to any payments of principal, interest or
Break Amount, if any, on the Loan Certificates, or to a Certificate
Holder, imposed by any government or taxing authority;
(3) 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) a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the voluntary revocation of the trust created by the Trust
Agreement or (B) 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, unless such transfer or disposition,
whether or not voluntary or involuntary, shall occur, (X) during a
period when a Default or Event of Default has occurred and is
continuing under the Lease at the time of transfer or disposition and
such transfer is as a result of such Default or Event of Default, or
(Y) in connection with the termination of the Lease or action or
direction of the Lessee pursuant to Section 7, 8, 9, 10 or 19 thereof;
(4) to any Tax imposed on any Indemnitee which is a Certificate
Holder, the Indenture Trustee or the Trust Indenture Estate 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
unless, in each case, such transfer or disposition shall occur (A)
during a period when a Default or 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 as a result of such Default or
Event of Default, or (B) in
25
<PAGE>
[Participation Agreement (1994 747 B)]
connection with the termination of the Lease or action or direction of
the Lessee pursuant to Section 7, 8, 9, 10 or 19 thereof;
(5) 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 the Owner Trustee or (ii) the Owner
Trustee to the extent imposed on the Owner Trustee;
(6) to any Tax imposed on an Indemnitee which is a Certificate
Holder, the Indenture Trustee or the Trust Indenture Estate which
results from the willful misconduct or gross negligence of such
Indemnitee;
(7) to any Tax based on or measured by any fees received by the
Owner Trustee or the Indenture Trustee in connection with any
transaction contemplated by the Operative Documents;
(8) so long as no Default or Event of Default shall be
continuing, to any Tax imposed with respect to any time period
commencing after the expiration of the Term and (A) return of the
Aircraft, (B) 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 Agreement or (C) placement in storage of
the Aircraft pursuant to Section 5(d) of the Lease Agreement; unless
such Tax relates to events or matters occurring prior to or
simultaneously with the earliest of such times;
(9) in the case of an Indemnitee which is the Trust Indenture
Estate or any Certificate Holder, or any successor, assign or
Affiliate of either 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 such Certificate Holder, as the case may
be, in any of the Loan Certificates imposed by any government or
taxing authority;
(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);
26
<PAGE>
[Participation Agreement (1994 747 B)]
(11) to any Tax which Lessee is contesting in good faith under
the provisions of Section 7(b)(iv) until the conclusion of such
contest, provided, however, the foregoing shall not limit the Lessee's
obligations under Section 7(b)(iv) to advance to such Indemnitee
amounts with respect to Taxes that are being contested in accordance
with Section 7(b)(iv) or any Expenses incurred by such Indemnitee in
connection with such contest;
(12) 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 on such Indemnitee 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;
(13) to any Tax which has been properly included in Lessor's
Cost;
(14) to any Tax imposed on or with respect to a transferee (or
subsequent transferee) of an original Indemnitee to the extent such
Tax would not have been required to be withheld or imposed on or with
respect to such original Indemnitee; provided, that the exception in
this Section 7(b)(ii)(14) shall not apply to any transferee (or
subsequent transferee) where such transfer shall have occurred at any
time after a declaration of Default in accordance with Section 15 of
the Lease and while an Event of Default shall be continuing under the
Lease at the time of transfer; and
(15) to any Tax, if any, for which Lessee is obligated to pay the
Owner Participant under the Tax Indemnity Agreement.
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 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 any other provision of this Section 7(b) to the
contrary, the Lessee will indemnify the Owner Trustee and the Owner
Participant (and any Affiliate of either thereof) for any obligation with
respect to United
27
<PAGE>
[Participation Agreement (1994 747 B)]
States federal withholding taxes imposed on the Owner Trustee or the Owner
Participant (or any Affiliate of either thereof) with respect to the Loan
Certificates (or any debt issued to refinance or refund such Loan
Certificates) or as a result of a claim by the Internal Revenue Service
asserted against the Trust Estate, the Owner Trustee or the Owner
Participant (or any Affiliate of the foregoing). The Lessee shall be
subrogated to the rights and defenses of the Owner Trustee and the Owner
Participant (and any Affiliate of either thereof) in respect of such
withholding taxes, including the rights and defenses in Section 8(x) of
this Agreement.
(iii) Calculation of General Tax Indemnity and General Indemnity
----------------------------------------------------------
Payments. Any payment which Lessee shall be required to make to or for the
--------
account of any Indemnitee with respect to any Tax or Expense which is
subject to indemnification under this Section 7(b) or 7(c) shall be made on
an After-Tax Basis.
If, by reason of any Tax or Expense payment made to or for the
account of an Indemnitee by Lessee pursuant to this Section 7(b) or Section
7(c) hereof, such Indemnitee subsequently actually realizes a net tax
deduction, savings or credit (including any foreign tax credit and any
reduction in Taxes) against Taxes not indemnified hereunder or under the
Tax Indemnity Agreement, which deductions, savings or credit was not
previously taken into account in computing such payment, such Indemnitee
shall promptly pay to Lessee on an After-Tax Basis, provided an Event of
Default or payment or bankruptcy Default shall not have occurred and be
continuing, an amount equal to the actual reduction in Taxes, if any,
actually realized by such Indemnitee which is attributable to such
deduction, savings or credit; provided, however, that such Indemnitee shall
-------- -------
not be obligated to make any payment pursuant to this Section 7(b)(iii) to
the extent that the amount of such payment (net of any amount necessary to
make such payment on an After-Tax Basis) would exceed an amount equal to
the excess (x) of all prior payments from Lessee pursuant to this Section
7(b) (net of any amount that was necessary to make such payment on an
After-Tax Basis) less (y) all prior amounts paid by the Indemnitee to the
Lessee under this paragraph (net of any amount necessary to make such
payment on an After-Tax 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
28
<PAGE>
[Participation Agreement (1994 747 B)]
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 Section 7(b)(ii), other than clauses (5), (6) or (10), or
Section 7(b)(iv).
(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 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 shall not
diminish Lessee's obligation hereunder unless such failure 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 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), then such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax, provided, however, that (A) if requested by Lessee in its written
notice such Indemnitee may consent, in its sole discretion, to allow Lessee
to contest such Tax, if permitted by law, either (X) directly in Lessee's
name, or (Y) with respect to a Tax other than an Income Tax or a Tax shown
on a return of an Indemnitee's along with other unindemnified Taxes, on
behalf of or in the name of such Indemnitee, or (B) if the Indemnitee has
requested Lessee to conduct such contest (if permitted by law) the Lessee
shall, at its own expense and in good faith, conduct such contest. 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.
29
<PAGE>
[Participation Agreement (1994 747 B)]
In no event shall such Indemnitee be required, or Lessee be permitted, 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 and shall in fact
pay on demand and on an After-Tax Basis 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 any Tax of an
Indemnitee which is the Owner Participant or the Owner Trustee or the
Original Loan Participant, or a successor, assign or Affiliate of the Owner
Participant or the Owner Trustee or the Original Loan Participant (other
than any Tax the contest of which is conducted hereunder by the Lessee in
its own name), 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 or appeal such claim, as the case may be, (V) in the case of an
Indemnitee which is the Owner Participant or the Owner Trustee or the
Original Loan Participant, or a successor, assign or Affiliate of the Owner
Participant or the Owner Trustee or the Original Loan Participant, prior to
the commencement of an administrative appeal (or if no such appeal is
available prior to commencing a judicial proceeding) 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
30
<PAGE>
[Participation Agreement (1994 747 B)]
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 sole option of the
Indemnitee, either (i) provided security for its obligations hereunder
reasonably satisfactory to such Indemnitee by placing in escrow sufficient
funds to cover any such contested Tax or (ii) paid such Tax and (VII) no
appeal of an adverse judicial decision to a contest conducted in an
Indemnitee's name shall be required unless such Indemnitee shall
have received an opinion of independent counsel that such appeal will more
likely than not be successful. In no event shall an Indemnitee be required
to appeal or 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 on an After-Tax Basis,
an amount equal to the amount of such refund, including interest received
and fairly attributable thereto, net of taxes required to be paid by such
Indemnitee as a result of any refund and/or interest received; provided,
--------
however, that the amount payable to the Lessee under this paragraph (net of
-------
any interest fairly attributable to such Taxes paid by the Lessee and any
amount necessary to make any payment under this paragraph on an After-Tax
Basis) shall not exceed the amount of the indemnity payment in respect of
such refunded Taxes that was made by the Lessee (net of any amount
necessary to make such payment on an After-Tax Basis). 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) (other
than clauses (5), (6) and (10)) or this 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 Tax
with respect to which a previous contest involving such Tax pursuant to the
provisions of this Section 7(b)(iv) shall have been determined adversely to
the taxpayer.
31
<PAGE>
[Participation Agreement (1994 747 B)]
(v) General Tax Indemnity -- Reports. Lessee will provide such
--------------------------------
information as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing and 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 Indemnitee in writing) 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; (ii) in the case of a return, statement or report required to be
in the name of or filed by such Indemnitee, Lessee shall prepare and
furnish such return, statement or report, or relevant portion thereof, 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; and (iii) in the case of a return, statement or report either
required to reflect items in addition to Taxes imposed on or indemnified
against by the Lessee under this Section 7(b) or which the Indemnitee has
notified Lessee in writing that it will prepare and file, Lessee shall,
upon written request of such Indemnitee, provide such Indemnitee with such
information as is within Lessee's reasonable control or access. 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.
32
<PAGE>
[Participation Agreement (1994 747 B)]
(vi) General Tax Indemnity -- Payment. Except as provided in
--------------------------------
Section 7(b)(iv) or 7(b)(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 twenty (20) Business Days of such demand, but in no
event shall any such payments be made more than ten (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 Event of Default
------------------------------------------------------------
or 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 or any amounts required to be
paid by Lessee hereunder are due and have not been paid. At such time as
there shall not be continuing any such 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, upon request
---------------------------------------
of, or on demand for payment by, any Indemnitee, Lessee makes 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
33
<PAGE>
[Participation Agreement (1994 747 B)]
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, 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 Tax returns or (B) execute and deliver any forms
or documents which could in the good faith determination of such Indemnitee
adversely effect 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.
(xii) Income Tax. For purposes of this Section 7, the term Income
----------
Tax means (A) any Tax based on or measured by or with respect to gross or
net income (including, without limitation, capital gains taxes, minimum
taxes, and taxes on tax preference items) or gross or net receipts or any
Tax in the nature thereof, and (B) Taxes which are capital, doing business,
franchise, excess profits, net worth taxes or any Tax in the nature
thereof, and (C) interest, additions to tax, penalties, or other charges in
respect of Taxes included in clauses (A) and (B) as Income Taxes, provided,
however, that Taxes which are sales, use, value added, rental, license, ad
valorem or property Taxes
34
<PAGE>
[Participation Agreement (1994 747 B)]
or any Tax in the nature thereof shall not constitute an Income Tax.
(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 are consummated), any and all
Expenses imposed on, incurred by or asserted against any Indemnitee, in any way
relating to or arising out of or which would not have occurred but for (A) the
Operative Documents or the transactions contemplated thereby, the negotiation
and the consummation of the transactions contemplated thereby (including any
misrepresentations or breach of warranty of Lessee contained herein or therein
or in any document or certificate delivered pursuant hereto and the breach by
Lessee of any covenant or agreement contained in any Operative Document) or any
sublease under the Lease or the enforcement of any of the terms of any thereof;
(B) the manufacture, design, purchase, resale, acceptance, rejection, storage,
airworthiness, registration, reregistration, financing, refinancing,
modification, alteration, sale, return or other disposition of the Airframe or
any Engine or Parts; (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 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; (D) the offer, sale, holding,
transfer or delivery of the Loan Certificates, whether before 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); (E) the offer, holding, transfer or sale of any interest in
the Trust Estate or the Trust Agreement or any similar interest on or prior to
the Delivery Date; or (F) the transactions contemplated hereby or by any other
Operative Document in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA; provided, that the foregoing indemnity shall not extend to
any Expense to the extent attributable to, resulting from or arising out of or
relating to the following: (1) any representation or warranty by such
Indemnitee in the Operative Documents being incorrect, or (2) the failure by
such Indemnitee to perform or observe any of its
35
<PAGE>
[Participation Agreement (1994 747 B)]
agreements, covenants or conditions in any of the Operative Documents 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) by such
Indemnitee 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 other than in each of (A), (B) and (C) during the continuance of an
Event of Default under the Lease, in connection with the exercise by Lessee of
its purchase option under the Lease, a voluntary termination under Section 9 of
the Lease, in connection with an Event of Loss, any disposition of Parts or
Obsolete Parts pursuant to Section 8 of the Lease or any exercise of remedies by
the Owner Participant pursuant to Section 15 of the Lease or (5) any Tax 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 exclusively provide for Lessee's liability with respect to Taxes)
(other than amounts necessary to make payments hereunder on an After-Tax Basis);
provided, however, such exception shall not apply to the application of Parts 4
or 5 of Subpart B of Title I of ERISA or Section 502(i) or (1) of ERISA to the
execution and delivery by the Lessee of the Operative Documents to which the
Lessee, Owner Participant or Original Loan Participant is or will be a party or
the consummation of the transactions contemplated thereby on the sale, resale or
transfer of the Loan Certificates, 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, or (7) 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 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, or (8) the authorization or
giving or withholding of any future amendments, supplements, waivers or consents
with respect to any of the Operative Documents unless such amendments,
supplements, waivers or consents (a) are requested by Lessee or (b) are required
pursuant to the terms of the Operative Documents (unless such requirement
results from the actions of an Indemnitee not required under the Operative
Documents), provided if Lessee is not responsible for the Expense associated
with such amendment, supplement, waiver or consent,
36
<PAGE>
[Participation Agreement (1994 747 B)]
the party requesting the execution of the same shall be responsible for such
expense or (9) 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 exclusively provide for Lessee's
liability with respect to Taxes) (other than amounts necessary to make payments
hereunder on an After-Tax Basis); provided, however, such exception shall not
apply to the application of Parts 4 or 5 of Subpart B of Title I of ERISA or
Section 502(i) or (1) of ERISA to the execution and delivery by the Lessee of
the Operative Documents to which the Lessee, Owner Participant or Original Loan
Participant is or will be a party or the consummation of the transactions
contemplated thereby on the sale, resale or transfer of the Loan Certificates 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 Lessor shall be entitled to exercise remedies under such
Section 15), (II) the termination of the Lease in accordance with Section 5, 9,
10 or 19 thereof, (III) the last day of the Term if Lessor shall have furnished
the notice referred to in Section 10(d) of the Lease and Lessee shall have
failed to return possession to Lessor 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).
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan 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, 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. 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
37
<PAGE>
[Participation Agreement (1994 747 B)]
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 its reasonable best 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) an
Event of Default or a Section 14(a), (b), (f) or (g) 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 material risk of civil
liability to any 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 (i) in the
-------- -------
written opinion of counsel to such Indemnitee (which counsel and opinion 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 or (ii) such Indemnitee has been indicted or otherwise charged
in a criminal complaint in connection with a claim not excluded by Section 7(b)
or (c) hereof, and such Indemnitee informs the Lessee in writing that such
Indemnitee desires to be represented by separate counsel, the reasonable fees
and expenses of such separate counsel shall be borne by Lessee, provided, that
Lessee shall not be responsible for the fees and expenses of more than one
separate counsel for each group of affiliated Indemnitees or more than one
separate counsel in any one jurisdiction.
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 without the prior written consent of
Lessee (except during the continuance of an Event of Default, when such consent
shall not be required if such
38
<PAGE>
[Participation Agreement (1994 747 B)]
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 5.03 or 7.01 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 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 the
Original Loan Participant or any successor, assign or Affiliate of the Owner
Participant or the Original Loan 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 the reasonable
39
<PAGE>
[Participation Agreement (1994 747 B)]
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), 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 an Event of Default or a Section 14(a),
(b), (f) or (g) Default under the Lease shall have occurred and be continuing or
if any payment is due and owing by Lessee to such Person under the Lease or any
other Operative Document. Any such amount shall be held by such Person (the
Lessee hereby granting a security interest in such amount to 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 Event of Default or 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 2.04(b) of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants.
-----------------------------------------
40
<PAGE>
[Participation Agreement (1994 747 B)]
(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 it has authorized
to act on its behalf (it being understood that Capstar Partners, Inc. is not
acting on behalf of the Owner Participant) has directly or indirectly offered
any interest in the Trust Estate or any Loan 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 First Security Bank of Utah,
National Association, 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" as defined in Section 101(16) of the Federal
Aviation Act. The Owner Participant agrees, solely for the benefit of Lessee,
each Sublessee 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" within the meaning of Section 101(16) of the Federal Aviation Act 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 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). Each
party hereto agrees, upon the request and at the sole expense of the Owner
Participant, to reasonably cooperate with
41
<PAGE>
[Participation Agreement (1994 747 B)]
the Owner Participant in complying with its obligations (such reasonable
cooperation shall not include any restriction on the use of the Aircraft) 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. First
Security Bank of Utah, National Association, in its individual capacity, agrees
that if at any time a responsible officer of First Security Bank of Utah,
National Association shall obtain Actual Knowledge that First Security Bank of
Utah, National Association has ceased to be a "citizen of the United States"
within the meaning of Section 101(16) of the Federal Aviation Act, 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, a Sublessee 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 First Security Bank of Utah, National Association, 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) First Security Bank of Utah, National Association in its
individual capacity represents and warrants that both the principal place of
business of the Owner Trustee and the place where its 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 Salt Lake City, Utah (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 Salt Lake City, Utah. First Security Bank of
Utah, National Association in its individual capacity agrees that it will not
change the location of such office to a location outside of Salt Lake City,
Utah, without prior written notice to Lessee, Indenture Trustee and the Owner
Participant.
(d) The Original Loan Participant represents and warrants and, by
acceptance of its Loan Certificate, each other Certificate Holder shall be
deemed to have represented and warranted that neither it nor anyone acting on
its behalf has offered any Loan Certificates or any similar securities relating
to the Aircraft for sale to, or solicited any offer to buy any Loan Certificates
or any similar securities relating to the Aircraft from, any person or entity
other than in a manner permitted by the Securities Act of 1933, as amended, and
the
42
<PAGE>
[Participation Agreement (1994 747 B)]
rules and regulations promulgated thereunder and the securities laws, rules and
regulations of any state.
(e) Each of the Owner Participant and so long as the Original Loan
Participant is a Certificate Holder, the Original Loan Participant, agree that,
if, at any time after the close of the calendar year in which occurs the seventh
anniversary of the Delivery Date and so long as no Default or Event of Default
under the Lease shall have occurred or be continuing, Lessee has, upon 15 days'
prior notice, 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) in a country
listed on Exhibit G to the Lease, with which the United States maintains normal
diplomatic relations (which for purposes of this Section 8(e) shall include
Taiwan and any other country that is similarly situated), or (ii) in any other
country with which the United States maintains normal diplomatic relations
(which for purposes of this Section 8(e) shall include Taiwan and any other
country that is similarly situated), and the Owner Participant and the Original
Loan Participant (but in regard to the Original Loan Participant, only so long
as the Original Loan Participant is a Certificate Holder) have 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 law, the Owner
Participant and the Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a Certificate
Holder) will not, in the case of either clause (i) or (ii), unreasonably
withhold its consent to such change of registration. Each of the Owner
Participant and the Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a Certificate
Holder) further agrees that the inability of Lessee to deliver an opinion
(reasonably satisfactory in form and substance to the Owner Participant and the
Indenture Trustee) of counsel reasonably acceptable to the Owner Participant and
the Indenture Trustee in such country listed on Exhibit G to the Lease with
which the United States maintains normal diplomatic relations (which for
purposes of this Section 8(e) shall include Taiwan and any other country that is
similarly situated), 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 (or, if appropriate, in the name of
Lessee or a Sublessee as a "lessee" or a "sublessee"), 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 such Exhibit G to the
Lease, and if said
43
<PAGE>
[Participation Agreement (1994 747 B)]
opinion is delivered, the Owner Participant and the Original Loan Participant
(but in regard to the Original Loan Participant, only so long as the Original
Loan Participant is a Certificate Holder) will instruct the Owner Trustee and
the Indenture Trustee, respectively, 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
the Indenture Trustee shall have received:
(i) assurances reasonably satisfactory to them (A) to the effect
that the insurance or self-insurance provisions of the Lease will have been
complied with after giving effect to such change of registry, (B) of the
payment by Lessee on an After Tax Basis of any reasonable expenses of the
Owner Participant, the Owner Trustee, the Indenture Trustee and any
Original Loan Participant (but in regard to the Original Loan Participant,
only so long as the Original Loan Participant is a Certificate Holder) 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), the Indenture Trustee and any Original
Loan Participant (but in regard to the Original Loan Participant, only so
long as the Original Loan Participant is a Certificate Holder), 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 ownership interest of
the Owner Trustee and 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, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement) and any Original Loan Participant (but in regard to the Original
Loan Participant, only so long as the Original Loan Participant is a
Certificate Holder) or any successor, assign or Affiliate of any thereof,
or the Trust Estate pursuant to Section 7(b) hereof, (F) that such new
country of registry imposes aircraft maintenance standards not materially
less stringent than those of the FAA, the Civil Aviation Authority of the
United Kingdom, the Director Generale de l'Aviation Civile of the French
Republic or the
44
<PAGE>
[Participation Agreement (1994 747 B)]
Luftfahrt Bundesamt of Germany or the central civil aviation authority of
Japan or Canada, and (G) that the Lessor's right to exercise remedies under
the Lease (including the right to repossess the Aircraft) will not be
substantially worse than the rights provided under the laws of the United
States (without regard to the rights and benefits provided by Sections 362
and 1110 of the Bankruptcy Code); and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee in its individual capacity and, so long as the Original
Loan Participant is a Certificate Holder the Indenture Trustee, 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 (subject to customary exceptions), (B) that it is not
necessary for the Owner Participant, the Owner Trustee, the Original Loan
Participant (but in regard to the Original Loan Participant, only so long
as the Original Loan Participant is a Certificate Holder), or the Indenture
Trustee to register or qualify to do business in such jurisdiction, and
there are no requirements that the Owner Participant or the Owner Trustee
must meet to maintain the registration of the Aircraft and the validity and
perfection of the Lien of the Trust Indenture under the laws of such
jurisdiction that, in the reasonable opinion of the Owner Participant,
would place an undue burden on the Owner Trustee or the Owner Participant,
as the case may be, (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 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, and (E) to such
further effect with respect to such other matters as the Owner Trustee, in
its individual capacity, or
45
<PAGE>
[Participation Agreement (1994 747 B)]
the Owner Participant or the Indenture Trustee may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee of
an opinion of counsel meeting the foregoing requirements, Exhibits F and G
to the Lease shall be amended to add such country.
At any time and from time to time during the Term, in connection with
a request by Lessee for a change in registration pursuant to this Section 8(e)
or sublease pursuant to Section 7(b)(viii)(2) or (3) of the Lease, the Owner
Participant, the Original Loan Participant or the Indenture Trustee (but in
regard to the Original Loan Participant and the Indenture Trustee, only so long
as the Original Loan Participant is a Certificate Holder) may request in writing
to Lessee, or Lessee may request in writing to the Owner Participant and the
Indenture Trustee that Exhibits F and G of the Lease be amended to delete, or in
the case of a request from Lessee be amended to add one or more countries on
Exhibits F and G of the Lease and specified in such request which is the country
of such change in registration or sublease, as the case may be, such request to
be based upon reasonable evidence, in the form of a legal opinion or other
substantive evidence (which opinion or other evidence shall be reasonably
satisfactory to the Lessee with respect to any requested deletion and to the
Owner Participant, the Indenture Trustee (but in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Certificate Holder)
and the Original Loan Participant (but in regard to the Original Loan
Participant, only so long as the Original Loan Participant is a Certificate
Holder) with respect to any requested addition), to the effect that (x) with
respect to any requested deletion, any one or more of the criteria set forth in
subparagraphs (i) and (ii) above (or any other criteria that would, in the
reasonable opinion of the Owner Participant and the Indenture Trustee (but in
regard to the Indenture Trustee, only so long as the Original Loan Participant
is a Certificate Holder), significantly adversely impact a significant interest
of the Owner Participant, the Original Loan Participant (but in regard to the
Original Loan Participant, only so long as the Original Loan Participant is a
Certificate Holder) or the Indenture Trustee in a manner that is substantially
similar to such criteria, including clause (ii)(E) above) are not then
applicable to the country proposed to be deleted from Exhibits F and G of the
Lease (and with respect to clause (i)(C), (i)(E), (ii)(C) or (ii)(D) above could
not otherwise be complied with in accordance with the terms thereof), or (y)
with respect to any requested addition, each of the criteria set forth in
subparagraphs (i) and (ii) above are then applicable to the country proposed to
be added to Exhibit F or G (or with respect to clause (i)(C), (i)(E), (ii)(C) or
(ii)(D)
46
<PAGE>
[Participation Agreement (1994 747 B)]
could not otherwise be complied with in accordance with the terms of such
criteria). Upon receipt of such opinion or other substantive evidence
supporting any such request, Exhibits F and G shall be deemed amended to reflect
such agreement (such agreement to be so evidenced by a writing signed by Lessee,
the Owner Participant, the Indenture Trustee and the Owner Trustee, and promptly
distributed to the Owner Trustee, the Original Loan Participant (but in regard
to the Original Loan Participant only so long as the Original Loan Participant
is a Certificate Holder) and the Indenture Trustee and duly filed for
recordation with the FAA); otherwise, such Exhibits F and G of the Lease shall
not be so amended. Lessee shall not request that any country be added to
Exhibit F or G unless Lessee intends to sublease or re-register the Aircraft in
such country.
Upon any addition to or deletion from Exhibits F or G to the Lease as
set forth in either of the two preceding paragraphs, Exhibits F and G to the
Lease shall be amended (if necessary) to reflect such change.
Lessee shall pay all reasonable fees and expenses, on an After-Tax
Basis, of the Owner Participant, the Owner Trustee, the Indenture Trustee and
the Certificate Holders, in connection with (x) any change of registry of the
Aircraft or (y) addition or deletion to the countries listed on Exhibits F and G
to the Lease.
(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
47
<PAGE>
[Participation Agreement (1994 747 B)]
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 U.S. 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;
(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;
(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, if determined
adversely to the Owner Participant, would materially adversely affect the
financial condition of the Owner Participant or the ability of the Owner
Participant to perform its obligations under the Owner Participant
Documents; and
(v) on the Delivery Date, there will be no Lessor Liens
attributable to the Owner Participant.
(g) Each of First Security Bank of Utah, National Association in its
individual capacity and the Owner Participant severally covenants and agrees (i)
that it shall not cause or permit to exist a 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
48
<PAGE>
[Participation Agreement (1994 747 B)]
indemnify the Trust Estate pursuant to Section 7 hereof and which the Owner
Participant is expressly required to pay by the terms of the Operative
Documents, but excluding Taxes or Expenses referred to in Sections 7(b)(ii)(5)
(with respect to the Owner Trustee), 7(b)(ii)(6) or 7(b)(ii)(7) and excluding
any diminution of the Trust Estate by a Lessor Lien attributable to or caused by
First Security Bank of Utah, National Association in its individual capacity or
any Liens attributable to the Original Loan Participant, any Certificate Holder
or the Indenture Trustee (in its individual capacity or in its capacity as
Indenture Trustee); provided that if the Owner Participant shall make
restitution to the Trust Estate on account of any Lessor Lien attributable to or
caused by First Security Bank of Utah, National Association in its individual
capacity, then First Security Bank of Utah, National Association, in its
individual capacity, shall reimburse the Owner Participant for such amount
together with interest thereon at the Past Due Rate.
(h) State Street Bank and Trust Company of Connecticut, 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 Indenture 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
hereof 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 IV or V of the Trust Indenture, or
(B) 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) The Original Loan Participant represents, warrants and covenants
that:
(i) it is a bank duly organized and validly existing in good
standing under the laws of its jurisdiction of organization and has full
power, authority and legal right to execute, deliver and carry out the
terms of this Agreement;
49
<PAGE>
[Participation Agreement (1994 747 B)]
(ii) this Agreement has been duly authorized, executed and
delivered by it and constitutes the legal, valid and binding obligation of
the Original Loan Participant enforceable against it in accordance with its
terms; and
(iii) the Loan Certificates to be issued to it pursuant to the
Trust Indenture are being acquired by it with no present intent to make any
resale or distribution thereof which would require registration under the
Securities Act of 1933, as amended, and it will not offer or sell any Loan
Certificates in violation of the Securities Act of 1933, provided that the
disposition of its property shall at all times be and remain within its
control.
(j) The Indenture Trustee, and by its acceptance of the Loan
Certificates, each Certificate Holder 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, Break Amount, 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 Reform Act of 1978 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 any Certificate Holder 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, Break Amount, if any, or interest on the Loan Certificates and
(iii) a Certificate Holder 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 or the Indenture Trustee shall (except in
the case of the Indenture Trustee, to the extent that such Excess Payment has
theretofore been distributed) 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 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
50
<PAGE>
[Participation Agreement (1994 747 B)]
any Certificate Holder 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) The Indenture Trustee represents, in its individual capacity, as
follows:
(i) it is a "citizen of the United States" as defined in Section
101(16) of the Federal Aviation Act, 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 8.02 of the Trust Indenture if
it should cease to be a "citizen of the United States";
(ii) it is a national banking association under the laws of the
United States of America and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Loan Certificates;
(iii) the Indenture Trustee Documents and the authentication of
the Loan Certificates have been duly authorized by all necessary corporate
action on its part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or Connecticut law or regulation relating to its 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; and
(iv) each of the Indenture Trustee Documents has been duly
executed and delivered by it and, assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, is the
legal, valid and binding obligation of the Indenture Trustee, enforceable
against it in accordance with its terms.
(l) So long as the Aircraft shall be leased to Lessee under the Lease,
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 shall have
delivered to the Owner Trustee, the Lessee and the
51
<PAGE>
[Participation Agreement (1994 747 B)]
Indenture Trustee an opinion (in form, scope and substance reasonably
satisfactory to the Lessee and the Indenture Trustee) of counsel reasonably
satisfactory to the Indenture Trustee and Lessee to the effect that the
agreement referred to in clause (O) below and any guaranty required by clause
(B) or (C) below, if any, are the legal, valid, binding and enforceable
obligations of the Transferee and the guarantor, if any, as the case may be
(subject to the normal bankruptcy and equitable remedies exceptions contained in
an opinion on such matters). 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
satisfactory to them 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 corporation, provided such obligations are guaranteed by the
transferor Owner Participant; provided, however, that unless otherwise consented
to by Lessee any Transferee shall not be an airline, a commercial passenger air
carrier or other similar person or corporation controlling, controlled by or
under common control with such an airline or commercial passenger air carrier,
or, unless an Event of Default has occurred and is continuing or a Section 14(f)
or (g) Default has occurred (during which period Lessee's consent shall not be
necessary) an air freight forwarder, an entity engaged in the business of parcel
transport by air or other similar person or a corporation controlling,
controlled by or under common control with such an air freight forwarder, an
entity engaged in the business of parcel transport by air or other similar
person; provided, however, that a Transferee shall not be a person other than a
-------- -------
"U.S. person" (within the meaning of Section 7701(a) of the Code) unless, prior
to the consummation of any transfer of the character referred to in this Section
8(l), (x) the Owner Participant shall have furnished or caused to be furnished
to the Indenture Trustee an opinion of counsel reasonably satisfactory to the
Indenture Trustee in form and substance reasonably satisfactory to the Indenture
Trustee to the effect that such transfer would not have adverse tax consequences
to the Indenture Trustee, the Trust Indenture Estate or any Certificate Holder
and (y) either the Owner Participant or such Transferee shall have indemnified
the Indenture Trustee, the Trust Indenture Estate and the Certificate Holders,
pursuant to an agreement in form and substance reasonably satisfactory to the
Indenture Trustee, in respect of any adverse tax consequences to any thereof as
a consequence of such transfer. Each such transfer to a Transferee shall be
52
<PAGE>
[Participation Agreement (1994 747 B)]
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of Section
101(16) of the Federal Aviation Act and the FAA regulations thereunder, (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 or
agreements, in form and substance reasonably satisfactory to the Owner Trustee,
Lessee and the Indenture Trustee, whereby Transferee confirms that it shall be
deemed a party to this Agreement and a party to the Trust Agreement and agrees
to be bound by all of the terms of, and to undertake all of the obligations of
the transferor Owner Participant contained in the Owner Participant's Documents
and makes representations of the scope provided for as to the Owner Participant
in this Agreement, (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 or ERISA or any rules or regulations promulgated
thereunder, (Q) after giving effect to such transfer, there shall be no more
than one Owner Participant of record at that time and (R) such transfer will not
give rise to a Default or Event of Default under the Trust Indenture; and Lessee
may request such Transferee to provide an opinion of counsel (who shall be
reasonably satisfactory to Lessee and the Indenture Trustee and who may be in-
house counsel) in form and substance reasonably satisfactory to the Lessee as to
any matter set forth in clauses (M), (N), (O) or (P) and as to such other
matters as Lessee may reasonably request (all subject to appropriate limitations
and exceptions). Upon any such transfer by the Owner Participant as above
provided, the Transferee shall be deemed the Owner Participant for all purposes
hereof and of the other Operative Documents and each reference herein to the
Owner Participant shall thereafter be deemed for all purposes to be to the
Transferee and the transferor Owner Participant shall be relieved of all of its
obligations 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. 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
ten (10) Business Days prior thereto, to the Indenture Trustee, the Owner
Trustee and Lessee, specifying the name and address of the proposed Transferee
and providing financial statements of the proposed Transferee. The Owner
Participant shall pay all of the reasonable invoiced costs and Expenses of the
other parties hereto (including, without limitation, the Certificate Holders),
on an 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
53
<PAGE>
[Participation Agreement (1994 747 B)]
accordance with generally accepted accounting principles consistently applied.
(m) [Intentionally Omitted].
(n) First Security Bank of Utah, National Association and State Street
Bank and Trust Company of Connecticut, National Association, each in its
individual capacity, agrees for the benefit of Lessee and the Owner Participant
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 ERISA (an "ERISA
Plan"). The Original Loan Participant represents and warrants that no part of
the funds used by it to acquire the Loan Certificates or any interest therein
(including any participation in such certificates) constitutes assets of an
ERISA Plan. Lessee represents and warrants that the execution and delivery of
this Agreement and the other Operative Documents and the consummation of the
transactions contemplated hereby and thereby will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code (such representation being made solely in reliance upon and subject to the
accuracy of the representations contained in the preceding sentences of this
subsection).
(p) First Security Bank of Utah, National Association both in its
individual capacity (except with respect to subsection (ix) below) and as Owner
Trustee, 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 First Security Bank of Utah, National Association in its
individual capacity, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
First Security Bank of Utah, National Association both in its individual
capacity 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
54
<PAGE>
[Participation Agreement (1994 747 B)]
this Agreement or any of the other Operative Documents, including any Lien
resulting from the nonpayment by First Security Bank of Utah, National
Association both in its individual capacity 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 First Security Bank of
Utah, National Association in its individual capacity and which is
presently continuing;
(iv) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States 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 Utah 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 First Security Bank of Utah, National Association in its
individual capacity and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
55
<PAGE>
[Participation Agreement (1994 747 B)]
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone, and no responsible officer or
responsible employee of First Security Bank of Utah, National Association
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 and the trust intended to
be formed by the Trust Agreement has been duly and validly formed;
(x) there are no proceedings pending or, to the best knowledge of
First Security Bank of Utah, National Association, threatened, against
First Security Bank of Utah, National Association in any court or before
any governmental authority or arbitration board or tribunal which, if
adversely determined, would materially and adversely affect the right,
power and authority of First Security Bank of Utah, National Association to
enter into or perform its obligations under the Owner Trustee Documents;
and
(xi) neither the due execution and delivery of the Owner Trustee
Documents by First Security Bank of Utah, National Association, 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 Utah governmental
authority or agency pursuant to any federal or Utah law governing the
banking or trust powers of First Security Bank of Utah, National
Association.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any undertaking delivered by it as contemplated in
Sections 3(c)(ii), 7(a)(1)(i) and (iv), 12 and Exhibit E to the Lease and shall
indemnify Lessee for any losses, damages, costs or expenses of any kind incurred
solely and directly as a consequence of such failure to comply with such
undertaking or obligation. The Owner
56
<PAGE>
[Participation Agreement (1994 747 B)]
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 Section 12 and Exhibit E of the Lease and all costs and expenses
that are for the account of the Owner Trustee pursuant to Sections 3(f), 5, 12
and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents and provided that the Loan Certificates are no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on an After-Tax Basis
(including, without limitation, reasonable attorney's fees and expenses of each
of such parties), (i) if Lessee elects to terminate the Lease and to purchase
the Aircraft pursuant to Section 19(b) of the Lease, 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, may, provided no Event of Default shall have occurred and be
continuing (unless such Event of Default is waived by the Indenture Trustee),
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
2.15 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.
57
<PAGE>
[Participation Agreement (1994 747 B)]
(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" as defined in Section 101(16) of the Federal
Aviation Act and shall be a United States 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 and the
Owner Participant a duly authorized, valid, binding and enforceable
agreement in form and substance reasonably satisfactory to the Indenture
Trustee and 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 to be
performed or observed by Lessee;
(iii) immediately after giving effect to such transaction and as
a result of 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 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 Indenture Trustee and the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
subparagraph (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,
58
<PAGE>
[Participation Agreement (1994 747 B)]
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 with the same
effect as if such successor corporation or Person had been named as Lessee
herein. 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.
(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 Interim
Rent, Basic Rent, Excess Amount, Stipulated Loss Value Percentages, 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 upon the
request of Lessee to take such further actions as may be necessary 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 terminate or revoke the
Trust Agreement or the trust created thereunder without the prior written
consent of the Lessee so long as the Lease shall remain in effect and provided
no Event of Default has occurred and is continuing and the Indenture Trustee, so
long as the Trust Indenture shall be in effect.
59
<PAGE>
[Participation Agreement (1994 747 B)]
(w) The Original Loan Participant and each subsequent Certificate
Holder represents, warrants and covenants that it will not sell, assign, grant
participations in or otherwise transfer its Loan Certificate or Loan
Certificates to any other Person unless such Person represents and warrants, in
writing, to the Original Loan Participant or such Certificate Holder, for the
benefit of the Original Loan Participant or said Certificate Holder, Owner
Participant and Lessee that at least one of the following statements is an
accurate representation as to such Person and/or the source of funds to be used
by such Person to acquire the Loan Certificate or Loan Certificates or
participation therein:
(i) no part of such funds directly or indirectly constitutes
or may be deemed under the Code, ERISA or any applicable state law
or any rulings or regulations thereunder to be assets of an ERISA
Plan; or
(ii) such Person is an insurance company and such funds
constitute assets allocated to a separate account maintained by it
which is a "pooled separate account" (within the meaning of
Section 3(17) of ERISA and Prohibited Transaction Class Exemption
90-1 issued by the Department of Labor ("PTE 90-1")) in which an
ERISA Plan has an interest and the acquisition and holding of Loan
Certificates is entitled to a prohibited transaction exemption
granted by PTE 90-1; or
(iii) such Person is a bank and such funds constitute assets
allocated to a bank collective investment vehicle maintained by it
as a "collective investment fund" (as defined in Prohibited
Transaction Class Exemption 91-38 issued by the Department of
Labor ("PTE 91-38")) in which an ERISA Plan has an interest and
the acquisition and holding of Loan Certificates is entitled to a
prohibited transaction exemption granted by PTE 91-38; or
(iv) such funds constitute assets of an "investment fund" in
which an ERISA Plan has an interest and which is managed by a
"qualified professional asset manager" or "QPAM" (as such terms
are defined in Part V of Prohibited Transaction Class Exemption
84-14 issued by the Department of Labor ("PTE 84-14") and the
acquisition and holding of the Loan Certificates is
60
<PAGE>
[Participation Agreement (1994 747 B)]
entitled to a prohibited transaction exemption granted by PTE 84-
14; or
(v) such funds constitute assets of one or more ERISA Plans,
each of which is a "governmental plan" (as such term is defined in
Section 3(32) of ERISA and in Section 414(d) of the Code) or a
"church plan" (as such term is defined in Section 3(33) of ERISA
and in Section 414(e) of the Code) and the acquisition and holding
of the Loan Certificates shall not constitute a prohibited
transaction under ERISA, the Code or any applicable state law.
provided, that the Original Loan Participant and any subsequent
Certificate Holder may grant participations in any Loan Certificates
held by it only in accordance with Section 8(y) hereof. Any such
Person shall also represent and warrant that it will require any
transferee of its interest in any Loan Certificates to make the
representations and warranties set forth in the preceding sentence of
this Section 8(w) and this sentence in writing, to such Person for the
benefit of such Person, the Owner Participant and Lessee.
(x) The Original Loan Participant represents and each subsequent
Certificate Holder by its acceptance of such Loan Certificate shall be deemed to
represent that it is exempt from United States withholding taxes, and each
Certificate Holder covenants that, if required to obtain or renew such
exemption, it will, upon request and to the extent it remains lawfully able to
do so, properly prepare and promptly furnish to each of the Owner Trustee, the
Indenture Trustee and the Lessee Internal Revenue Service Form 1001, Form 4224
(with respect to each tax year) or Form W-8, whichever is applicable.
Each Certificate Holder shall indemnify (on an after-tax basis) and
hold harmless the Indenture Trustee, the Owner Trustee, Lessee and the Owner
Participant against any United States withholding taxes (and related interest
and penalties) which the Indenture Trustee fails to withhold on payments to it
as a result of its failure to provide the required certificate or form or the
invalidity of any certificate or form provided by it pursuant to this Section
8(x). Any amount payable hereunder by any Certificate Holder shall be paid
within 30 days after receipt by such Certificate Holder of a written demand
therefor.
(y) The Original Loan Participant covenants that it will not grant
participations in its Loan Certificates to any Person unless such Person
represents and warrants, in writing, to
61
<PAGE>
[Participation Agreement (1994 747 B)]
the Original Loan Participant and for the benefit of the Original Loan
Participant, Owner Participant and Lessee that no part of the funds used by it
to acquire its interest in the Loan Certificates constitutes assets of an ERISA
Plan. Any such Person shall require any transferee of its interest in the Loan
Certificates to make the representation in the preceding sentence, in writing,
to such person for its benefit and the benefit of the Original Loan Participant,
Owner Participant and Lessee.
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
--------------------------
Participant and the Owner Trustee hereby (A) agrees with Lessee 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 (so long as no Event
of Default under the Lease shall have occurred and be continuing) 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, 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.
The Certificate Holders agree that they 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 Owner Participant, 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
62
<PAGE>
[Participation Agreement (1994 747 B)]
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).
(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, the Trust Supplement covering the
Aircraft, the Trust Agreement, the Lease and the Trust Indenture, such
documents 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.
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[Participation Agreement (1994 747 B)]
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
prepaid telex, TWX or telegram (with messenger delivery specified in the case of
a telegram), 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 received, 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 telex, TWX
or telecopier numbers) as follows: (A) if to Lessee, the Owner Trustee, the
Original Loan Participant, the Indenture Trustee 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 2.07 of the Trust Indenture.
(b) Each party to this Agreement and, by acceptance of its Loan
Certificate, each subsequent 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.
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[Participation Agreement (1994 747 B)]
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
------------------------------
agrees that if, at any time, the Trust Estate or the Owner Trustee becomes
subject to any Taxes for which it is indemnified pursuant to Section 7(b) hereof
and if, as a consequence thereof, Lessee should 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 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 adversely 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, (D) the Owner Participant 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
reasonable judgment, result in any Loss of MACRS Deductions, FSC Benefits,
Interest Deductions or an Inclusion Event (as defined in the Tax Indemnity
Agreement) or other adverse tax consequences 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
described in 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,
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[Participation Agreement (1994 747 B)]
registration, recording or filing fees incurred by the Owner Trustee or Owner
Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Owner Participant and
-------------
each Certificate Holder 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 Owner Participant and the
Original Loan Participant provided for in this Agreement, and Lessee's, the
Owner Trustee's, Indenture Trustee's, Original Loan Participant's and the Owner
Participant's 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 or the Trust Indenture Estate and the expiration or
other termination of this Agreement or any other Operative Document.
(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 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
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[Participation Agreement (1994 747 B)]
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 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
and the other Operative Documents.
(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.
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[Participation Agreement (1994 747 B)]
SECTION 16. Transaction Expenses; Invoices and Payment of Expenses.
------------------------------------------------------
(a) The parties hereto agree that the term "Transaction Expenses" shall mean
(i) with respect to the closing on the Delivery Date and a refinancing, if any,
pursuant to Section 20 hereof, the reasonable and actual fees, expenses and
disbursements of (1) Bingham, Dana & Gould, special counsel for the Indenture
Trustee and the Indenture Trustee Parent, (2) Ray, Quinney & Nebeker, special
counsel for the Owner Trustee, (3) Crowe & Dunlevy, P.C., special counsel in
Oklahoma City, Oklahoma, (4) Vedder, Price, Kaufman & Kammholz, special counsel
for Lessee, and (5) Hunton & Williams, special counsel for the Owner
Participant, and (6) Akin, Gump, Strauss, Hauer & Feld, L.L.P., special counsel
to the Original Loan 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 initial reasonable and actual
disbursements of the Owner Trustee under the Trust Agreement, (iv) the initial
fee and initial reasonable and actual disbursements of the Indenture Trustee
under the Trust Indenture, (v) the fee and expenses of Aero Economics, Inc. (or
of such other appraiser as shall be acceptable to Lessee and the Owner
Participant) with respect to the appraisal of the Aircraft required on or before
the Delivery Date pursuant to Section 4(a) hereof, (vi) the fees 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 hereby up to an
aggregate of $10,000 (provided that airfare charges incurred by the Owner
Participant for travel on an airline other than United Airlines shall not be
included as Transaction Expenses), (ix) the initial fee, if any, of the Original
Loan Participant, (x) the placement or underwriting fees, commissions and
expenses, if any, in initially placing debt pursuant to Section 20 hereof and
all costs and expenses associated with a public offering, if any, pursuant
thereto, (xi) costs incurred by Lessee in connection with the initial ferry
flight of the Aircraft, and (xii) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee, Lessee and the
Participants shall promptly (and in the case of Transaction Expenses incurred in
connection with the placement of permanent debt pursuant to Section 20 hereof,
within 90 days after such refinancing) submit to the Owner Participant and the
Lessee for their joint prompt approval copies of invoices of the Transaction
Expenses as they are received. The Owner Participant agrees to pay such amounts
directly or 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. To
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[Participation Agreement (1994 747 B)]
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 Original Loan
Participant (including those relating to its counsel) shall be borne by the
Original Loan Participant if such failure to consummate the transactions results
from the fault of the Original Loan Participant and the fees, expenses and
disbursements of the Owner Participant (including those relating to its counsel)
and the fees and expenses of any appraisal shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
fault of the Owner Participant or the Owner Participant's failure to close after
all conditions precedent to the Owner Participant's funding set forth herein
have been satisfied (other than those within the control of the Owner
Participant). In addition, upon such failure to consummate, Lessee (unless such
failure to consummate results from the fault of the Original Loan Participant)
shall pay the Original Loan Participant any applicable Break Amount. To the
extent Transaction Expenses exceed .75% of Lessor's Cost, the Lessee may pay all
or a portion of the Transaction Expenses described in clauses (i)(4) and (vi) of
the definition of Transaction Expenses; provided, however, that if Transaction
Expenses exceed .75% of Lessor's Cost after any payment by Lessee of the
expenses described in clauses (i)(4) and (vi) of the definition of Transaction
Expenses, at the option of the Owner Participant, either (i) the Lessee shall
pay such amounts in excess of .75% of Lessor's Cost to the Owner Participant or
(ii) the Owner Participant shall pay such amounts in excess of .75% of Lessor's
Cost and such amounts shall be included in Transaction Expenses.
SECTION 17. Optional Redemption of Loan Certificates. (a) 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 good faith 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 good faith negotiation Lessee and the Owner Participant shall have
concluded an agreement with respect to such terms:
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[Participation Agreement (1994 747 B)]
(1) within ten (10) 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
Interim Rent, Basic Rent, Excess Amount, debt amortization, Stipulated Loss
Value Percentages, Termination Value Percentages and EBO Percentage.
Within ten (10) 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 Interim Rent, Basic Rent, Excess
Amount, debt amortization, Stipulated Loss Value Percentages, Termination
Value Percentages and EBO Percentage (provided, however, in no event shall
the EBO Percentage be less than the estimate of the fair market value of
the Aircraft on the EBO Date as set forth in the appraisal delivered by
Aero Economics, Inc. on the Delivery Date in accordance with Section
4(a)(xx) hereof) and the Debt/Equity Ratio (such information, the
"Refinancing Information") the appropriate parties will take the actions
specified in subparagraphs (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
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[Participation Agreement (1994 747 B)]
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) Interim Rent, Basic Rent and the Excess Amount 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, Termination Value and EBO Percentage 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;
(5) unless otherwise agreed to or required by the Owner
Participant to be paid as a Transaction Expense and whether or not such
refunding or refinancing transaction is consummated, Lessee shall pay 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 redemption under the Trust Indenture and
this Agreement, each Certificate Holder being refinanced or refunded will
transfer on the applicable Refinancing Date 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
simultaneous receipt by such Certificate Holder of the then outstanding
principal amount of such Certificates, accrued and unpaid interest thereon,
plus Break Amount, 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
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[Participation Agreement (1994 747 B)]
(which approval shall not be unreasonably withheld) all offering materials to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as requested by Lessee, contain any restrictions on the sale to
Certificate Holders who may use ERISA funding sources. 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 or any of its Affiliates' exposure to (i) regulation under
state or federal securities laws, (ii) the need to publicly disclose information
that is not generally available to the public, or (iii) 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 name of the Owner Participant to be identified 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 in connection with such refunding or refinancing Lessee shall have agreed
to indemnify the Owner Participant with respect to such right in a manner
reasonably satisfactory to the Owner Participant. 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 a combined capital and surplus
of at least $100,000,000 (or, if less, then its obligations shall be guaranteed
by an entity 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 Owner Participant, the Owner Trustee and the
Indenture Trustee at least twenty-five (25) days irrevocable written notice of
the proposed date of the refunding or refinancing.
(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 reasonable, good faith judgment,
there is a risk that such transaction could have any adverse tax
consequences on it which are not indemnified by Lessee in a manner
acceptable to the Owner Participant in its reasonable discretion;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the
financing needed to consummate the
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[Participation Agreement (1994 747 B)]
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 for any cost or expense (including, without limitation,
reasonable attorneys' fees) related to or arising out of any such refunding
or refinancing transaction;
(iv) if in the Owner Participant's reasonable judgment, such
refunding or refinancing would result in any unindemnified increased
liability to the Owner Participant or would adversely affect any material
rights of the Owner Trustee or the Owner Participant contained in the Trust
Indenture;
(v) if an Event of Default has occurred and is continuing;
(vi) if the principal amount of the New Debt is greater than the
principal amount of the Loan Certificates being refunded or refinanced or
if the New Debt will have a term that will exceed by more than 6 months the
remaining term of the Original Debt (determined on the basis of both the
final maturity date and the then weighted average life but, in each case
without regard to any tranching or serialization of the New Debt);
(vii) if any additional equity is required to be contributed by
the Owner Participant or if any equity is required to be returned to the
Owner Participant; or
(viii) if the New Debt is not fixed-rate debt denominated in
Dollars.
(e) There shall be no more than one optional redemption or refunding
under this Section 17.
(f) Any refinancing or refunding pursuant to this Section 17 shall be
of all outstanding Loan Certificates.
(g) No voluntary refinancing or refunding pursuant to this Section 17
shall occur prior to a refinancing of the Loan Certificates pursuant to Section
20 hereof.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
------------
Date occurs other than on August 1, 1994 or (ii) Transaction Expenses paid by
Lessor are determined to be other than .75% of Lessor's Cost, the Lessee may,
provided that the
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[Participation Agreement (1994 747 B)]
condition in Section 17(d)(i) shall be satisfied as if such reoptimization were
a refunding or refinancing under Section 17, pursuant to this Section 18 and in
accordance with the requirements of Section 3(c) of the Lease (including the
proviso set forth in Section 3(c)(i) thereof), request the Owner Participant to
optimize the Interim Rent, Basic Rent, Excess Amount, Stipulated Loss Value
Percentages, Termination Value Percentages and EBO Percentage. 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 Interim Rent,
Basic Rent, Excess Amount, Stipulated Loss Value Percentages, Termination Value
Percentages and EBO Percentage. Within fifteen (15) 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 Owner
Trustee to execute an amendment to the Lease setting forth the optimized Interim
Rent, Basic Rent, Excess Amount, Stipulated Loss Value Percentages, Termination
Value Percentages and EBO Percentage, and the Lessee will execute such amendment
to the Lease and the Indenture Trustee will execute any amendments to the Trust
Indenture necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Interim Rent, Basic
Rent, Excess Amount, Stipulated Loss Value Percentages, Termination Value
Percentages and EBO Percentage pursuant to this Section 18 and Section 3(c) of
the Lease, (M) the Certificate Holders will agree to changes in the amortization
schedule of the Loan Certificates, and (N) each Certificate Holder will exchange
the Loan Certificates held by it immediately prior to such optimization for new
Loan Certificates containing optimized amortization schedules; provided, that
such changes do not (X) increase or decrease the principal amount of the Loan
Certificates outstanding as of the time of such exchange, (Y) change the final
maturity date of any Loan Certificate, or (Z) increase or decrease by more than
six months the original Weighted Average Life to Maturity (determined as of the
Delivery Date) of the Loan Certificates.
(c) There shall be no unindemnified adverse impact to the Owner
Participant by reason of such optimization.
(d) 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.
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[Participation Agreement (1994 747 B)]
(e) No optimization shall occur pursuant to this Section 18 prior to a
refinancing of the Loan Certificates pursuant to either Section 17 or Section 20
hereof; notwithstanding the aforesaid, if no optimization pursuant to this
Section 18 shall have occurred prior to December 31, 1995 the Owner Participant
may require (by written notice to the Lessee) the Lessee to initiate an
optimization pursuant to this Section 18 so long as any such optimization does
not, in any way, affect the then amortization schedule of the Loan Certificates.
SECTION 19. [Intentionally Omitted].
SECTION 20. Initial Debt Refinancing. (a) In connection with a
------------------------
refinancing of the Loan Certificate issued to the Original Loan Participant, in
the event that at any time Lessee shall have given not less than 10 days' prior
written notice to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Original Loan Participant that Lessee is requesting a
voluntary prepayment of the Loan Certificates (in compliance with Section 2.11
of the Trust Indenture) by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith with Lessee in connection therewith (including the terms of any debt
to be issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Documents as may be necessary in order to facilitate
such permanent debt financing), and if after such good faith negotiation Lessee
and the Owner Participant shall have concluded an agreement with respect to such
terms:
(1) within five (5) 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 "Section 20
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 "Section 20 Refinancing
Date") and (ii) the following information: (A) the principal amount of
debt to be issued by the Owner Trustee on the Section 20 Refinancing Date,
and (B) the proposed revised schedules of Excess Amount, Interim Rent,
Basic Rent, debt amortization, Stipulated Loss Value Percentages,
Termination Value Percentages and EBO Percentage. Within five (5) Business
Days of its receipt of the Section 20 Refinancing Certificate, Lessee may
demand a verification pursuant to Exhibit E to the Lease of the information
set forth in the Section 20 Refinancing Certificate. Upon the acceptance
by
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[Participation Agreement (1994 747 B)]
Lessee of the accuracy of the information set forth in the Section 20
Refinancing Certificate or the determination pursuant to such verification
procedures of the revised Excess Amount, Interim Rent, Basic Rent, debt
amortization, Stipulated Loss Value Percentages, Termination Value
Percentages and EBO Percentage (provided, however, in no event shall the
EBO Percentage be less than the estimate of the fair market value of the
Aircraft on the EBO Date as set forth in the appraisal delivered by Aero
Economics, Inc. on the Delivery Date in accordance with Section 4(a)(xx)
hereof) (such information, the "Section 20 Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (12) below;
(2) the appropriate parties will enter into a financing or loan
agreement (which, subject to subsection (d) below, may involve a public
offering of such debt or the purchase of such debt by a publicly funded
entity (or entities)) with the institution or institutions to be named
therein providing for (i) the issuance and sale by the Owner Trustee to
such institution or institutions on the Section 20 Refinancing Date of debt
securities in an aggregate principal amount specified in the Section 20
Refinancing Information (such debt securities, the "Section 20 New Debt"),
and (ii) the application of the proceeds of the sale of the Section 20 New
Debt to the prepayment of all the Loan Certificates outstanding on the
Section 20 Refinancing Date and (iii) the payment of the excess of such
proceeds over the amount necessary to effect such prepayment to the Owner
Trustee for payment to the Owner Participant (which shall Dollar for Dollar
reduce the Owner Participant's Commitment);
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Interim Rent, Basic Rent and Excess Amount payable in respect of
the period from and after the Section 20 Refinancing Date shall be as
provided in the Section 20 Refinancing Information and (ii) amounts payable
in respect of Stipulated Loss Value, Termination Value and the EBO
Percentage from and after the Section 20 Refinancing Date shall be as
provided in the Section 20 Refinancing Information;
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the Section 20 New Debt in like manner as the
outstanding 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;
76
<PAGE>
[Participation Agreement (1994 747 B)]
(5) upon the closing of such refunding or refinancing (and as
indemnification for the loss resulting therefrom), the Lessee on behalf of
the Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (without duplication of other
amounts, if any, payable pursuant to any other provision of the Operative
Documents);
(6) except as provided in paragraph (5) above, the Owner Trustee
shall pay all of the costs of such refunding or refinancing, such costs
shall be considered as Transaction Expenses and such additional Transaction
Expenses shall be appropriately considered in calculating the proposed
revised schedules of Excess Amount, Interim Rent, Basic Rent, debt
amortization, Stipulated Loss Value Percentages, Termination Value
Percentages and EBO Percentage;
(7) the Original Loan Participant will deliver to the Owner
Trustee the Loan Certificates held by it concurrently with such refunding
or refinancing for cancellation (and the Owner Trustee shall cancel the
same), against simultaneous receipt by the Original Loan Participant of the
then outstanding principal amount of such Loan Certificates, accrued and
unpaid interest, if any, thereon, plus Break Amount, if any, together with
payment in full of all other amounts then payable to the Original Loan
Participant hereunder or under the Loan Certificates or the Trust
Indenture;
(8) the appropriate parties will amend such of the Operative
Documents in such respects as shall be necessary to reflect any amendments
agreed upon by the parties thereto;
(9) the parties hereto agree that, on the day immediately
preceding the closing of such refunding or refinancing, an amount equal to
all accrued and unpaid interest on the Loan Certificates (the "Interest
Amount") shall be paid as follows: (1) if such refunding or refinancing is
to close on or prior to the Commencement Date, the Owner Participant on
behalf of the Owner Trustee shall pay to the Indenture Trustee an amount
equal to the lesser of the Interest Amount and the Excess Amount (which
payments shall be treated as a prepayment of the Excess Amount) and the
Lessee shall pay to the Indenture Trustee (on behalf of the Owner Trustee)
an amount equal to (A) the excess, if any, of the Interest Amount over the
amount payable hereunder by the Owner Participant, as a prepayment by the
Lessee of Rent payable by Lessee on the Commencement
77
<PAGE>
[Participation Agreement (1994 747 B)]
Date or otherwise, or (ii) if such refunding or refinancing is to close
after the Commencement Date, the Lessee shall make a prepayment of Rent on
the day immediately preceding the closing of such refunding or refinancing
equal to the Interest Amount provided that, in either case, Rent shall be
adjusted in connection with such refunding or refinancing to reflect such
prepayment of accrued and unpaid interest on the Loan Certificates and the
prepayment, if any, by Lessee of Rent in connection therewith. Any payment
to the Indenture Trustee hereunder shall be applied on the day immediately
preceding the closing of such refunding or refinancing to pay any such
accrued and unpaid interest;
(10) the appropriate parties will execute and deliver appropriate
closing documents, execute and deliver appropriate closing certificates and
deliver appropriate opinions of counsel; and
(11) the Owner Participant shall not be obligated to proceed with
any refunding or refinancing under this Section 20 if, in the opinion of
counsel, selected by the Owner Participant and reasonably satisfactory to
the Lessee, there is a risk that such refinancing could result in any
unindemnified adverse consequences (including tax consequences), provided,
however, that the Owner Participant will be obligated to proceed with such
refunding or refinancing if the Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such indemnity
to be reasonably satisfactory to the Owner Participant), provided further,
the Owner Participant and the Lessee agree that, (A) the existence or mere
exercise of the right to cause a refinancing in and of itself shall not be
considered to result in any additional tax risks, and (B) the tax
consequences relating to causing the Section 20 New Debt not to be
classified as "qualified non-recourse indebtedness" within the meaning of
Reg. Section 1.861-10T shall not be governed by this Section 20(a)(11) but
shall be governed under Section 20(f).
(12) Notwithstanding the foregoing, the Owner Participant shall
have no obligation to proceed with any refunding or refinancing transaction
as contemplated by this Section 20:
(i) unless a third party or parties, unaffiliated with Lessee
and Owner Participant, shall have committed to (and shall) provide the
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that the
78
<PAGE>
[Participation Agreement (1994 747 B)]
Owner Participant shall have no obligation to locate any such party or
parties;
(ii) if the rights and obligations of the Owner Participant
under the trust indenture to be executed in connection with such
refunding or refinancing, considered as a whole, would be
unsatisfactory in the Owner Participant's reasonable judgment such
that the Owner Participant would have been unwilling on the Delivery
Date to cause the Owner Trustee to execute the Trust Indenture (had it
contained such rights and obligations) (the Owner Participant
acknowledging that it would have caused the Owner Trustee on the
Delivery Date to execute a trust indenture that was substantially
similar to the Trust Indenture but that contained the following terms:
(a) if the Delivery Date debt was swap based the definition of
Priority Break Amount equaled 3.5% of the principal debt amount of the
Loan Certificates outstanding and (b) if the Delivery Date debt was
premium based (whether sold in the public or private markets), (A)
that the Loan Certificates could be acquired by ERISA Plans (subject
to the negotiation by the Owner Participant and Lessee of appropriate
indemnification language and in the case of privately sold debt
appropriate representations delivered by the proposed Certificate
Holders) and (B) that upon the occurrence of a Lease Event of Default
that the Loan Certificates could not, absent an acceleration of the
same by the Indenture Trustee, be purchased pursuant to Section 2.14
of the Trust Indenture, for a period not exceeding 6 months and during
the next 6 months could only be so purchased upon payment of the
premium based lenders' make-whole premium);
(iii) if an Event of Default under the Lease has occurred and
is continuing;
(iv) if any additional equity is required to be contributed by
the Owner Participant; or
(v) if the New Debt is not denominated in Dollars.
(b) Only one optional refunding or refinancing pursuant to this
Section 20 shall be permitted during the Term and such refunding or refinancing
of the Loan Certificates pursuant to this Section 20 shall occur not later than
July 30, 1997; provided, however, that if after using reasonable efforts, Lessee
-------- -------
is unable to accomplish such refunding or refinancing with
79
<PAGE>
[Participation Agreement (1994 747 B)]
permanent New Debt prior to July 30, 1996, then two optional refinancings or
refundings shall be permitted pursuant to this Section 20 (the first with
interim New Debt (which shall occur prior to July 30, 1997) and the second with
permanent New Debt). In the event that the Loan Certificates issued to the
Original Loan Participant are refinanced by the issuance of interim New Debt as
provided in the proviso to the preceding sentence, references in this Section 20
to the Original Loan Participant and the Loan Certificate held by the Original
Loan Participant shall be deemed to be references to the new interim Certificate
Holder and the Loan Certificate to such Certificate Holder. In the event that
interim Section 20 New Debt is issued: (A) permanent Section 20 New Debt, with
a fixed rate of interest, shall be issued on or before December 31, 2001, and
(B) such permanent Section 20 New Debt shall not decrease the then outstanding
principal or then remaining term of the Original Debt (determined on the basis
of both the final maturity date and the then weighted average life but, in each
case, without regard to any tranching or serialization of the Section 20 New
Debt). Any permanent Section 20 New Debt shall bear a fixed rate of interest
for all periods beginning after December 31, 2001.
(c) Any refinancing or refunding pursuant to this Section 20 shall be
of all the Loan Certificates then outstanding.
(d) Any public refinancing pursuant to this Section 20 shall comply
with all the restrictions, limitations and conditions applicable in the case of
a public refinancing pursuant to Section 17(b) hereof.
(e) The parties hereto agree that they have reviewed Section 20(e)
Refinancing Information for United Air Lines, Inc. 1994 747 B Equipment Trust
and that the same describes, based on certain assumptions that the parties
hereto have found satisfactory, an example of Section 20 Refinancing Information
that the parties hereto have found satisfactory. Consequently, any Section 20
Refinancing Information that is consistent with such sample Section 20
Refinancing Information will be acceptable to the parties hereto.
(f) The first issuance of Section 20 New Debt will (A) have an
aggregate principal amount not greater than 80% of Lessor's Cost but in excess
of 105% of the then outstanding aggregate principal amount of the then
outstanding Loan Certificates (the "Original Debt") (which will be computed
including accrued but unpaid interest, if any, on such then outstanding
principal balance), (B) have a term that will exceed by more than 6 months the
remaining term of the Original Debt (determined on the basis of both the final
maturity date and the
80
<PAGE>
[Participation Agreement (1994 747 B)]
then weighted average life but, in each case, without regard to any tranching or
serialization of the Section 20 New Debt), and (C) if, on or before the Section
20 Refinancing Date and after the Delivery Date, there shall have been any Tax
Law Changes (as defined in the Tax Indemnity Agreement), which would cause
counsel, selected by the Owner Participant and reasonably acceptable to Lessee,
in its judgement, to be unable to provide the Owner Participant an opinion,
satisfactory to the Owner Participant, that the Section 20 New Debt should not
be classified as "qualified non-recourse indebtedness" within the meaning of
Reg. Section 1.861-10T (as it or any successor is then in effect), then, in
addition to or in substitution of the requirements in (A) and (B), comply with
the opinion of counsel, selected by the Owner Participant and reasonably
acceptable to the Lessee, as to the requirements for causing the Section 20 New
Debt not to be classified as "qualified non-recourse indebtedness" within the
meaning of Reg. Section 1.861-10T (as it or any successor is then in effect).
* * *
81
<PAGE>
[Participation Agreement (1994 747 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: _________________________________
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
Indenture Trustee
By: ____________________________________
Title:__________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, not in
its individual capacity, except as expressly provided
herein, but solely as Owner Trustee, Owner Trustee
By: ____________________________________
Title:__________________________________
THE MITSUBISHI TRUST AND BANKING
CORPORATION, NEW YORK BRANCH,
Original Loan Participant
By:_____________________________________
Title:__________________________________
82
<PAGE>
[Participation Agreement (1994 747 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
Owner Participant: Payment Address
- ----------------- ---------------
_______________________ The First National Bank of Chicago
_______________________ Chicago, Illinois
_______________________ _____________________
_______________________ Credit: _________________
Account No. _______________
Attn: Senior Vice President - Reference: _______________
Leasing
Telecopy: ___________
Special Delivery/Federal Express:
- --------------------------------
________________________
________________________
________________________
________________________
Attn: Senior Vice President -
Leasing
Original Loan Participant:
- -------------------------
The Mitsubishi Trust and Banking Instructions for the Account
Corporation, New York Branch of The Mitsubishi Trust and
520 Madison Avenue, 25th Floor Banking Corporation, New York
New York, New York 10022 Branch:
Bankers Trust Company
Attn: Scott J. Paige Account No. 04201547
Telecopy: (212) 755-2349 Reference: United Air Lines, Inc.
Telex: 425078 Attn: Scott J. Paige
Telephone No.: (212) 838-7700
<PAGE>
[Participation Agreement (1994 747 B)]
Indenture Trustee:
- -----------------
State Street Bank and Trust Company
of Connecticut, National Association
750 Main Street
Suite 1114
Hartford, Connecticut 06103
Attn: Corporate Trust Department
Telecopy: (203) 244-1899
Owner Trustee:
- --------------
First Security Bank of Utah,
National Association
79 S. Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
I-2
<PAGE>
[Participation Agreement (1994 747 B)]
SCHEDULE II
Commitments
-----------
Original Percentage of
Loan Participant Lessor's Cost Dollar Amount
- ---------------- ------------- -------------
The Mitsubishi Trust and $
Banking Corporation
Owner Participant:
- -----------------
_____________________
Total Commitments:
=================
<PAGE>
[Participation Agreement (1994 747 B)]
Aircraft N106UA
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1994 747 B)
Dated February __, 1996
Among
UNITED AIR LINES, INC.,
Lessee,
________________________________,
Owner Participant,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
and
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
In its Capacity as Pass Through Trustee under
each of the two separate Pass Through Trust Agreements
and as Certificate Holder
___________________________
United Air Lines, Inc.
1994 747 B Equipment Trust
One Boeing 747-451 Aircraft
_____________________________
<PAGE>
[Participation Agreement (1994 747 B)]
TABLE OF CONTENTS
-----------------
SECTION 1. Amendment to Schedules I and II....................... 2
SECTION 2. Amendment to Section 5................................ 2
SECTION 3. Amendment to Section 6................................ 3
SECTION 4. Amendments to Section 7(b)............................ 3
SECTION 5. Amendments to Section 7(c)............................ 5
SECTION 6. Amendments to Section 8............................... 7
SECTION 7. Amendments to Section 13.............................. 17
SECTION 8. Amendments to Section 15.............................. 17
SECTION 9. Amendment to Section 16............................... 17
SECTION 10. Amendments to Section 17.............................. 18
SECTION 11. Amendments to Section 18.............................. 19
SECTION 12. Ratification; References to Participation
Agreement.............................
SECTION 13. Miscellaneous......................................... 20
SECTION 14. Authorization to Execute Amendments................... 21
SECTION 15. Pass Through Trustee a Party.......................... 21
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
<PAGE>
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
(1994 747 B)
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (1994 747 B) dated
February __, 1996 (this "Amendment") among (i) UNITED AIR LINES, INC., a
Delaware corporation (the "Lessee"), (ii) ______________________, a Delaware
corporation (the "Owner Participant"), (iii) STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (as
assignee of the Original Owner Trustee (as defined below)), 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 (as assignee
of the Original Indenture Trustee (as defined below)), in its individual
capacity and as indenture trustee under the Trust Indenture (the "Indenture
Trustee"), and (v) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national
banking association, in its capacity as Pass Through Trustee (the "Pass Through
Trustee"), under each of two separate Pass Through Trust Agreements, amends that
certain Participation Agreement (1994 747 B) dated as of August 1, 1994 (the
"Participation Agreement") among Lessee, the Owner Participant, The Mitsubishi
Trust and Banking Corporation (the "Original Loan Participant"), First Security
Bank of Utah, National Association, not in its individual capacity except as
expressly provided therein (the "Original Owner Trustee") and State Street Bank
and Trust Company of Connecticut, National Association, as Indenture Trustee
(the "Original Indenture Trustee").
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1994 747 B) dated January __, 1996, between the Owner Trustee and the Original
Owner Trustee, the Original Owner Trustee assigned to the Owner Trustee, and the
Owner Trustee assumed, all of the obligations of the Original Owner Trustee
under the Trust Agreement, which obligations are guaranteed by the Owner Trustee
Parent pursuant to the terms of the Owner Trustee Parent Guaranty; and
WHEREAS, concurrently with the execution of this Amendment, the Loan
Certificate held by the Original Loan Participant is being refinanced by the
issuance of new Loan Certificates issued to the Pass Through Trustees under each
of
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
the two separate Pass Through Trust Agreements, as Certificate Holders; and
WHEREAS, as contemplated by Section 20 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Amendment to Schedules I and II. Schedules I and II to
-------------------------------
the Participation Agreement are hereby deleted in their entirety and replaced
with Schedules I and II, respectively, to this Amendment.
SECTION 2. Amendment to Section 5. The first sentence of Section 5
----------------------
of the Participation Agreement is hereby amended to be and read in its entirety
as follows:
"Lessor, the Participants, the Pass Through Trustees and the
Indenture Trustee shall keep the Purchase Agreement confidential and
shall not disclose or cause to be disclosed the same to any Person,
except (A) to prospective and permitted transferees of Lessor's, the
Original Loan Participant's, the Owner Participant's, a Pass Through
Trustee's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to the aforementioned prospective and
permitted transferees', Lessor's, the Original Loan Participant's, the
Owner Participant's, a Pass Through Trustee'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 (including in connection with discovery proceedings) 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 Lessor, the Participants, any Pass Through
Trustee or the Indenture Trustee; provided, however, that any and all
disclosures of all or any part of the Purchase Agreement which are
permitted by clause (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. Each party hereto agrees
that it will not, and that it will use its best efforts to cause its
agents and advisors
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
not to, issue or release for external publication any article or
advertising or publicity matter mentioning or implying the identity of
the Owner Participant without the Owner Participant's prior written
consent."
SECTION 3. Amendment to Section 6. Section 6 of the Participation
----------------------
Agreement is hereby amended to be and read in its entirety as follows:
"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 4. Amendments to Section 7(b). Section 7(b) of the
--------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 7(b) is hereby amended such that wherever the phrase
"Operative Documents" is used, such phrase is hereby amended to be and read
in its entirety as follows:
"Operative Documents or any Pass Through Trust Agreement"
(b) Clause (C) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
"(C) any amount paid or payable pursuant to any Operative Document 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
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
property held in the Trust Estate or the Trust Indenture Estate or the
property held by any Pass Through Trustee under the respective Pass
Through Trust Agreement,"
(c) Clause (E) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
"(E) any or all of the Operative Documents, any Pass Through Trust
Agreement 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,"
(d) Clause (F) of Section 7(b)(i) is hereby amended to be and read in
its entirety as follows:
"(F) the payment of the Original Amount of, or interest or Premium on,
or other amounts payable with respect to, the Loan Certificates or the
payment of principal of, interest or Premium on or any other amounts
payable with respect to the Pass Through Certificates,"
(e) Clause (3) of Section 7(b)(ii) is hereby amended by deleting the
word "or" before subclause (Y) and adding the following after subclause (Y)
and before the semi-colon:
", or (Z) pursuant to or in connection with any transfer contemplated
by the Assignment and Assumption Agreements or a refinancing at the
request of the Lessee."
(f) Clause (4) of Section 7(b)(ii) is hereby amended by deleting the
word "or" before subclause (B) and adding the following after subclause (B)
and before the semi-colon:
"or (C) pursuant to or in connection with any transfer contemplated by
the Assignment and Assumption Agreements or a refinancing at the
request of the Lessee"
(g) Clause (14) of Section 7(b)(ii) is hereby amended by adding the
following after the semi-colon on the last line of such Clause (14) and
before the word "and":
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
"provided, further, that the exception in this Section
7(b)(ii)(14) shall not apply to any transferee where such transfer
occurred pursuant to or in connection with the Assignment and
Assumption Agreements (a "Trustee Transferee"), and that, subsequent
to any such transfer, such Trustee Transferee shall be treated as an
"original Indemnitee" for purposes of this Section 7(b)(ii)(14);"
(h) The last paragraph of Section 7(b)(ii) is hereby amended to be and
read in its entirety as follows:
"Notwithstanding any other provision of this Section 7(b) to the
contrary, the Lessee will indemnify the Owner Trustee and the Owner
Participant (and any Affiliate of either thereof) for any obligation
with respect to United States federal withholding taxes imposed on the
Owner Trustee or the Owner Participant (or any Affiliate of either
thereof) with respect to the Certificates or the Pass Through
Certificates (or any debt issued to refinance such Certificates) or as
a result of a claim by the Internal Revenue Service asserted against
the Trust Estate, the Owner Trustee or the Owner Participant (or any
Affiliate of the foregoing). The Lessee shall be subrogated to the
rights and defenses of the Owner Trustee and the Owner Participant
(and any Affiliate of either thereof) in respect of such withholding
taxes, including the rights and defenses in Section 8(x) of this
Agreement."
SECTION 5. Amendments to Section 7(c). Section 7(c) of the
--------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 7(c) is hereby amended such that wherever the phrase
"Operative Documents" is used, such phrase is hereby amended to be and read
in its entirety as follows:
"Operative Documents or any Pass Through Trust Agreement"
(b) Clause (D) of the first paragraph of Section 7(c) is hereby
amended to be and read in its entirety as follows:
"(D) the offer, sale, holding, transfer or delivery of the Loan
Certificates or the Pass Through Certificates (or other evidence of
the debt relating to the Aircraft); or"
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
(c) Clause (4) of the proviso to the first paragraph of Section 7(c)
is hereby amended by inserting the following phrase immediately following
the phrase "any disposition of Parts or Obsolete Parts pursuant to Section
8 of the Lease" and preceding the phrase "or any exercise of remedies by
the Owner Participant pursuant to Section 15 of the Lease":
", a disposition contemplated by either of the Assignment and
Assumption Agreements"
(d) Clause (7) of the proviso to the first paragraph of Section 7(c)
is hereby amended to be and read in its entirety as follows:
"(7) 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 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 or, with
respect to any Indemnitee other than the Owner Participant, a failure
on the part of a 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"
(e) The first sentence of the sixth paragraph of Section 7(c) is
hereby amended by deleting the words "Sections 5.03 or 7.01 of the Trust
Indenture" which appear therein and inserting the words "Section 9.06 of
the Trust Indenture" in lieu thereof.
(f) The eighth paragraph of Section 7(c) is hereby amended to be and
read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee and the 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) for acting as such, other than such fees
and expenses which constitute Transaction Expenses."
(g) Section 7(d) is hereby amended by deleting the reference to
"Section 2.04(b)" which appears therein and inserting a reference to
"Section 9.11" in lieu thereof.
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
SECTION 6. Amendments to Section 8. Section 8 of the Participation
-----------------------
Agreement is hereby amended in the following manner:
(a) Section 8(e) is hereby amended to be and read in its entirety as
follows:
"(e) The Owner Participant agrees that, if, at any time after
the close of the calendar year in which occurs the seventh anniversary
of the Delivery Date and so long as no Default or Event of Default
under the Lease shall have occurred or be continuing, Lessee has, upon
fifteen (15) days' prior notice to the Owner Participant, 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) in
a country listed on Exhibit G to the Lease, with which the United
States maintains normal diplomatic relations (which for purposes of
this Section 8(e) shall include Taiwan and any other country that is
similarly situated) or (ii) in any other country with which United
States maintains normal diplomatic relations (which for purposes of
this Section 8(e) shall include Taiwan and any other country that is
similarly situated) 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 law, the Owner Participant will not, in the case
of either clause (i) or (ii), unreasonably withhold its consent to
such change of registration. The Owner Participant further agrees
that the inability of Lessee to deliver 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 with which the United States
maintains normal diplomatic relations (which for purposes of this
Section 8(e) shall include Taiwan and any other country that is
similarly situated), 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 (or, if
appropriate, in the name of Lessee or a Sublessee as a "lessee" or a
"sublessee"), and to the priority of the Lien under the Trust
Indenture substantially to the same extent as provided under United
States law, shall
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
constitute the sole reasonable grounds to withhold such consent in
regard to a country listed in Exhibit G to the Lease, 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 Trust 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 and,
so long as the Lien of the Trust Indenture has not been released, the
Indenture Trustee, in each case in its individual capacity, shall have
received:
(i) assurances reasonably satisfactory to them (A) to the
effect that the insurance or self-insurance provisions of the
Lease shall have been complied with after giving effect to such
change of registry, (B) of the payment by Lessee on an After-Tax
Basis of any reasonable 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 ownership
interest of the Owner Trustee and the continuation of the Trust
Indenture as a first priority lien on the Aircraft, (E) that such
change will not result in the imposition or increase in the
amount of, any Tax for which Lessee is not required to indemnify,
the Owner Participant, the Indenture Trustee and 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, (F)
that such new country of registry imposes aircraft maintenance
standards not materially less stringent than those of the FAA,
the Civil
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
Aviation Authority of the United Kingdom, the Direction Generale
de l'Aviation Civile of the French Republic, the Luftfahrt
Bundesamt of Germany or the central aviation authority of Japan
or Canada and (G) that the Lessor's right to exercise remedies
under the Lease (including the right to repossess the Aircraft)
will not be substantially worse than the rights provided under
the laws of the United States (without regard to the rights and
benefits provided by Sections 362 and 1110 of the Bankruptcy
Code); 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
(subject to customary exceptions), (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, and that there are no requirements that the Owner
Participant or the Owner Trustee must meet to maintain the
registration of the Aircraft and the validity and priority of the
Lien of the Trust Indenture under the laws of such jurisdiction
that, in the reasonable opinion of the Owner Participant, would
place an undue burden on the Owner Trustee or the Owner
Participant, as the case may be, (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, the requirement of such
opinion shall be waived if insurance reasonably satisfactory to
Owner Participant and 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 of the Aircraft by the
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
government 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 taking or
requisition by such government of such use, 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 the foregoing opinion of counsel meeting the foregoing
requirements, Exhibit F and Exhibit G to the Lease shall be
amended to add such country.
At any time and from time to time during the Term, in connection
with a request by Lessee for a change in registration pursuant to this
Section 8(e) or sublease pursuant to Section 7(b)(viii)(2) or (3) of
the Lease, the Owner Participant may request in writing to Lessee, or
Lessee may request in writing to the Owner Participant, that Exhibits
F and G of the Lease be amended to delete, or in the case of a request
from Lessee be amended to add, one or more countries on Exhibits F and
G of the Lease and specified in such request which is the country of
such change in registration or sublease, as the case may be, such
request to be based upon reasonable evidence, in the form of a legal
opinion or other substantive evidence (which opinion or other evidence
shall be reasonably satisfactory to the Lessee with respect to any
requested deletion and to the Owner Participant with respect to any
requested addition), to the effect that (x) with respect to any
requested deletion, any one or more of the criteria set forth in
subparagraphs (i) and (ii) above (or any other criteria that would, in
the reasonable opinion of the Owner Participant, significantly
adversely impact a significant interest of the Owner Participant in a
manner that is substantially similar to such criteria, including
clause (ii)(E) above) are not then applicable to the country proposed
to be deleted from Exhibits F and G of the Lease (and with respect to
clause (i)(C), (i)(E), (ii)(C) or (ii)(D) above could not otherwise be
complied with in accordance with the terms thereof), or (y) with
respect to any requested addition, each of the criteria set forth in
subparagraphs (i) and (ii) above
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
are then applicable to the country proposed to be added to Exhibit F
or G (or with respect to clause (i)(C), (i)(E), (ii)(C) or (ii)(D)
could not otherwise be complied with in accordance with the terms of
such criteria). Upon receipt of such opinion or other substantive
evidence supporting any such request, Exhibits F and G shall be deemed
amended to reflect such agreement (such agreement to be so evidenced
by a writing signed by Lessee, the Owner Participant and the Owner
Trustee, and promptly distributed to the Owner Trustee and duly filed
for recordation with the FAA); otherwise, such Exhibits F and G of the
Lease shall not be so amended. Lessee shall not request that any
country be added to Exhibit F or G unless Lessee intends to sublease
or re-register the Aircraft in such country.
Upon any addition to or deletion from Exhibits F or G to the
Lease as set forth in either of the two preceding paragraphs, Exhibits
F and G to the Lease shall be amended (if necessary) to reflect such
change.
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 (x) any change of registry of the
Aircraft or (y) addition or deletion to the countries listed on
Exhibits F and G to the Lease."
(b) Section 8(h) is hereby amended by deleting the phrase "Article IV
or V" which appears therein and inserting the phrase "Article 5 or 8" in
lieu thereof.
(c) Section 8(j) is hereby amended to be and read in its entirety as
follows:
"(j) The Indenture Trustee and, by its acceptance of a Loan
Certificate, each Certificate Holder (including each Pass Through
Trustee, so long as it is a Certificate Holder), 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
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
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 any Certificate Holder (including
each Pass Through Trustee, so long as it is a Certificate Holder), 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 (including each Pass Through Trustee, so
long as it is a Certificate Holder), 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 (including each Pass Through Trustee, so long as it
is a Certificate Holder), or the Indenture Trustee, as the case may
be, shall (except in the case of the Indenture Trustee, to the extent
that such Excess Payment has theretofore been distributed to the
Certificate Holders and, in the case of such Pass Through Trustee,
such Excess Payment has been distributed to the holders of the
applicable Pass Through Certificates) 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)."
(d) Clause (i) of Section 8(k) is hereby amended to be and read in its
entirety as follows:
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
"(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;"
(e) Clause (ii) of Section 8(r) is hereby amended by deleting the
reference "Section 2.15 of the Trust Indenture" which appears therein and
inserting a reference to "Section 7.03 of the Trust Indenture" in lieu
thereof.
(f) Clause (i) of Section 8(s) is hereby amended to be and read in its
entirety as follows:
"(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;"
(g) Clause (ii) of Section 8(s) is hereby amended to be and read in
its entirety as follows:
"(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 Pass Through Trustees and the Owner Participant 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;"
(h) Clause (iv) of Section 8(s) is hereby amended to be and read in
its entirety as follows:
"(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, each Pass Through Trustee and the Owner Participant
a certificate signed by the President or any Vice President and by the
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
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 subparagraph (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"
(i) The last paragraph of Section 8(s) is hereby amended to be and
read in its entirety as follows:
"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."
(j) Section 8(w) is hereby amended to be and read in its entirety as
follows:
"(w) [intentionally omitted.]"
(k) Section 8(x) is hereby amended and to be and read in its entirety
as follows:
"(x) The Original Loan Participant represents that it is exempt
from United States withholding taxes, and covenants that, if required
to obtain or renew such exemption, it will, upon request and to the
extent it remains lawfully able to do so, properly prepare and
promptly furnish to each of the Owner Trustee, the Indenture Trustee
and the Lessee Internal Revenue
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
Service Form 1001, Form 4224 (with respect to each tax year) or Form
W-8, whichever is applicable.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee,
Lessee and the Owner Participant against any United States withholding
taxes (and related interest and penalties) which the Indenture Trustee
fails to withhold on payments to it as a result of its failure to
provide the required certificate or form or the invalidity of any
certificate or form provided by it pursuant to this Section 8(x). Any
amount payable hereunder by the Original Loan Participant shall be
paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor."
(l) Section 8(y) is hereby amended to be and read in its entirety as
follows:
"(y) [intentionally omitted.]"
(m) Section 8 is hereby amended by adding new Sections 8(z), 8(aa) and
8(bb) to the end thereof, which Sections 8(z), 8(aa) and 8(bb) shall be and
read in their entirety as follows:
"(z) 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) and
provided that no Event of Default shall have occurred and be
continuing, 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 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(z).
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
(aa) 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.
(bb) 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(bb), 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
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
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(bb) and not previously applied to the
payment of the Loan Certificates, after deducting therefrom any
portion of such fee then due and unpaid."
SECTION 7. Amendments to Section 13. Section 13 of the Participation
------------------------
Agreement is hereby amended in the following manner:
(i) Clause (A) of Section 13(a) is amended by deleting the words
"the Original Loan Participant" which appear therein and inserting the
words "the Pass Through Trustees" in lieu thereof.
(ii) Clause (C) of the second sentence of Section 13(a) is
hereby amended by deleting the reference to "Section 2.07" which
appears therein and inserting a reference to "Section 2.03" in lieu
thereof.
SECTION 8. Amendments to Section 15. Section 15 of the Participation
------------------------
Agreement is hereby amended in the following manner:
(a) Section 15(b) is hereby amended by adding the words "or any of the
Pass Through Trust Agreements" immediately after the words "or any other
Operative Document" and before the period which appears at the end thereof.
(b) The last sentence of Section 15(d) is hereby amended to be and
read in its entirety as follows:
"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."
SECTION 9. Amendment to Section 16. Section 16 of the Participation
-----------------------
Agreement is hereby amended in the following manner:
(a) Clause (i) of Section 16(a) is hereby amended to be and read in
its entirety as follows:
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
"(i) with respect to the closing on the Delivery Date and a
refinancing, if any, pursuant to Section 20 hereof, the reasonable and
actual fees, expenses and disbursements of (1) Bingham, Dana & Gould,
special counsel for the Original Indenture Trustee, the Owner Trustee
and the Owner Trustee Parent, (2) Ray, Quinney & Nebeker, special
counsel for the Original Owner Trustee, (3) Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee and the Pass Through Trustee
and (4) Crowe & Dunlevy, P.C. and Lytle Soule & Curlee special counsel
in Oklahoma City, Oklahoma, (5) Vedder, Price, Kaufman & Kammholz,
special counsel for the Lessee, (6) Hunton & Williams, special counsel
for the Owner Participant, (7) Akin, Gump, Strauss, Hauer & Feld,
L.L.P., special counsel to the Original Loan Participant and (8)
Shearman & Sterling, special counsel to the underwriters (to the
extent not payable by the underwriters, if any);"
(b) Clause (iv) of Section 16(a) is hereby amended to be and read in
its entirety as follows:
"(iv) the initial fee and reasonable and actual disbursements of
the Indenture Trustee under the Trust Indenture and the initial fee
and reasonable and actual disbursements of each Pass Through Trustee
under its respective Pass Through Trust Agreement,"
(c) The last sentence of Section 16(b) is hereby amended by deleting
each reference to ".75% of Lessor's Cost" which appears therein and
inserting a reference to "[1.480]% of Lessor's Cost" in lieu thereof.
SECTION 10. Amendments to Section 17.
------------------------
(a) Clause (6) of Section 17(a) of the Participation Agreement is
hereby amended by deleting the words "Break Amount" which appear therein
and inserting the word "Premium" in lieu thereof.
(b) The last sentence of Section 17(b) is hereby amended to be and to
read in its entirety as follows:
"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,
Boston, Massachusetts or Salt Lake City, Utah and having a combined
capital and surplus of at least $100,000,000
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
(or, if less, then its obligations shall be guaranteed by an entity
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) Section 17(g) is hereby amended to be and read in its entirety as
follows:
"(g) No voluntary redemption shall occur pursuant to this Section
17 prior to February __, 2001."
SECTION 11. Amendments to Section 18. Section 18 of the
------------------------
Participation Agreement is hereby amended in the following manner:
(a) Section 18(a) is hereby amended to be and read in its entirety as
follows:
"(a) In the event that: (i) the Delivery Date occurs other than
on August 1, 1994 or (ii) Transaction Expenses paid by Lessor are
determined to be other than [1.480]% of Lessor's Cost, the Lessee may,
provided that the condition in Section 17(d)(i) shall be satisfied as
if such reoptimization were a refunding or refinancing under Section
17, pursuant to this Section 18 and in accordance with the
requirements of Section 3(c) of the Lease (including the proviso set
forth in Section 3(c)(i) thereof), request the Owner Participant to
optimize the Basic Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages and EBO Percentage. 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 and EBO Percentage. Within
fifteen (15) 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 Owner Trustee to execute an amendment to the Lease
setting forth the optimized Basic Rent, Excess Amount, Stipulated Loss
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
Value percentages, Termination Value percentages and EBO Percentage,
and the Lessee will execute such amendment to the Lease necessary to
effectuate the foregoing."
(b) Section 18(b) is hereby amended to be and read in its entirety as
follows:
"(b) In connection with optimization adjustments of Basic Rent,
Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages and EBO Percentage pursuant to this Section 18 and Section
3(c) of the Lease, the debt amortization schedules, principal amounts
and interest rate associated with the Loan Certificates shall not be
altered."
SECTION 12. Ratification; References to Participation Agreement.
---------------------------------------------------
Except as amended hereby, the Participation Agreement continues and shall remain
in full force and effect in all respects. From and after the date of this
Amendment, each and every reference in the Participation Agreement, as amended
hereby, to "this Agreement," "herein," "hereof" or similar words and phrases
referring to the Participation Agreement or any word or phrase referring to a
section or provision of the Participation Agreement is deemed for all purposes
to be a reference to the Participation Agreement or such section or provision as
amended pursuant to this Amendment.
SECTION 13. Miscellaneous. This Amendment 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 Amendment 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
Amendment shall be binding upon, and inure to the benefit of and shall be
enforceable by, the Lessee, the Owner Participant, the Indenture Trustee, the
Certificate Holders and the Owner Trustee. This Amendment 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 Amendment is being delivered in the State of Illinois.
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
SECTION 14. Authorization to Execute Amendments. By execution of
-----------------------------------
this Amendment, the Owner Participant hereby authorizes, directs and instructs
the Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary in a result of the
refinancing contemplated hereby and by Section 20 of the Participation
Agreement. By their execution of this Amendment, the Lessee and the Indenture
Trustee hereby consent to the execution and delivery of the First Amendment to
Trust Agreement (1994 747 B) dated February __, 1996 between Owner Participant
and State Street Bank and Trust Company of Connecticut, National Association.
SECTION 15. Pass Through Trustee a Party. Effective as of the date
----------------------------
hereof, each Pass Through Trustee shall be a party to the Participation
Agreement and each Pass Through Trustee shall have the rights and obligations of
the Certificate Holders as set forth in the Participation Agreement, as amended
hereby.
* * *
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to 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:_____________________________________
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity, except as
expressly provided herein, but solely as
Owner Trustee, Owner Trustee
By:_____________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION,
Indenture Trustee
By:_____________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, in its capacity as Pass
Through Trustee under each of two separate
Pass Through Trust Agreements and as
Certificate Holder
By:_____________________________________
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
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: _________________
(Special Delivery/Federal Express)
- ----------------------------------
____________________________
____________________________
____________________________
Owner Trustee:
- -------------
State Street Bank and Trust Company
of Connecticut, National
Association
750 Main Street
Suite 1114
Hartford, Connecticut 06103
Attn: Corporate Trust Department
Telecopy: (203) 244-1899
Certificate Holder and 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:
- ---------------
_________________________
_________________________
ABA No.:_________________
Credit: _________________
Acct#: __________________
Reference: ______________
<PAGE>
[First Amendment to Participation Agreement (1994 747 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
<PAGE>
[First Amendment to Participation Agreement (1994 747 B)]
SCHEDULE II
COMMITMENTS
-----------
<TABLE>
<CAPTION>
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
<S> <C> <C>
FIRST SECURITY BANK OF 80.00% $ 96,000,000
UTAH, NATIONAL
ASSOCIATION,
in its capacity as Pass
Through Trustee under
each of two separate Pass
Through Trust Agreements
and as Certificate
Holder
Owner Participant:
- ------------------
____________________ 20.00% $ 24,000,000
Total Commitments: 100.00% $120,000,000
</TABLE>
<PAGE>
Reg. No. 33-57192 Reg No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(n)(4) Exhibit 4(b)(45)
<PAGE>
*
Doc. No. 1.02
Aircraft N767UA
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(1995 777 C)
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 C Equipment Trust
One Boeing 777-222 Aircraft
----------------------------
Manufacturer's Serial No. 26918
- --------------------------------------------------------------------------------
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
-----------------
Page
----
SECTION 1. Definitions.................................................... 1
SECTION 2. Acceptance and Lease........................................... 19
SECTION 3. Term and Rent.................................................. 19
(a) Interim Term and Basic Term...................................... 19
(b) Basic Rent....................................................... 19
(c) Adjustments to Basic Rent, Excess Amount,
Stipulated Loss Values, Termination Values and the
EBO Percentage................................................... 20
(d) Supplemental Rent................................................ 24
(e) Payments in General.............................................. 25
(f) Prepayments of Certain Rent Payments............................. 26
(g) Rent Rebate...................................................... 27
SECTION 4. Lessor's Representations and Warranties........................ 27
SECTION 5. Return of the Aircraft......................................... 28
(a) Condition Upon Return............................................ 28
(b) Return of the Engines............................................ 31
(c) Fuel; Manuals.................................................... 32
(d) Storage Upon Return.............................................. 32
(e) Severable Parts.................................................. 32
(f) Return of Engines................................................ 33
SECTION 6. Liens.......................................................... 33
SECTION 7. Registration, Maintenance and Operation;
Possession and Subleases; Insignia.................................... 34
SECTION 8. Replacement and Pooling of Parts; Alterations,
Modifications and Additions........................................... 43
(a) Replacement of Parts............................................. 43
(b) Pooling of Parts................................................. 44
(c) Alterations, Modifications and Additions......................... 44
SECTION 9. Voluntary Termination.......................................... 47
(a) Termination Event................................................ 47
(b) Option to Purchase............................................... 48
(c) Optional Sale of the Aircraft.................................... 49
(d) Termination as to Engines........................................ 51
SECTION 10. Loss, Destruction, Requisition, etc........................... 51
(a) Event of Loss with Respect to the Aircraft....................... 51
(b) Event of Loss with Respect to an Engine.......................... 54
(c) Application of Payments from Governmental
Authorities for Requisition of Title, Etc........................ 56
i
<PAGE>
(d) Requisition for Use of the Aircraft by the United
States Government or Government of Registry of the
Aircraft......................................................... 57
(e) Requisition for Use of an Engine by the United
States Government or the Government of Registry of
the Aircraft..................................................... 58
(f) Application of Payments During Existence of Events
of Default....................................................... 58
SECTION 11. Insurance..................................................... 59
(a) Public Liability and Property Damage Insurance................... 59
(b) Insurance Against Loss or Damage to the Aircraft................. 60
(c) Reports, Etc..................................................... 62
(d) Self-Insurance................................................... 63
(e) Additional Insurance by Lessor and Lessee........................ 64
(f) Indemnification by Government in Lieu of Insurance............... 64
(g) Application of Payments During Existence of an Event of Default.. 64
(h) Terms of Insurance Policies...................................... 65
(i) Non-Discrimination Against the Aircraft in Insurance............. 66
SECTION 12. Inspection.................................................... 66
SECTION 13. Assignment.................................................... 67
SECTION 14. Events of Default............................................. 68
SECTION 15. Remedies...................................................... 70
SECTION 16. Lessee's Cooperation Concerning Certain
Matters............................................................... 75
SECTION 17. Notices....................................................... 77
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc...................... 78
SECTION 19. Renewal Options; Purchase Options; Valuation.................. 80
(a) Renewal Options.................................................. 80
(b) Purchase Options................................................. 82
(c) Valuation........................................................ 82
SECTION 20. Security for Lessor's Obligation to Certificate
Holders............................................................... 84
SECTION 21. Lessor's Right to Perform for Lessee.......................... 84
SECTION 22. Investment of Security Funds; Liability of
Lessor Limited........................................................ 85
(a) Investment of Security Funds..................................... 85
(b) Liability of Lessor Limited...................................... 86
ii
<PAGE>
SECTION 23. Miscellaneous................................................. 86
SECTION 24. Successor Trustee............................................. 87
iii
<PAGE>
EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Schedule of Allocation of Basic Rent; Excess Amount
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 Registration
EXHIBIT H - Lessor's Cost, EBO Date, EBO Percentage and Engine Cost
iv
<PAGE>
LEASE AGREEMENT
(1995 777 C)
This LEASE AGREEMENT (1995 777 C), 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").
W I T N E S S E T H:
--------------------
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 PW4077
engine or an engine of the same or another manufacturer of equivalent or
greater value, condition, utility, airworthiness and remaining useful life
as the Engine being replaced (assuming such Engine had been maintained in
accordance with this Lease) 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, 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" shall mean, (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 or 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 Certificate
Holder, the
<PAGE>
[Lease Agreement (1995 777 C)]
Indenture Trustee or the Owner Trustee, such notice having been given
pursuant to 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, the
Original Loan Participant (so long as it holds any Loan Certificate),
Lessee in its capacity as sublessor under any Sublease, and each of their
respective Affiliates, successors and permitted assigns, and the respective
directors, officers, employees and agents 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.
"Assumed Interest Rate" has the meaning set forth in Section 3(b)
herein.
"Base Rate" means the rate of interest announced from time to time by
The First National Bank of Chicago
2
<PAGE>
[Lease Agreement (1995 777 C)]
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 increased or decreased, as the
case may be, by the Rent Differential Amount (as defined in Section 3(b)
hereof), and 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.
"Break Amount" has the meaning set forth in the Trust Indenture.
"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, 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;
provided, however, that so long as the Loan Certificates bear interest at a
rate based on the Eurodollar Rate or the London Interbank Offered Rate,
such day must also constitute a Eurodollar Business Day (as defined in
Section 1.01 to the Trust Indenture) in order to be deemed a Business Day
hereunder and under the Participation Agreement.
"Certificate Holder" has the meaning set forth 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.
3
<PAGE>
[Lease Agreement (1995 777 C)]
"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" shall mean 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 November 29, 1995.
"Commitment" means the commitment of the Original Loan Participant or
the Owner Participant, as the case may be, to finance the Owner Trustee's
payment of Lessor's Cost for the Aircraft pursuant to, and in accordance
with, the Participation Agreement.
"Consent and Agreement" means the Consent and Agreement (1995 777 C),
dated as of the date hereof, executed by the Manufacturer, as the same may
be amended, modified or supplemented from time to time in accordance with
the applicable provisions thereof.
"Corporate Trust Office" means the principal office of the Indenture
Trustee located at 79 South Main Street, Salt Lake City, Utah 84111,
Attention: Corporate Trust Department, or such other office at which the
Indenture Trustee's corporate trust business shall be administered which
the Indenture Trustee shall have specified by notice in writing to Lessee,
the Owner Participant, the Owner Trustee and each Certificate Holder.
"Debt Rate" means at any time outstanding, the 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.
4
<PAGE>
[Lease Agreement (1995 777 C)]
"EBO Date" has the meaning set forth on Exhibit H.
"EBO Percentage" has the meaning set forth in Exhibit H.
"Engine" means (i) each of the two Pratt & Whitney Model PW4077
engines listed by manufacturer's serial numbers in the initial Lease
Supplement and installed on the Airframe at the time of the Lessee's
delivery to Lessor of such Airframe, whether or not from time to time
thereafter installed on such Airframe or any other airframe; (ii) any
Acceptable Alternate Engine or Replacement 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Rate" has the meaning specified in the Trust Indenture.
"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 for a period of 30 consecutive days (or, earlier if, either
(a) when Lessee shall no longer be diligently attempting to locate and
pursue the return of such property or (b) the last day of the Term has
occurred); (iv) the
5
<PAGE>
[Lease Agreement (1995 777 C)]
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 by any other government of registry of the Aircraft, or any agency or
instrumentality of any thereof), which in the case of any event referred to
in this clause (iv) shall have resulted in the loss of possession of such
property by Lessee for a period in excess of 90 consecutive days (or,
shorter if, for a period ending on the last day of the Term) or shall have
resulted in the loss of title of such property by Lessor for a period in
excess of 45 consecutive days (or, shorter if, for a period ending on the
last day of the Term); (v) 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 of 120 consecutive days, unless Lessee, prior to
the expiration of such 120-day period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit the normal use of such property by Lessee, but in any event if such
use shall have been prohibited for a period of one year; (vi) the
requisition for use by the United States Government or any other government
of registry of the Aircraft or any instrumentality or agency of any
thereof, which shall have occurred during the Basic Term (or the Interim
Term or any Renewal Term) and, in the case of the United States Government,
or any instrumentality or agency thereof, shall have continued for 30 days
beyond the Term and Lessor shall not have furnished the written notice
specified in Section 10(d) hereof or, in the case of any other government
of registry of the Aircraft, or any instrumentality or agency thereof,
shall have continued for more than two years (or if earlier until the end
of the Term); and (vii) with respect to an Engine only, any divestiture of
title to such Engine or other event specified as an Event of Loss with
respect to an Engine in 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 under the heading "Excess Amount" (as
such
6
<PAGE>
[Lease Agreement (1995 777 C)]
Exhibit B may be adjusted from time to time as provided in Section 3(c)
hereof); provided, however, to the extent that the aggregate amount of
interest due and payable for the period from, and including, the Delivery
Date to, but excluding, the Commencement Date on the Loan Certificates is
less than the aggregate amount of interest on the Loan Certificates that
would have been due and payable for such period if such Loan Certificates
had borne interest at the Assumed Interest Rate during the Interim Term,
such percentage shall be decreased proportionately to compensate for such
differential.
"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, liabilities
arising out of negligence, strict or absolute liability, liability in tort
and liabilities arising out of violation of laws or regulatory requirements
of any kind), actions, suits, out-of-pocket costs, expenses and
disbursements (including reasonable legal fees, costs of investigation of
whatsoever kind and nature 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, but excluding internal costs and expenses such as salaries, any
amounts that would be included in Break Amount and overhead of whatsoever
kind and nature).
"Fair Market Renewal Term" has the meaning set forth in Section
19(a)(2) hereof.
"Fair Market Renewal 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 Section 19(c) hereof.
"Federal Aviation Act" means the Sections of Title 49 of the United
States Code relating to aviation, as amended.
7
<PAGE>
[Lease Agreement (1995 777 C)]
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any successor agency or agencies
thereto.
"Fixed Renewal Term" has the meaning set forth in Section 19(a)(1)
hereof.
"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, the Original
Loan Participant (so long as the Original Loan Participant is a Certificate
Holder), any Person who purchases a participation in a Loan Certificate
from the Original Loan Participant in accordance with Section 2.17(e) of
the Trust Indenture and Section 8(y) of the Participation Agreement, and
each of their respective Affiliates, successors and permitted assigns and
the directors, officers, employees, servants and agents of each of the
foregoing.
"Indenture Trustee" means the Person executing the Participation
Agreement as Indenture Trustee and any Person appointed as successor
Indenture Trustee.
"Indenture Trustee Documents" means the Participation Agreement and
the Trust Indenture.
"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 (1995 777 C) 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 November 29, 2019.
8
<PAGE>
[Lease Agreement (1995 777 C)]
"Lease Period" means each of the consecutive semi-annual periods
throughout the Basic Term and any Renewal Term commencing on a Lease Period
Date and continuing to, but not including, a Lease Period Date provided
that the first such period shall commence on and include the Commencement
Date.
"Lease Period Date" means May 29, 1996, and each November 29 and May
29 thereafter to but not including the last such date in the Term.
"Lease Supplement" means a Lease Supplement (1995 777 C),
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 (1995 777 C) entered into in accordance with
the terms hereof and the Trust Indenture.
"Lessee Documents" means the Participation Agreement, the Lease, the
Purchase Agreement, the Owner Trustee's Purchase Agreement, the Tax
Indemnity Agreement, the Owner Trustee's Bill of Sale and the Owner
Trustee's FAA Bill of Sale.
"Lessor Liens" means any Lien or disposition of title 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 the Trust Indenture (other than a transfer pursuant to
Section 4.04 of the Trust Indenture not
9
<PAGE>
[Lease Agreement (1995 777 C)]
attributable to a Lease Event of Default) or a transfer pursuant to
Sections 9, 10 or 19 hereof or pursuant to the exercise of the remedies set
forth in Section 15 hereof); provided, however, that any Lien which is
attributable solely to the Lessor, 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 the
applicable portion of 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, claim, encumbrance, lease,
security interest or any other charge of any kind on property.
"Loan Certificate" has the meaning set forth in the Trust Indenture.
"London Interbank Offered Rate" has the meaning specified in the Trust
Indenture.
"Manufacturer" means The Boeing Company, a Delaware corporation.
"Manufacturer Documents" means the Manufacturer's Bill of Sale, the
Manufacturer's FAA Bill of Sale, the Purchase Agreement and the Consent and
Agreement.
10
<PAGE>
[Lease Agreement (1995 777 C)]
"Manufacturer's Bill of Sale" means a bill of sale for the Aircraft,
dated the Delivery Date, executed by the Manufacturer in favor of the
Lessee.
"Manufacturer's FAA Bill of Sale" means a bill of sale on Form 8050-2,
or such other form as may be approved by the FAA on the Delivery Date,
executed by the Manufacturer in favor of Lessee.
"Net Economic Return" means the Owner Participant's net after-tax book
yield, aggregate after-tax cash flow, internal rate of return (as
calculated by the Owner Participant) and after-tax cash flow as a
percentage of equity, determined by 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, Termination
Value percentages and EBO Percentage as of the Delivery Date, as such
assumptions may be adjusted for events which have been the basis for
adjustments to Rent pursuant to Section 3(c) hereof.
"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 maximum
number of Lease Periods per year.
"Obsolete Parts" has the meaning set forth in Section 8(c) hereof.
"Operative Documents" means the Lease (including any Lease
Supplement); the Participation Agreement; the Tax Indemnity Agreement; the
Trust Agreement; the Trust Indenture; any Trust Supplement; the Purchase
Agreement; the Owner Trustee's Purchase Agreement; the Manufacturer's Bill
of Sale; the Manufacturer's FAA Bill of Sale; the Owner Trustee's Bill of
Sale; the Owner Trustee's FAA Bill of Sale; an acceptance certificate
covering the Aircraft in the form agreed to by the Participants and Lessee;
the Owner Participant Guaranty; the Loan Certificates outstanding at the
time of reference; the Consent and Agreement; and any other documents
executed in connection with the transactions contemplated by the
Participation Agreement.
"Original Amount" means, with respect to a Loan Certificate, the
stated original principal amount of such
11
<PAGE>
[Lease Agreement (1995 777 C)]
Loan Certificate plus any amounts of interest added to principal amount
pursuant to the terms of said Loan Certificate and with respect to all the
Loan Certificates means the aggregate stated original principal amounts of
such Loan Certificates, including any amounts of interest added to
principal amount as aforesaid, as the case may be.
"Original Loan Participant" means The Mitsubishi Trust and Banking
Corporation, acting through its New York Branch, and if such bank or other
Original Loan Participant sells, transfers, assigns or otherwise conveys
its Loan Certificates (or any portion thereof) in accordance with Section
8(w) of the Participation Agreement (other than pursuant to Section 17 or
20 of the Participation Agreement and other than as a participation
interest) to any Person, shall also mean and include any such Person.
"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 and the Tax Indemnity Agreement.
"Owner Participant Guarantor" has the meaning set forth in Section
1(a) of the Participation Agreement.
"Owner Participant Guaranty" means the Guaranty (1995 777 C) dated the
Delivery Date from the Owner Participant Guarantor to the beneficiaries
named therein, as the same may be amended, modified, or supplemented from
time to time in accordance with the applicable provisions thereof.
"Owner Trustee" means the Person executing the Participation Agreement
as Owner Trustee and any Person appointed as successor Owner Trustee.
"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 and the Loan
Certificates.
"Owner Trustee's Bill of Sale" means a bill of sale for the Aircraft,
dated the Delivery Date,
12
<PAGE>
[Lease Agreement (1995 777 C)]
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 C) 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.
"Participants" means and includes the Original Loan Participant and
the Owner Participant.
"Participation Agreement" means that certain Participation Agreement
(1995 777 C), dated as of the date hereof, among Lessee, the Owner
Participant, the Indenture Trustee, the Original Loan Participant 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 and all such items
which are subsequently removed therefrom so long as title thereto shall
vest in the Lessor in accordance with Section 8(a) hereof.
"Passenger Convenience Equipment" means severable components or
systems installed on or affixed to the Airframe that are used to provide
individual telecommunications or electronic entertainment to passengers
aboard the Aircraft, if and for so long as such equipment shall be owned
by, or shall be subject to a security interest, license or other interest
of, another Person (other than any Affiliate of Lessee) in accordance with
the provisions of Section 8(d) of the Lease.
"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 to any
Certificate Holder, the "Past Due Rate" as defined in the Trust
13
<PAGE>
[Lease Agreement (1995 777 C)]
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 rate per annum equal from time to
time to the lesser of (a) 2% over the Base Rate or (b) the highest rate
allowed under applicable law.
"Permitted Lien" means any Lien referred to in clauses (i) through
(vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled and principally
located 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
or any other entity.
"Prepaid Rent" has the meaning set forth in Section 3(f) 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(b)
hereof.
"Reimbursement Amount" has the meaning set forth in Section 3(f)
hereof.
"Renewal Term" means a Fixed Renewal Term or Fair Market Renewal Term
as those terms are defined in Section 19 hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Rent Differential Amount" has the meaning set forth in Section 3(b)
hereof.
"Replacement Airframe" means any airframe substituted for the Airframe
in accordance with Section 10(a) of the Lease.
14
<PAGE>
[Lease Agreement (1995 777 C)]
"Replacement Engine" means any engine substituted for an Engine in
accordance with Sections 9(d), 10(a) or 10(b) of the Lease.
"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 the actual amount of interest paid and to be paid on the
Loan Certificates during the Lease Period in which such Stipulated Loss
Value Date occurs up to and including such Stipulated Loss Value Date is
greater or less than the amount included in calculating the percentage set
forth in Exhibit C with respect to such Stipulated Loss Value Date on
account of such interest (calculated at the Assumed Interest Rate), such
percentage shall be adjusted appropriately to compensate for such
differential. Stipulated Loss Values are calculated assuming that if a
Stipulated Loss Value Date is also a Lease Period Date, only Basic Rent
that is scheduled to be payable on such date and designated as "in arrears"
shall be payable on such date.
"Stipulated Loss Value Date" has the meaning set forth in the initial
Lease Supplement.
"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, such Person and one or more Subsidiaries or one or
more Subsidiaries.
15
<PAGE>
[Lease Agreement (1995 777 C)]
"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 Break Amount, if
any, payable in accordance with Section 3(d) hereof, amounts payable under
2.17 of the Trust Indenture 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 Attribute Period" means the period of time ending with the last
day of the Owner Participant's eighth taxable year during which the Lease
is in effect or such longer period of time as Lessee and the Owner
Participant shall agree.
"Tax Indemnity Agreement" means that certain Tax Indemnity Agreement
(1995 777 C), 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").
"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(a) 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
16
<PAGE>
[Lease Agreement (1995 777 C)]
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 the actual
amount of interest paid and to be paid on the Loan Certificates during the
Lease Period in which such Termination Date occurs up to and including such
Termination Date is greater or less than the amount included in calculating
the percentage set forth in Exhibit D hereto with respect to such
Termination Date on account of such interest (calculated at the Assumed
Interest Rate), such percentage shall be adjusted appropriately to
compensate for such differential.
"Transaction Expenses" means (i) with respect to the closing on the
Delivery Date and the subsequent placement of any permanent debt pursuant
to Section 20 hereof, the reasonable and actual fees, expenses and
disbursements of (1) Ray, Quinney & Nebeker, special counsel to the
Indenture Trustee, (2) Bingham, Dana & Gould, counsel for the Owner
Trustee, (3) Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, (4) White & Case, special counsel for the Owner Participant, (5)
Vedder, Price, Kaufman & Kammholz, special counsel for Lessee and (6)
Coudert Brothers, special counsel for the Original Loan 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 initial reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v) the
reasonable fee of B.K. Associates (or of such other appraiser as shall be
acceptable to Lessee and 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) printing and distribution
costs relating to the transactions contemplated by the Operative Documents;
(ix) the reasonable out-of-pocket expenses of the Owner Participant
relating to the transactions contemplated by the Operative Documents (x)
the initial fee, if any, of the Original Loan
17
<PAGE>
[Lease Agreement (1995 777 C)]
Participant, and (xi) the placement, underwriting fees, commissions and
expenses, if any, in placing the permanent debt pursuant to Section 20
hereof and all costs and expenses associated with a public offering if any,
pursuant thereto.
"Trust Agreement" means that certain Trust Agreement (1995 777 C),
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.
"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, 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 liability
insurance proceeds payable to or for the benefit of the Owner Trustee, for
its own account or in its individual capacity, or the Owner Participant)
and requisition, indemnity or other payments of any kind for or with
respect to the Aircraft (except amounts owing to the Owner Participant, or
to the Owner Trustee, in its individual capacity, or to any of their
respective directors, officers, employees, servants and agents, pursuant to
Section 7 of the Participation Agreement).
"Trust Office" means the principal corporate trust office of the Owner
Trustee located at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust Department, or 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 Lessee, the
Owner Participant, the Indenture Trustee and each Certificate Holder.
"Trust Supplement" means a supplement to the Trust Indenture and to
the Trust Agreement, substantially in the form of Exhibit A to the Trust
Indenture.
"United States Government" means the federal government of the United
States of America or any instrumentality or agency thereof.
18
<PAGE>
[Lease Agreement (1995 777 C)]
"Wet Lease" means any arrangement whereby the 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 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 understands 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
and Lessee agrees to designate such employees and to cause such employees to
accept such authorization. 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 48 consecutive installments in the respective amounts as provided
in the next sentence, each such installment to be allocable to the Lease Period
specified in Exhibit B. Each such installment of Basic Rent shall be equal to
Lessor's Cost multiplied by the
19
<PAGE>
[Lease Agreement (1995 777 C)]
percentage for the applicable Lease Period Date specified in Exhibit B hereto.
Although the Basic Rent amounts set forth in Exhibit B hereto have
been computed on the assumption that the rate of interest on the Loan
Certificates throughout the Basic Term will be 9.25% per annum, compounded
semiannually and computed on the basis of a 360-day year of twelve 30-day months
(the "Assumed Interest Rate"), Lessor and Lessee recognize that the actual rate
and method of computing interest on the Loan Certificates may, from time to time
during the Basic Term, be different from the Assumed Interest Rate.
Accordingly, each installment of Basic Rent shall be increased or decreased (but
not below zero), as the case may be, by the Rent Differential Amount (as defined
herein). For purposes hereof, "Rent Differential Amount" shall mean, as of any
Lease Period Date the absolute value of the difference between (i) the aggregate
amount of interest due and payable on such Lease Period Date on the Loan
Certificates (or due and payable on the next following Business Day if such date
shall not constitute a Business Day) and (ii) the aggregate amount of interest
on the Loan Certificates that would have been due and payable on such Lease
Period Date if the Loan Certificates had borne interest at the Assumed Interest
Rate. If, as of such Lease Period Date, the amount determined in accordance
with clause (i) of the immediately preceding sentence shall be greater than the
amount determined in accordance with clause (ii) of such sentence, the amount of
Basic Rent due and payable on such Lease Period Date shall be increased by the
Rent Differential Amount. If, as of such Lease Period Date the amount
determined in accordance with such clause (ii) shall exceed the amount
determined in accordance with such clause (i), the amount of Basic Rent due on
such Lease Period Date shall be decreased (but not below zero) by the Rent
Differential Amount. Exhibit B hereto indicates in regard to each payment of
Basic Rent whether such payment is payable in advance or in arrears.
(c) Adjustments to Basic Rent, Excess Amount, Stipulated Loss Values,
-----------------------------------------------------------------
Termination Values and the EBO Percentage.
- -----------------------------------------
(i) In the event that (A) Transaction Expenses paid by Lessor are
determined to be other than .75% of Lessor's Cost, (B) there shall be an
optional refinancing or refunding of the Loan Certificates in accordance
with Sections 17 or 20 of the Participation Agreement, (C) the Delivery
Date occurs other than on May 31, 1995, or (D) there is an optimization in
accordance with Section 18 of the Participation Agreement; then in each
case the Basic Rent and, to the extent not theretofore paid, Excess Amount
set forth in
20
<PAGE>
[Lease Agreement (1995 777 C)]
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 set forth on 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) above) used to calculate Basic Rent, Excess Amount, Stipulated Loss
Value and Termination Value percentages and the EBO Percentage as set forth
in Exhibits B, C, D, and H, respectively, in each case 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. In the event that Lessee shall have exercised its
option to purchase the Aircraft pursuant to Section 9(b) hereof, or the
Aircraft is to be sold pursuant to Section 9(c) hereof, then solely for the
purposes of determining the amount payable under such Section 9(b) or
Section 9(c), the Termination Value percentages as of the applicable
Termination Date shall be adjusted upwards, if applicable, on account of
any change in the Code which raises the highest marginal statutory rate of
federal income tax applicable to corporations over that previously assumed
in calculating the Termination Value percentages set forth in Exhibit D as
amended from time to time (other than a change which is in the nature of a
minimum tax) using the same methods and assumptions (as modified on account
of any of the events referred to in (A) and (B) and such change in tax
rate) used to calculate the Termination Value percentages set forth in
Exhibit D in order to maintain the Owner Participant's Net Economic Return;
provided, however, that notwithstanding any other provision in any
-------- -------
Operative Document, the EBO Percentage shall not be decreased below the
highest of (A) the estimated fair market value of the Aircraft on the EBO
Date, determined as of the Delivery Date and set forth in the opinion
received by the Owner Participant from B.K. Associates pursuant to Section
4(a)(xx) of the Participation Agreement (the "Appraisal"), (B) the sum of
the present values, as of the EBO Date, of (1) Basic Rent payable with
respect to the period from the EBO Date to and including the Lease Expiry
Date and (2) the estimated fair market value of the Aircraft on the Lease
Expiry Date, determined as of the Delivery Date and set forth in the
Appraisal and (C) Stipulated Loss Value on the EBO Date.
21
<PAGE>
[Lease Agreement (1995 777 C)]
(ii) In the event of any change to the Code which is enacted after the
Delivery Date and which raises the highest marginal statutory rate of
federal income tax applicable to corporations (other than a change which is
in the nature of a minimum tax), the Owner Participant may recalculate
Basic Rent and Excess Amount as set forth in Exhibit B hereto in order to
maintain, to the extent feasible, the Owner Participant's Net Economic
Return, and recalculate the Stipulated Loss Value percentages set forth in
Exhibit C hereto, the Termination Value percentages set forth in Exhibit D
hereto and EBO Percentage set forth on Exhibit H, in each case using the
same methods and assumptions (as modified on account of any of the events
referred to in Section 3(c)(i)(A) and (B) and such change in tax rate),
provided that any such recalculations may not (A) increase the Net Present
Value of Rents to Lessee, (B) as of any Lease Period Date, increase the sum
of the Net Present Value of Rents payable through such date and the present
value of the Stipulated Loss Value or the Termination Value as of such
date, discounted to the Commencement Date at 11% per annum, or (C)
otherwise result in any adverse consequence (including tax consequences) to
Lessee as determined by Lessee in its sole judgment.
(iii) Any recalculation of Basic Rent, Excess Amount, Stipulated Loss
Value and Termination Value percentages and EBO Percentage pursuant to this
Section 3(c) 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, Excess Amount, Stipulated Loss Value and
Termination Value percentages and EBO Percentage 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 the Excess Amount and Supplemental Rent, if
any, in respect of the date on which such installment is payable, and each
payment of Stipulated Loss Value, Termination Value and the EBO Percentage,
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
22
<PAGE>
[Lease Agreement (1995 777 C)]
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 Break Amount, if any) of
and accrued and unpaid 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 or the EBO Percentage 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 other than as required or expressly permitted by the
Participation Agreement, the Lease and any Lease Supplement thereto and the
Trust Indenture and any Trust Supplement thereto, 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 (A) under Section 3(c)(i) shall be
consistent with the requirements of Rev. Proc. 75-21 and Rev. Proc. 75-28,
both as modified and in effect on the Delivery Date, to the same extent and
in the same manner that such requirements were satisfied in calculating
Basic Rent as originally set forth in Exhibit B, and shall not cause the
Lease to be a "disqualified leaseback or long-term agreement" or cause an
increase in the Owner Participant's "constant rental amount", each within
the meaning of Section 467(b) of the Internal Revenue Code of 1986, as
amended, and the final, proposed or temporary regulations thereunder or any
administrative interpretation thereof by the Internal Revenue Service, each
as in effect on the date of the effectiveness of the adjustment, or (B)
under Section 3(c)(ii) shall be consistent with the requirements of Rev.
Proc. 75-21 and Rev. Proc. 75-28, both 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(b) of
the Code, it being understood that the Owner Participant bears the
23
<PAGE>
[Lease Agreement (1995 777 C)]
risk of any change in tax law or regulation (including loss of any
grandfathering protection) under Section 467 of the Code in any Section
3(c)(ii) adjustment and the Lessee bears all such risk in any adjustment
under Section 3(c)(i) hereof; provided, however, that if any proposed,
temporary or final regulations issued subsequent to the Delivery Date are
inconsistent with the Owner Participant's interpretation of Section 467 of
the Code in effect on the Delivery Date, then at the election of the Owner
Participant any adjustment of Basic Rent required by Section 3(c)(i) or
permitted by Section 3(c)(ii) may be effected in a manner that satisfies
the requirements of such proposed, temporary or final regulations, but (x)
only in the case of an adjustment of Basic Rent under Section 3(c)(i) in a
manner that does not cause the Net Present Value of Rents resulting from
such adjustment to be greater than that which it would have been if Basic
Rent had been adjusted strictly in accordance with the provisions of said
Section 3(c)(i) and 3(c)(v)(A), and (y) in the case of Section 3(c)(ii),
only if such adjustment complies with the provisions of clauses (A) and (B)
of said Section 3(c)(ii).
(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, or the
EBO Percentage 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 Break
Amount as and when due and such other amounts as shall be due and payable under
Section 2.17 of the Trust Indenture; provided, however, that Lessee shall have
no obligation to pay to Lessor any Break Amount payable under Section 2.14 or
4.04(b) 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. In the event that the aggregate amount of interest actually
due and payable on the Loan Certificates on the Commencement Date exceeds the
aggregate amount of interest on the Loan Certificates that would have been due
and payable if such Loan Certificates had borne interest at the Assumed Interest
Rate, Lessee agrees to pay Lessor on the Commencement Date, as
24
<PAGE>
[Lease Agreement (1995 777 C)]
Supplemental Rent, an amount equal to such excess. Lessee also will pay to
Lessor, or 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 when due for
any period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due for the period until the same shall be paid.
(e) Payments in General. All payments of Rent 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, Attention: Corporate Trust Department
(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 agrees, that all Rent (other than Excluded Payments) and all other
amounts which are required to be paid to or deposited with the Owner Trustee
hereunder (other than Excluded Payments) 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 79 South Main Street, Salt Lake City, Utah 84111,
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 ten (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 (unless, so long
as the Original Loan Participant shall hold any Loan Certificate and the Loan
Certificates bear interest at a rate based on the Eurodollar Rate or the London
Interbank Offered Rate, such succeeding Business Day is in the next calendar
month, in which case the payment date shall be the next preceding Business Day)
and (except, with respect to any Loan Certificate held by the Original Loan
Participant, in regard to the amount of Rent attributable to the corresponding
payments on the Loan Certificates held by the Original Loan Participant) no
interest shall accrue on the amount of such payment, if such payment is made on
such next succeeding Business Day.
25
<PAGE>
[Lease Agreement (1995 777 C)]
(f) Prepayments of Certain Rent Payments. 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 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. If the Owner Participant has defaulted in
its obligation set forth in the last paragraph of Section 2 of the Participation
Agreement, any Rent (to the extent the Owner Participant has so defaulted)
shall, to the extent not reimbursed pursuant to the next sentence, be offset
against installments of Basic Rent in the order in which they become due,
subject to the last sentence of this paragraph. 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(f), plus (z) accrued interest on the unreimbursed portion
thereof at a rate per annum equal to the Past Due Rate (calculated in accordance
with clause (ii) of the definition of such term) 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").
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, Supplemental Rent payable
to the Owner Participant or the Owner Trustee or EBO Percentage 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 Break Amount, if any) of and accrued and unpaid
interest on the Loan Certificates then outstanding.
26
<PAGE>
[Lease Agreement (1995 777 C)]
(g) Rent Rebate. Lessor agrees to pay to Lessee, as a rebate of Rent,
-----------
an amount equal to any amount paid to Lessor by a Certificate Holder as a Break
Amount (other than Break Amount paid to Lessor by a Certificate Holder in
connection with Section 2.14 or Section 4.04(b) of the Trust Indenture due to
the occurrence of an "Event of Default" (as defined in the Trust Indenture),
which constitutes an Event of Default hereunder); provided, however, that if at
the time of any such payment by Lessor to Lessee, a Section 14(a), (b), (h) or
(i) Default or any Event of Default shall have occurred and be continuing
hereunder, such amount shall be held by Lessor as security for the obligations
of Lessee under this Lease and applied against Lessee's obligations hereunder
with respect to such Section 14(a), (b), (h) or (i) Default or any Event of
Default as and when due, and at such time as there shall not be continuing any
Section 14(a), (b), (h) or (i) Default or any Event of Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
this sentence.
SECTION 4. Lessor's Representations and Warranties. THE LESSEE
---------------------------------------
ACKNOWLEDGES AND AGREES THAT AS BETWEEN THE LESSOR AND THE LESSEE (A) THE
AIRFRAME AND EACH ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO THE LESSEE, (B) THE LESSEE IS SATISFIED THAT THE
AIRFRAME AND EACH ENGINE ARE SUITABLE FOR ITS PURPOSES, (C) THE LESSOR IS NOT A
MANUFACTURER NOR A DEALER IN PROPERTY OF SUCH KIND, AND (D) NEITHER LESSOR, IN
ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE UNDER THE TRUST AGREEMENT, THE
INDENTURE TRUSTEE NOR ANY 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, 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)(v) (in the case of the Owner Participant) and
8(j)(ii) (in the case of Lessor in its individual capacity) of the Participation
Agreement as to title and except that Lessor, in its individual capacity (except
with respect to (i) which shall be in its trust 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,
27
<PAGE>
[Lease Agreement (1995 777 C)]
(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 of the
Aircraft unless an Event of Default shall have occurred and be continuing, (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 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 affiliate thereof, any subcontractor or supplier of the
Manufacturer or any affiliate thereof, with respect to the Airframe, Engines, or
any Parts, or to release the Manufacturer, any affiliate thereof, or any such
subcontractor or supplier from any such representation, warranty or obligation.
Unless a Section 14(a), (b), (h) or (i) Default or 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 affiliate thereof or any of its subcontractors or
suppliers and any other claims against the Manufacturer or any affiliate
thereof, 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 9(b) or 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(c) or 15, Lessee, at its own expense, will return the
Airframe to Lessor upon ten days' prior written notice to Lessor, at the
location of one of Lessee's principal maintenance facilities in one of the
forty-eight contiguous states of the United States; provided, however, that if
Lessor shall have made the request for storage pursuant to Section 5(d) hereof,
Lessee shall return the Airframe to Lessor at the site of the storage. At the
time of such return, (A) Lessee will, unless otherwise requested by Lessor to
retain the existing registration of the Aircraft, at least 90 days prior to the
return hereunder, cause the Aircraft, if it is not then so registered, to be
registered under the laws
28
<PAGE>
[Lease Agreement (1995 777 C)]
of the United States with the FAA in the name of the 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 the Owner
Participant, Lessor 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(f) hereof, the Airframe will be fully equipped with the Engines (or
Acceptable Alternate Engines) installed thereon. Also, at the time of such
return, 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
requested the retention of the existing registration of the Aircraft, shall be
eligible for certification) 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
any arrangement including but not limited to pooling, interchange, overhaul,
repair or other similar agreements or arrangements, (iii) shall be in a regular
passenger configuration used by Lessee and in as good an operating condition as
when delivered by Manufacturer to Lessee, ordinary wear and tear excepted, and
otherwise in the condition required to be maintained under Lessee's FAA-approved
maintenance plan, irrespective of whether such Airframe or Engines have been
under Sublease during the Term, (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 all necessary governmental approvals of the country under the
laws of which the Aircraft shall then have been registered 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 FAA-approved 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 or refurbishment shall be at
least 25% of the hours or cycles (whichever is applicable) between engine heavy
maintenance or refurbishment allowed under the FAA-approved maintenance program
then in use with respect to such Engines (or Acceptable Alternate
29
<PAGE>
[Lease Agreement (1995 777 C)]
Engines), (vi) shall have all exterior markings removed or painted over with the
areas thereof refinished to match adjacent areas, (vii) shall be in a state of
cleanliness suitable under Lessee's normal service standards for operation in
Lessee's revenue passenger service and (viii) shall have no airworthiness
directives issued by the FAA requiring terminating action by the date of return
(and, in the event of a termination of the Lease pursuant to Section 9 hereof,
requiring such terminating action within one year after the date of return); 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.
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 clause
(iv)(B), Lessee shall pay or cause to be paid to Lessor a Dollar amount computed
by multiplying (i) 125% of the direct cost to Lessee (based upon the direct cost
to Lessee for similar aircraft in the fleet of Lessee) during the preceding 12
months of performing an airframe block overhaul of the type referred to in such
clause (iv)(B) (or in the event that Lessee has not performed such type of
airframe block overhaul during the preceding 12 months, then this clause (i)
shall be equal to the fair market cost of the performance of such airframe block
overhaul) 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 a Dollar amount computed by multiplying (i) 125% of the direct cost to
Lessee (based upon the direct cost to Lessee for similar aircraft in the fleet
of Lessee) during the preceding 12 months of performing for an engine of the
same model as the Engines (or Acceptable Alternate Engines) the scheduled engine
heavy maintenance or refurbishment under the FAA-approved maintenance program
then used by Lessee for engines of the same model as the Engines (or Acceptable
Alternate Engines) (or in the event that Lessee has not performed such a
scheduled engine heavy maintenance or refurbishment during the preceding 12
months, then this clause (i) shall be equal to the fair market cost of the
performance of such scheduled engine heavy maintenance or refurbishment) by (ii)
a fraction of which (x) the numerator shall be the excess of 25% of the hours or
cycles (whichever is
30
<PAGE>
[Lease Agreement (1995 777 C)]
applicable) of operation of one Engine between engine heavy maintenance or
refurbishment allowable under the FAA-approved 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 on such Engines (or Acceptable
Alternate Engines) remaining until the next such scheduled engine heavy
maintenance or refurbishment and (y) the denominator shall be the number of
hours or cycles allowable between such scheduled engine heavy maintenance or
refurbishment by (iii) two.
During the last six months of the Term (unless Lessee shall have
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
and any 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 of the Aircraft by, or
the business of, Lessee or any Sublessee.
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 Lessee's maintenance program
summarized in the "United Air Lines 777 Maintenance Program", furnished to
Lessor and the Owner Participant 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 the excerpt from Lessee's maintenance program
summarized in the "United Air Lines 777 Maintenance Program", shall be
considered an on-condition maintenance program.
(b) Return of the 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 such Acceptable Alternate Engines are free
and clear of all Liens other than
31
<PAGE>
[Lease Agreement (1995 777 C)]
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
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 not installed on the Airframe at the time of the return of the
Airframe.
(c) Fuel; Manuals. Upon the return of the Airframe upon any
-------------
termination of this Lease in accordance with paragraph (a) of this Section 5,
(i) Lessor shall have no obligation with respect to the fuel or oil contained in
the fuel or oil tanks of such Airframe, and (ii) Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals and data and inspection,
modification and overhaul records required to be maintained with respect thereto
under applicable rules and regulations of each country under the laws of which
the Aircraft has been registered during the period of operation thereof.
(d) Storage Upon Return. If, at least 15 days prior to termination
-------------------
of this Lease at 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 out-
of-pocket expenses) for a period not exceeding sixty days (or, if a Section
14(a), (b), (h) or (i) Default or an Event of Default shall be continuing at the
time of Lessor's request for storage, 120 days) commencing on the date of such
termination, at a location in the continental United States selected by Lessee
(or, if a Section 14(a), (b), (h) or (i) Default or an Event of Default shall be
continuing at the time of Lessor's request for storage, selected by Lessor) used
as a location for the parking or storage of aircraft. Lessee shall, at Lessor's
written request, maintain insurance (if available) for the Aircraft during such
period not exceeding sixty days (or, if a Section 14(a), (b), (h) or (i) Default
or an Event of Default shall be continuing at the time of Lessor's request for
storage, 120 days) and shall be reimbursed by Lessor for the premiums thereon.
(e) 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
32
<PAGE>
[Lease Agreement (1995 777 C)]
nonproprietary 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 in
accordance with Section 8 hereof. Lessor may, at its option, upon 30 days
notice to Lessee, purchase any or all of such nonproprietary Parts from Lessee
upon the expiration of the Term at their fair market value.
(f) Return of Engines. 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 or elsewhere in this Lease or any other
Operative Document, Lessee shall 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 (subject to availability as
determined by 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.
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, Airframe
or Engines, 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 proceedings 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
33
<PAGE>
[Lease Agreement (1995 777 C)]
Lessee (or any Sublessee), unless the judgment secured shall not, within 30 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 30 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 as
otherwise required by applicable law or to the extent that such
registration cannot be effected because of Lessor's or the Owner
Participant's failure to comply with the citizenship or other eligibility
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; (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 to keep the
Aircraft in as good an operating condition as when delivered by
Manufacturer to Lessee, ordinary wear and tear excepted, and so as 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 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, or (II) the applicable laws of any other jurisdiction in which the
Aircraft may then be registered from time to time, except when all Boeing
Model 777-222 aircraft (powered by engines of the same type as those with
which the Aircraft shall be equipped at the time of such grounding)
registered in such jurisdiction have been
34
<PAGE>
[Lease Agreement (1995 777 C)]
grounded by the aeronautical authorities of such jurisdiction and (y) in
substantially the same manner as Lessee (or, if under Sublease, Sublessee)
maintains, services, repairs or overhauls similar aircraft operated by
Lessee (or, if under Sublease, Sublessee) in similar circumstances and
without in any way discriminating against the Aircraft, whether by reason
of its leased status or otherwise, or such other manner as shall have been
approved by the Owner Participant; (iii) maintain or cause to be maintained
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 shall, as between Lessor and Lessee and
all parties claiming through Lessee, be the property of Lessor but 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 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 (and will not 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. In the
event that such law, rule, regulation, treaty, order or certificate
requires alteration of the Aircraft, the Lessee will conform thereto or
obtain conformance therewith at no expense to Lessor. Notwithstanding the
foregoing, after Lessee shall have provided Lessor with a certificate of an
officer of the Lessee who is expressly authorized by the Lessee's Board of
Directors or its President or Treasurer to provide certificates of this
type stating all relevant facts with respect thereto, Lessee or any
Sublessee may contest in good faith the validity or application of any such
law, rule, regulation, treaty, order, certificate, license, registration or
violation in any reasonable manner which does not materially adversely
affect the Lessor, the Indenture Trustee or the Owner Participant or any of
their respective legal and economic interests in or to the Aircraft or any
Operative Document. In addition, no contest
35
<PAGE>
[Lease Agreement (1995 777 C)]
shall continue beyond the Term and Lessee shall comply with the provisions
of Sections 5 and 11 and the other provisions of Section 7 notwithstanding
such contest. If the indemnities or insurance specified in Section 11(f),
or some combination thereof, 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 or in or to a country with which the
United States does not have diplomatic relations, except that Lessee may
operate, or permit any Sublessee to operate, the Aircraft in or to a
country with which the United States does not have diplomatic relations, so
long as (x) Lessee maintains the insurance specified in Section 11 and (y)
Lessee or Sublessee, as the case may be, does not discriminate against the
Aircraft in usage in or to such country as compared with other aircraft
owned, leased or operated by Lessee or Sublessee, as the case may be, of
the same type as the Aircraft, provided, however, that the failure of
Lessee to comply with the provisions of this sentence shall not give rise
to a Default or an Event of Default hereunder (a) where such failure is an
isolated extraordinary occurrence attributable to a hijacking, medical
emergency, equipment malfunction, weather conditions or navigational error,
or series of events not in the ordinary course of the regular operations of
the Lessee or any Sublessee or (b) if the Aircraft shall be operating in a
country at the time that the United States and such country shall
discontinue diplomatic relations (as long as Lessee thereafter attempts in
good faith to remove the Aircraft from such country), or (c) if while a
Sublease is in effect, the United States shall discontinue diplomatic
relations with the country of the Sublessee's domicile. The Aircraft may
not be operated in any declared war zone or in any area which is an area of
recognized hostilities. Notwithstanding the preceding sentence, Lessee
(but not a Sublessee) may operate the Aircraft in any declared war zone or
any area which is an area of recognized hostilities but only if (x) such
operation is in accordance with a request, contract, arrangement or
understanding of or with the United States Government or any agency or
instrumentality thereof and (y) Lessee shall have complied with Section 11
hereof. If while Lessee shall operate the Aircraft in any declared war
zone or any area which is an area of recognized hostilities (except as a
result of an isolated extraordinary occurrence attributable to a hijacking,
medical emergency, equipment malfunction, weather conditions, or series of
events not in the ordinary course of the regular operations of Lessee),
there shall occur an Event of Loss with respect to the Airframe or the
Airframe and the Engines and/or engines then
36
<PAGE>
[Lease Agreement (1995 777 C)]
installed thereon, then the amount payable under Section 10(a)(i) shall be
increased by the amount, if any, that the Fair Market Sales Value of the
Aircraft (determined as if the Aircraft were located in the United States)
as of the date immediately preceding the date of such Event of Loss exceeds
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. If Lessee shall cease to be a Citizen of the United States
then Lessee shall not operate the Aircraft in or to any country other than
the United States and any country which in the Owner Participant's
reasonable opinion provides substantially equivalent protection for the
rights of owner participants and lessors in similar transactions as
provided under United States law.
(3) Reregistration. At any time after the Tax Attribute Period,
--------------
subject to compliance with the terms of Section 8(e) of the Participation
Agreement, Lessor shall, at the request and sole expense of Lessee,
cooperate with Lessee and take all actions requested by Lessee to change
the country of registration of the Aircraft to another country.
(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 neither a Section 14(a), (b), (h) or (i) Default nor an 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
perfected lien of the Trust Indenture on the Airframe or any Engine and so long
as 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, if with respect to the Airframe, entered
into by Lessee (or any Sublessee) in the ordinary course of its
business with a Certificated Air Carrier or a Permitted Sublessee or
any other air carrier approved by Lessor; provided, that (A) no such
agreement or arrangement contemplates
37
<PAGE>
[Lease Agreement (1995 777 C)]
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, such divestiture shall be deemed to be an Event of Loss
with respect to such Engine and Lessee shall (or shall cause Sublessee
to) comply with Section 10(b) 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 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;
38
<PAGE>
[Lease Agreement (1995 777 C)]
(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
such installation shall be deemed an Event of Loss with respect to
such Engine and Lessee shall (or shall cause any Sublessee to) comply
with Section 10(b) 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
10(b);
(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,
that does not extend beyond the end of the Term so long as Lessee (or
any Sublessee) shall promptly notify Lessor 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;
(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, 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
(subject to the notice requirements specified in the second to last
paragraph of this Section 7(b)), in its sole discretion, enter into a
sublease with (1) a Certificated Air Carrier, (2) after the Tax
Attribute Period, any Permitted Sublessee or (3) any other Person
approved in writing by the Owner Participant, which approval shall not
be unreasonably withheld, provided, however, that (A) no sublease,
including all permissible renewal periods, entered into pursuant to
this clause (viii) shall extend beyond the date three months prior to
the expiration of the Basic Term or any
39
<PAGE>
[Lease Agreement (1995 777 C)]
Renewal Term then in effect, unless Lessee shall have irrevocably
committed to purchase the Aircraft or renew this Lease at the end of
the Basic Term or Renewal Term, as the case may be, to a date at least
three months beyond the latest permissible expiration date of such
sublease, (B) each Sublease, including all permissible renewal
periods, entered into pursuant to this clause (viii) shall provide
that (a) the Sublessee may not operate the Aircraft (x) in countries
with which the United States does not maintain diplomatic relations
(except if the United States and any such country shall discontinue
diplomatic relations at the time that the Aircraft shall be in route
to or operating in such country, provided Sublessee thereafter
attempts in good faith to remove the Aircraft from such country) or
(y) in areas of armed hostilities, and (b) the Sublease shall
terminate if the Sublessee's country of domicile and the United States
terminate diplomatic relations, provided that this clause (b) shall
not prohibit the operation of the Aircraft in the country of the
Sublessee's domicile so long as Lessee attempts in good faith to
remove the Aircraft from such country and terminate such Sublease,
(provided, however, that clauses (a)(x) and (b) shall not apply so
long as (r) Lessee or Sublessee maintains the insurance specified in
Section 11 and (s) Sublessee does not discriminate against the
Aircraft in usage in or to such country as compared with other
aircraft owned, leased or operated by Sublessee of the same type as
the Aircraft), and (C) no Sublease, including all permissible renewal
periods, entered into pursuant to this clause (viii) shall be made to
a Person described in clause (3) of this subparagraph which is not
domiciled in a country listed in Exhibit F, as in effect from time to
time, unless Lessor and the Owner Participant shall have received
reasonably satisfactory assurances regarding the protection of the
rights of lessors under the laws of the Sublessee's jurisdiction and
domicile, including a favorable opinion of counsel (which counsel and
opinion are reasonably satisfactory to the Owner Participant) in such
jurisdiction (a) that the terms (including, without limitation, the
governing-law, service- of-process and jurisdictional-submission
provisions thereof) of the Sublease and the Lease are legal, valid,
binding and enforceable in such jurisdiction against third parties to
substantially the same extent as in the United States, and that the
Sublease is subject and subordinate to the Lease, (b) that it is not
necessary
40
<PAGE>
[Lease Agreement (1995 777 C)]
for the Owner Trustee, the Owner Participant 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 (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 the Owner Participant
and the Owner Trustee in its individual capacity is available to cover
such risk and is provided by Lessee), (d) (unless Lessee shall have
provided insurance reasonably satisfactory to the Owner Participant
covering the risk of requisition of use of the Aircraft by the
government of such jurisdiction so long as the Aircraft is subleased)
that the laws of such jurisdiction require fair compensation by the
government of such jurisdiction payable in a 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, (e) that
there exist no possessory rights in favor of such Sublessee under the
laws of such jurisdiction which would, upon bankruptcy of Lessee or
Sublessee or other default by Lessee or Sublessee, prevent the return
of the Aircraft to Lessor in accordance with and where permitted by
the terms of Sections 14 and 15 hereof upon the exercise by Lessor of
its remedies under Section 15 hereof and the practical realization by
Lessor of its rights and benefits under Section 15, and (f) to such
further effect with respect to such other matters as Lessor and the
Owner Participant may reasonably request or unless the Lessor and the
Owner Participant shall otherwise approve. Upon receipt of the
foregoing opinion of counsel by Lessor and the Owner Participant,
Exhibit F shall be amended to add such country. If at any time Lessor
or the Owner Participant determines (which determination shall be
evidenced by an opinion of counsel) with respect to a country then
listed on Exhibit F, that the opinion of counsel referred to in the
previous sentence would not be obtainable or that the United States
does not maintain full diplomatic relations with such country, Exhibit
F shall be amended to delete such country; provided that such deletion
will not impair any Sublease or any interchange agreement or pooling
or similar arrangement then in effect. If the Aircraft shall be
subject to a Sublease at any time within the last four months of the
Term, the Aircraft shall be returned to Lessee's active fleet upon the
expiration of such Sublease.
41
<PAGE>
[Lease Agreement (1995 777 C)]
The rights of any Sublessee or other transferee who receives
possession by reason of a transfer permitted by this paragraph (b) (other than
the transfer of an Engine which is deemed an Event of Loss) shall be subject and
subordinate to, and any Sublease permitted by this paragraph (b) shall be made
expressly subject and subordinate to, all the terms of this Lease, including,
without limitation, the covenants contained in Section 7(a) hereof and Lessor's
(and so long as the Trust Indenture is in effect, the Indenture Trustee's (as
Lessor's assignee)) rights to repossession pursuant to Section 15 hereof and to
void such Sublease upon such repossession, and Lessee shall remain primarily
liable hereunder for the performance of all of the terms of this Lease, and the
terms of any such Sublease shall not permit any Sublessee to take any action not
permitted to be taken by Lessee or such Sublessee in this 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 hereunder 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 leased to Lessee (or any Sublessee) and any conditional vendor of
any engine purchased by Lessee (or any Sublessee) subject to a conditional sale
agreement or any other security agreement, that no interest shall be created
hereunder 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 any 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
of or any other holder of a security interest in an airframe owned by Lessee (or
any Sublessee), 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
written notice and a copy of any Sublease hereunder which has a term of more
than three (3) months (such notice to be given prior to entering into such
42
<PAGE>
[Lease Agreement (1995 777 C)]
Sublease, if practicable, but in any event promptly after entering into such
Sublease).
Lessor acknowledges that 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 7(b). 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
7(b).
(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
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
43
<PAGE>
[Lease Agreement (1995 777 C)]
permanently rendered unfit for use for any reason whatsoever, except as
otherwise provided in Section 8(c). All replacement Parts, prior to their
incorporation or installation or attachment to the Airframe or any Engine, 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 (other than Obsolete 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 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 to be made during
the Term to meet
44
<PAGE>
[Lease Agreement (1995 777 C)]
the applicable standards of the FAA or any applicable regulatory agency or body
of any other jurisdiction in which the Aircraft may then be registered;
provided, however, that, after providing Lessor with a certificate of an officer
of the Lessee who is expressly authorized by the Lessee's Board of Directors or
its President or its Treasurer to provide certificates of this type stating all
relevant facts with respect thereto, Lessee or any Sublessee may, in good faith,
contest the validity or application of any such law, rule, regulation or order
in any reasonable manner which does not adversely affect the Lessor, the Owner
Participant or any of their respective legal or economic interests in or to such
Airframe or Engines or any Operative Document. In addition, no contest shall
continue beyond the Term and Lessee shall comply with the provisions of Sections
5, 7 (except as provided in the third sentence of Section 7(a)(2)) and 11,
notwithstanding such contest. 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 (x)
results in the Aircraft becoming "limited use property" within the meaning of
Rev. Proc. 76-30, or (y) impairs the condition or airworthiness of the Airframe
or such Engine, or diminishes the value, utility or remaining useful life of the
Airframe or such Engine below the value, utility or 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, except that the value (but not the
utility, condition, airworthiness or remaining useful life) of the Airframe or
any Engine may be reduced by the value of Obsolete Parts which shall have been
removed so long as the aggregate value of all Obsolete Parts which shall have
been removed and not replaced shall not exceed $700,000, provided further that
any value received by Lessee in respect of the sale or use of such Obsolete
Parts shall be paid to Lessor on a net after-tax basis. 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 (x)
Lessee has leased from others and (y) 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) may, at any time during the Term,
so long as neither a Section 14(a), (b), (h) or (i) Default nor an Event of
Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that
45
<PAGE>
[Lease Agreement (1995 777 C)]
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, utility or
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, provided that Lessor shall have the option of
purchasing such Additional Part for sixty days following such removal for its
fair market sales value, if such Additional Part (w) is nonproprietary (as
determined by Lessee in its sole discretion), (x) is owned by Lessee, (y) has
not, prior to Lessor's request to Lessee to purchase such Part, been installed
in or attached or added to another aircraft and (z) has not, prior to Lessor's
request to Lessee to purchase such Part, been disposed of, transferred,
conveyed, assigned, lost or misplaced by Lessee and such Additional Part is
otherwise available for sale (provided that nothing herein shall require Lessee
to give notice that any Additional Part has been so 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.
(d) Certain Matters Regarding Passenger Convenience Equipment. Lessee
---------------------------------------------------------
may install on the Airframe, subject to the requirements of Section 8(c) above,
Passenger Convenience Equipment that is (i) owned by another Person and leased
to Lessee, (ii) sold to Lessee by another Person subject to a conditional sale
contract or other retained security interest, (iii) leased to Lessee pursuant to
a lease which is subject to a security interest in favor of another Person or
(iv) installed on the Aircraft subject to a license granted to Lessee by another
Person, and in any such case (A) the Lessor and the Indenture Trustee will not
acquire or claim, as against any such other Person, any right, title or interest
in any such Passenger Convenience Equipment solely as a result of its
installation on the Airframe, (B) the Lessee shall notify such Person of
Lessor's and Indenture Trustee's respective interest in the Aircraft, and (C)
upon the occurrence of any default under the applicable lease, conditional sale
agreement, security agreement or license, such Person shall not be entitled to
repossess such Passenger Convenience Equipment unless it shall, in connection
with such
46
<PAGE>
[Lease Agreement (1995 777 C)]
repossession, undertake to restore the Aircraft to the condition it would have
been in had the installation of such Passenger Convenience Equipment not
occurred.
SECTION 9. Voluntary Termination.
---------------------
(a) Termination Event.
-----------------
(1) So long as neither a Section 14(a), (b), (h) or (i) Default nor
an Event of Default shall have occurred and be continuing, Lessee shall
have the right at its option to elect to terminate this Lease on the Lease
Period Date occurring in May 29, 2008, May 29, 2010 and May 29, 2012.
(2) So long as no Default or Event of Default shall have occurred and
be continuing, Lessee shall have the right to terminate this Lease on any
Lease Period Date during the Basic Term occurring on or after the seventh
anniversary of the Delivery Date if Lessee shall have made a good faith
determination, which shall be evidenced by delivery to the Owner
Participant of a certificate of an officer of the Lessee who is expressly
authorized by the Lessee's Board of Directors or its President or Treasurer
to provide certificates of this type, that the Aircraft is surplus to
Lessee's requirements or economically obsolete to Lessee. Lessee shall
exercise this option by selling the Aircraft pursuant to Section 9(c).
(3) Lessee shall give to Lessor and the Indenture Trustee at least
one hundred twenty (120) days' revocable advance written notice of Lessee's
intention to so terminate this Lease pursuant to Section 9(a)(2) or at
least one hundred eighty (180) days' revocable advance written notice of
Lessee's intention to so terminate this Lease pursuant to Section 9(a)(1)
(any such notice, a "Termination Notice") specifying (i) the Lease Period
Date on which Lessee intends to terminate this Lease in accordance with
this Section 9 (such specified date, a "Termination Date") and (ii) if
Section 9(a)(2) is applicable, that Lessee has determined that the Aircraft
is surplus to its requirements or economically obsolete to it. Before any
such Termination Notice becomes irrevocable, Lessee may revoke such notice,
but Lessee shall not be entitled to revoke such notice more than three
times during the Basic Term. The Termination Notice shall be irrevocable
thirty Business Days prior to the Termination Date. In addition, if
Section 9(a)(1) is
47
<PAGE>
[Lease Agreement (1995 777 C)]
applicable, Lessee agrees that it shall deliver to Lessor at least thirty
(30) Business Days' irrevocable notice of its election to purchase the
Aircraft pursuant to Section 9(b) or to sell the Aircraft pursuant to
Section 9(c).
(b) Option to Purchase. If Lessee exercises its right to terminate
------------------
this Lease under Section 9(a)(1), gives its notice pursuant to Section 9(a)(3)
to purchase the Aircraft pursuant to this Section 9(b) and such notice becomes
irrevocable, then on the Termination Date specified in Section 9(a), Lessee
shall purchase the Aircraft at the greater of (i) the Termination Value on the
Termination Date, or (ii) its Fair Market Sales Value on the Termination Date,
provided the Lessee shall have also paid the amounts specified in (A) and (B) of
the following sentence. In such event, Lessor 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)), sell the Aircraft to Lessee in exchange for the payment in immediately
available funds in an amount equal to the greater of (x) the Termination Value
for the Aircraft, computed as of the Termination Value Date, or (y) the Fair
Market Sales Value of the Aircraft on the Termination Date, provided that on
such date the Lessee shall have also paid to the Lessor the sum of (A) all
unpaid Basic Rent with respect to the Aircraft due on or prior to such
Termination Date (other than Basic Rent payable in advance and due on the
Termination Date) and all unpaid Supplemental Rent (including an amount equal to
Break Amount, if any) with respect to the Aircraft due on or prior to such
Termination Date plus (B) all reasonable expenses incurred by Lessor and the
----
Owner Participant in connection with such sale. Upon payment in full of the
amounts required to be paid and the performance of all acts required to be
performed by Lessee pursuant to the preceding sentence, (i) the obligation of
Lessee to pay Basic Rent hereunder with respect to the Aircraft for any period
commencing on or after the Termination Date shall terminate with respect to the
Aircraft, (ii) this Lease shall terminate on the Termination Date and (iii)
Lessor will 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 in the Airframe and Engines
and furnish to or at the direction of the Lessee a bill of sale in form and
substance reasonably satisfactory to Lessee, evidencing such transfer.
Notwithstanding the foregoing, Lessee may, in accordance with Section 8(l) of
the Participation Agreement, assume the principal amount of the Loan
Certificates then outstanding on any Termination Date specified in Section 9(a),
in which event the Lessee will receive a credit against the purchase price
otherwise
48
<PAGE>
[Lease Agreement (1995 777 C)]
payable pursuant to this Section 9(b) in an amount equal to the principal amount
of Loan Certificates so assumed.
(c) Optional Sale of the Aircraft. In the event that Lessee shall
-----------------------------
have terminated this Lease under Section 9(a)(1) but shall not have elected to
purchase the Aircraft pursuant to Section 9(b), or Lessee shall have terminated
this Lease under Section 9(a)(2), then during the period commencing with the
date of the Termination Notice until the proposed Termination Date Lessee, as
agent for Lessor and at no expense to Lessor, shall use its reasonable best
efforts to obtain bids in Dollars for the cash 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 so 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 two 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: (1) Lessee shall
deliver the Aircraft, or cause the Aircraft to be delivered to Lessor, 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 Acceptable Alternate
Engine installed on the Airframe and not owned by Lessor, all in accordance with
the terms of Section 5 (but subject to the terms of Section 5(f) hereof), (2)
Lessor 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 highest bidder(s) (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), the sum of (A) if the proceeds of the sale
of the Aircraft so sold, net of reasonable costs and expenses incurred by Lessor
and the Owner Participant in connection therewith, are less than the Termination
Value for the Aircraft computed as of the Termination
49
<PAGE>
[Lease Agreement (1995 777 C)]
Date, the difference in Dollars; (B) all unpaid Basic Rent due on or prior to
the Termination Date (other than Basic Rent payable in advance and due on such
Termination Date) and all unpaid Supplemental Rent with respect to the Aircraft
due on or prior to such Termination Date, and (C) the Break Amount, 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
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 five but no more than nineteen 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 Termination Date together with all other amounts
due on such Termination 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 pay in full the unpaid Original
Amount of the Loan Certificates outstanding on the Termination Date, plus any
interest accrued to but excluding the Termination Date together with all other
amounts due thereunder less any amounts to be paid by Lessee as a result of the
payment thereof and, simultaneously with the payment of the Loan Certificates as
aforesaid, Lessee shall deliver the Airframe and Engines or Acceptable Alternate
Engines to Lessor in accordance with Section 5 and shall pay all Basic Rent due
on or prior to the Termination Date (other than Basic Rent payable in advance)
and all unpaid Supplemental Rent due on or prior to such Termination Date and
Break Amount, if any, due on the Loan Certificates. If no sale shall have
occurred on the Termination Date, this Lease shall continue in full force and
effect as to the Aircraft, Lessee shall pay the reasonable costs and expenses
incurred by the Owner Participant, Indenture Trustee and Lessor, if any, in
connection with preparation for such sale and Lessee may give one or more
additional Termination Notices. 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
50
<PAGE>
[Lease Agreement (1995 777 C)]
cease to accrue other than Supplemental Rent which by the terms of the Operative
Documents survives the termination of this Lease. Upon payment of all amounts
that may then be due hereunder, this Lease shall terminate. Lessor 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.
Lessor may solicit bids or inquire into the efforts of Lessee to obtain bids.
(d) Termination as to Engines. So long as neither a Section 14(a),
-------------------------
(b), (h) or (i) Default nor an Event of Default shall have occurred and be
continuing, 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, (i) 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 as provided in the
first proviso contained in Section 10(b) hereof), and (ii) 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 the 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 30 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 (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 30th day following the occurrence of
such Event of Loss), Lessee shall:
51
<PAGE>
[Lease Agreement (1995 777 C)]
(i) 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) interest on
such Stipulated Loss Value at the Debt Rate with respect to the portion of
Stipulated Loss Value payable to the Indenture Trustee and at 10% with
respect to the portion of Stipulated Loss Value payable to the Lessor, in
each case, 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,
plus (C) any amount referred to in Section 7(a)(2) hereof due in respect of
such Event of Loss plus (D) Break Amount, if any, due on the Loan
Certificates; provided, however, that if the Commencement Date or 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, Lessee shall pay on the Commencement Date or such Lease Period
Date an amount equal to the Basic Rent that would have been due on the
Commencement Date or 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) provided that neither a Section 14(a), (b), (h) or (i) Default
nor an 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.
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 and due on such payment date) and all Supplemental
Rent due on or before the date of such payment including Break Amount, if any,
payable in regard to the Loan Certificates), under the Participation Agreement
or under the Tax Indemnity Agreement, (1) the obligation of Lessee to pay the
52
<PAGE>
[Lease Agreement (1995 777 C)]
installments of Basic Rent, Supplemental Rent, Stipulated Loss Value,
Termination Value or any other amount shall cease to accrue other than
Supplemental Rent which by the terms of the Operative Documents survives the
termination of the Lease, (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 and furnish to or at the direction of Lessee
a bill of sale in form and substance reasonably satisfactory to Lessee,
evidencing such transfer, and (4) Lessee will be subrogated to all claims of
Lessor if any against third parties, 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, not later than the Business Day next succeeding the 100th day following
the occurrence of such Event of Loss (A) convey or cause to be conveyed to
Lessor and to be leased by Lessee hereunder 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 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, airframe or engine so substituted hereunder
shall be of the same or improved make and model as those initially leased
hereunder 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 Lessor, 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, (3) furnish Lessor with such evidence of Lessee's title to such
replacement aircraft and of compliance with the insurance provisions of Section
11 with respect to such substituted property as Lessor or the Indenture Trustee
may reasonably request and that the substituted property has been entered into
Lessee's FAA-approved maintenance program or under the maintenance program of
any Sublessee, (4) provide the documentation required to be provided by it
pursuant to
53
<PAGE>
[Lease Agreement (1995 777 C)]
Section 5.06 of the Trust Indenture (the provisions whereof being incorporated
by reference and made a part hereof to the same extent as if set forth in full
herein) and an opinion of independent tax counsel, satisfactory to the Owner
Participant, as to the tax consequences (without any limitation as to the nature
of such tax consequences) to Lessor and the Owner Participant of such
substitution, and the Owner Participant and Lessor simultaneously will 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, 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, (5) be subrogated to all claims of Lessor, if any, against third
parties 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 and (6)
provide an opinion of counsel, which counsel shall be reasonably acceptable to
the Lessor, to the effect that title to such replacement aircraft has been duly
conveyed to the Lessor free and clear of all Liens except Permitted Liens and
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 Reform Act of 1978, as amended,
with respect to the aircraft substituted hereunder. 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 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); provided, however, upon written notice to Lessee from Owner
Participant given within 20 days after Lessor
54
<PAGE>
[Lease Agreement (1995 777 C)]
has received notice of such Event of Loss, the Lessee will pay with respect to
the Engine subject to such Event of Loss within 45 days after the occurrence of
such Event of Loss 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
with respect to such amounts payable to the Indenture Trustee and at 10% with
respect to such amounts payable to the Lessor, in each case, 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 portion of Stipulated Loss
Value and interest, then Lessee shall only be obligated to return the Aircraft
to Lessor with any Engine attached thereto with respect to which Lessee has not
paid such portion of 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. 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
Acceptable Alternate 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, (iii) furnish Lessor
with such evidence of Lessee's title to such Acceptable Alternate Engine and of
compliance with the insurance provisions of Section 11 hereof with respect to
such Acceptable Alternate Engine as Lessor may reasonably request, (iv) furnish
the Lessor and the Indenture Trustee with an opinion of Lessee's counsel to the
effect that title to such Acceptable Alternate Engine has been duly conveyed to
the Lessor free and clear of all Liens except Permitted Liens, and (v) provide
the documentation required to be provided by it pursuant to Section 5.06 of the
Trust Indenture (the provisions thereof being herein incorporated by reference
and made a part hereof to the same extent as if set forth in full herein) 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 (A) the Engine 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 and (B) all claims, if any,
against third parties, 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 Acceptable Alternate Engine shall,
55
<PAGE>
[Lease Agreement (1995 777 C)]
after such conveyance, be deemed part of the property leased hereunder, and
shall be deemed an "Engine." 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 resulting from the theft, disappearance, destruction,
condemnation, confiscation or seizure of, or requisition of title to or use of,
the Airframe or any Engine, 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 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, so much of such
payments remaining after reimbursement of Lessor (as provided for in
Section 7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses shall be paid over to, or
56
<PAGE>
[Lease Agreement (1995 777 C)]
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
rights and obligations under this Lease Agreement with respect to the Aircraft
shall continue to the same extent as if such requisition had not occurred
(except to the extent that any failure or delay in repairing or maintaining the
Aircraft shall have been caused by such requisition), provided that if such
Airframe and Engines or engines installed thereon are not returned by such
government prior to the end of the Term, Lessee shall be obligated to return the
Airframe and such Engines or Acceptable Alternate Engines to Lessor pursuant to,
and in all other respects in compliance with the provisions of, Section 5
promptly on the date of such return by such government. If Lessee shall fail to
return the Aircraft on or before the thirtieth day beyond the end of the Term in
the case of a requisition for use by the United States Government (or any agency
or instrumentality thereof) or on the last day of the Term in the case of a
requisition for use by any other government of registry (or by an agency or
instrumentality thereof), such failure shall constitute an Event of Loss which
shall be deemed to have occurred on the last day of the Term, 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 Acceptable Alternate
Engines on or before the thirtieth day beyond the end of the Term, or on the
last day of the Term, as the case may be, such failure shall not be deemed an
Event of Loss. Upon the giving of such notice by Lessor and such failure to
return by the thirtieth day beyond the end of the Term in the case of a
requisition for use by the United States Government (or any agency or
instrumentality thereof) or on the last day of the Term in the case of a
requisition for use by any other government of registry (or by an agency or
instrumentality thereof), 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 Acceptable Alternate Engines 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
57
<PAGE>
[Lease Agreement (1995 777 C)]
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 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 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 the
United States Government or any other government of registry of the Aircraft 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,
for the period after the end of the Term, the Owner Participant shall be
entitled to receive the greater of (x) all payments received by Lessor or Lessee
from the United States Government for the use of such Airframe and Engines or
engines or (y) a per diem rate equal to one-half of the average per diem Basic
Rent during the Basic Term unless Lessee shall have exercised its purchase
option hereunder and made all payments required in connection therewith, or
there is a deemed Event of Loss hereunder and Lessee shall have made all
payments required in connection therewith, in which case the payments referred
to in (x) above 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 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)), Lessee shall replace
(or cause any Sublessee to replace) such Engine hereunder with an Acceptable
Alternate Engine 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. No
such requisition shall result in any reduction of Basic Rent.
(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
58
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[Lease Agreement (1995 777 C)]
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, if Lessor
declares this Lease to be in default pursuant to Section 15 hereof, 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 the provisions of Section 11(d) hereof permitting self-insurance,
Lessee will carry or cause to be carried 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 with respect to the Aircraft, (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 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 provisions of Section
11(d) hereof permitting self-insurance, insurance by insurers of recognized
reputation and responsibility otherwise conforming with the provisions of
said 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 or similar type as such non-operating property and which is on the
ground and
59
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[Lease Agreement (1995 777 C)]
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 or similar 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) 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 property
damage insurance covering Engines and Parts while temporarily removed from the
Aircraft and not replaced by similar components (including, without limitation,
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 either by Lessee or any Sublessee with respect to
other aircraft owned, leased or operated by either the 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)) not less than the Stipulated
Loss Value for the Aircraft. In the case of a loss with respect to an engine
(other than an Engine) installed on 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), (h) or (i) Default
or an Event of Default has occurred and is continuing, all losses will be
adjusted by Lessee with the insurers. As between Lessor and Lessee, it is
agreed that all insurance payments 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),
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
60
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[Lease Agreement (1995 777 C)]
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 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), 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) 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 (as provided in
Section 7.01 of the Trust Agreement) 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) with respect to the Event of Loss
for which such payments are made.
As between Lessor and Lessee, the insurance payments for any property
damage loss to the Airframe or any Engine not constituting an Event of Loss
with respect thereto shall be paid to Lessee (or any Sublessee if directed
by Lessee).
(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 provisions of
Section 11(d) hereof permitting self-insurance, 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 provisions of Section 11(d) hereof permitting self-
insurance, 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.
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[Lease Agreement (1995 777 C)]
(c) Reports, Etc. Lessee will furnish, or cause to be furnished, to
------------
Lessor, the Indenture Trustee, the Owner Participant and, so long as the
Original Loan Participant is a Certificate Holder, the Original Loan Participant
on or before the Delivery Date and during each calendar year thereafter on or
before the anniversary of the Delivery Date a report, signed by (x) Rollins
Hudig Hall of Illinois, Inc., or (y) 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 such insurance complies with the terms hereof and that
such insurance together with any self-insurance permitted hereby is adequate
("adequate" being defined as coverage which is in substantially similar form, is
of such type and has limits within the range of limits as is customarily carried
by United States air carriers and is normally considered adequate for the
protection of trustees, owners, lessors and their assignees in similar
transactions) for the protection of the interests of Lessor and the Owner
Participant; provided, that all information contained in the foregoing report
shall not be made available by Lessor, the Indenture Trustee, the Original Loan
Participant or the Owner Participant to anyone except (A) to prospective and
permitted transferees of Lessor's, the Indenture Trustee's, the Original Loan
Participant's or the Owner Participant's interest, who agree to hold such
information confidential, (B) to Lessor's, the Indenture Trustee's, the Original
Loan Participant's or the Owner Participant'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 interests of any such person or
for enforcement of this Lease by the Lessor or the Indenture Trustee; provided,
however, that any and all disclosures 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. Lessee will cause
such Insurance Brokers to agree to advise Lessor, the Owner Participant, the
Indenture Trustee and, so long as the Original Loan Participant is a Certificate
Holder, the Original Loan Participant in writing of any default in the payment
of any premium and of any other 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 (but not scheduled expiration) or material adverse
62
<PAGE>
[Lease Agreement (1995 777 C)]
change of any insurance maintained pursuant to this Section 11, provided that if
the notice period specified above is not reasonably obtainable, the Insurance
Brokers shall provide for as long a period of prior notice as shall then be
reasonably obtainable. In addition, Lessee will also cause such Insurance
Brokers to deliver to Lessor, the Owner Participant, the Indenture Trustee, and,
so long as the Original Loan Participant is a Certificate Holder, the Original
Loan Participant, 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 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 Owner Participant, the Indenture Trustee or, so long as the Original
Loan Participant shall hold any Loan Certificate, the Original Loan Participant
may at its sole option provide such insurance and, in such event, Lessee shall,
upon demand, reimburse Lessor, the Owner Participant, the Indenture Trustee or,
so long as the Original Loan Participant shall hold any Loan Certificate, the
Original Loan Participant as Supplemental Rent, for the cost thereof to Lessor,
the Owner Participant, the Indenture Trustee or, so long as the Original Loan
Participant shall hold any Loan Certificate, the Original Loan Participant, as
the case may be; provided, however, that no exercise by the Lessor, the Owner
Participant, the Indenture Trustee or, so long as the Original Loan Participant
shall hold any Loan Certificate, the Original Loan Participant of said option
shall affect the provisions of this Lease, including the provisions that failure
by the 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 Section 11(a) and Section
11(b) exceed, 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 largest 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.
63
<PAGE>
[Lease Agreement (1995 777 C)]
(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 any Affiliate thereof may carry for its or
their own account (directly or through the Owner Trustee) at its or their 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 by this Section 11 or adversely affect such
insurance or 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 United States Government, 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)). Any such
indemnification or insurance provided by the United States Government or any
agency or instrumentality thereof shall provide substantially similar protection
as the insurance required by Section 11 hereof. Lessee shall furnish, in
advance of attachment of such indemnity or insurance, a certificate of a
responsible financial or legal officer of Lessee confirming in reasonable detail
the amount and scope of such indemnification or insurance and that such
indemnification or insurance complies with the preceding sentence.
(g) Application of Payments During Existence of an Event 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 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 such Event of Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
the preceding sentence.
64
<PAGE>
[Lease Agreement (1995 777 C)]
(h) Terms of Insurance Policies. Any policies carried in accordance
---------------------------
with Sections 11(a) and 11(b) 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, and, as appropriate, loss payees, as
their respective interests may appear (but without imposing on any such party
liability to pay premiums, calls or other charges with respect to such
insurance), (B) may provide for self-insurance to the extent permitted in
Section 11(d), (C) shall provide that if the insurers cancel such insurance for
any reason whatever, or if the same is allowed to lapse for nonpayment 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
(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 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 $4,000,000 (or, if
the Aircraft is then under a Sublease, in excess of $2,500,000), 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 damage 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
65
<PAGE>
[Lease Agreement (1995 777 C)]
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 $4,000,000 (or,
if the Aircraft is then under a Sublease, are $2,500,000) 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 an Event of Default shall
have occurred and be continuing and the insurers have been notified thereof by
Lessor or the Indenture Trustee.
(i) Non-Discrimination Against the Aircraft in Insurance.
----------------------------------------------------
Notwithstanding any provisions contained in this Section 11, (i) all insurance
required to be maintained by Lessee under this Lease shall cover at least the
same risks as that maintained on other aircraft owned, leased or operated by
Lessee of the same type as the Aircraft, and (ii) Lessee shall not discriminate
against the Aircraft in the placement, terms and conditions, or collection, of
insurance required to be maintained by Lessee under Section 11 hereof as
compared with other aircraft owned, leased or operated by Lessee of the same
type as the Aircraft.
SECTION 12. Inspection. At reasonable times, Lessor, the Indenture
----------
Trustee or the Owner Participant, or their respective authorized
representatives, may inspect the Aircraft and inspect and make copies of the
nonproprietary (as determined by Lessee in its sole discretion) books and
records and FAA-required books and records of Lessee and any Sublessee relating
to the maintenance of the Aircraft (at Lessor's, the Indenture Trustee's or the
Owner Participant's expense, as the case may be, unless an Event of Default
shall have occurred and be continuing, in which case such inspection shall be at
Lessee's expense) and shall keep any information or copies obtained thereby
confidential and shall not disclose the same to any Person, except (A) to a
Certificate Holder or to prospective and permitted transferees of Lessor's, the
Indenture Trustee's or the Owner Participant's interest in each case who agree
to hold such information confidential, (B) to Lessor's, the Indenture Trustee's
or the Owner Participant'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 or (D) as may be necessary for purposes of protecting the
interests of any such Person or for enforcement of this Lease by the Lessor;
provided, however, that any and all disclosures 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. Any such
inspection 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, which consent
66
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[Lease Agreement (1995 777 C)]
Lessee may in its sole discretion withhold; provided that no exercise of such
inspection right shall interfere with the normal operation of the Aircraft by,
or the business of, Lessee (or any Sublessee). Notwithstanding the previous
sentence, the Lessor, the Owner Participant and the Indenture Trustee and their
respective authorized representatives shall each be entitled to inspect the
Aircraft only one time during any consecutive twelve month period except during
the continuance of an Event of Default when such inspection right shall not be
so limited. Unless Lessee shall irrevocably commit to purchase the Aircraft
pursuant to the terms hereof at the end of the Term, upon receipt by Lessee of a
written request from the Owner Participant specifying that the Owner Participant
desires to have an authorized representative observe (x) the next scheduled
heavy maintenance visit to be performed on the Aircraft or (y) any "C" Check (or
substantially equivalent successor type of maintenance work) scheduled to be
performed on the Aircraft during the last 18 months of the Term, Lessee shall
cooperate with the Owner Participant to enable the Owner Participant's
representative to observe the next scheduled heavy maintenance visit or such "C"
check to be performed on the Aircraft, including reasonable advance notification
to the Owner Participant of the time and place of such heavy maintenance visit
or "C" Check; provided that the Owner Participant's authorized representative
shall merely observe such heavy maintenance visit or "C" Check, shall not
interfere with or extend in any manner the normal conduct or duration of the
heavy maintenance visit or "C" Check and shall not be entitled to direct any of
the work performed in connection with such heavy maintenance visit or "C" Check.
Neither Lessor, the Indenture Trustee nor the Owner Participant shall have any
duty to make any such inspection nor shall either of them incur any liability or
obligation by reason of not making any such inspection. Unless Lessee shall
have irrevocably committed to purchase the Aircraft pursuant to the terms hereof
at the end of the Term, Lessee shall give the Owner Participant two Business
Days' prior written notice of the Aircraft's last flight during the Term and
shall allow an authorized representative of the Owner Participant an opportunity
to accompany the Aircraft on such flight; provided that such representative
shall not be allowed into the cockpit unless the pilot shall so agree and such
representative shall not be entitled to direct or instruct the pilot in any
regard.
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
67
<PAGE>
[Lease Agreement (1995 777 C)]
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, Break Amount or the amounts, if any, payable by
the Lessee pursuant to the penultimate sentence of Section 3(d) hereof within 5
days (or in the event that the Original Loan Participant shall no longer hold
any Loan Certificates, 10 days) after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Stipulated Loss Value, Termination Value, Break Amount or the
amounts, if any, payable by the Lessee pursuant to the penultimate sentence of
Section 3(d) hereof) after the same shall have become due and such failure shall
continue for 10 days (or in the event that the Original Loan Participant shall
no longer hold any Loan Certificates, 15 days) after Lessee's receipt of written
demand therefor; 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 in any material respect 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 which arises under clause
(ii) of Section 7(a)(1), or under the first sentence of Section 7(a)(2) as it
relates to maintenance, service, repair or overhaul, or under Section 8 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 90 days (or, in the event
68
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[Lease Agreement (1995 777 C)]
that the Original Loan Participant shall no longer hold any Loan Certificates,
180 days) after Lessee shall have received written notice of such failure;
provided, further that if the Original Loan Participant shall no longer hold any
Loan Certificates, such failure to cure shall not constitute an Event of Default
if (A) Lessee provides a certificate from a responsible operating officer,
including a statement in reasonable detail of Lessee's program and timetable for
curing such failure indicating (x) that Lessee is proceeding with due diligence
to cure such failure, (y) that in such officer's opinion, such failure can be
cured within one full year after such 180-day period, and (z) the officer's
estimate of the costs (including direct internal costs and expenses such as
salaries but excluding indirect costs, expenses and allocations such as
overhead) to cure such failure, (B) if the estimated costs to cure such failure
shall equal or exceed $2,000,000, such aggregate amount shall be placed in a
reserve fund established by Lessee with an institution approved by Lessor in an
account as to which Lessee has granted a first perfected security interest for
the benefit of Lessor and applied (in a manner reasonably approved by Lessor)
toward the costs of curing such failures (and once such failures are cured, the
amount remaining in the reserve fund shall be returned to Lessee), and (C) such
failure is cured within one full year after such 180-day period; 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 and such documents or certificates as are furnished to the Owner
Participant solely in connection with matters dealt with in the Tax Indemnity
Agreement and for no other purpose) shall prove to have been incorrect in any
material respect at the time made; provided, however, such incorrectness shall
constitute a default hereunder only if such incorrectness shall continue uncured
for a period of thirty days after the earlier of (i) the receipt by Lessee of a
written notice from Lessor or the Indenture Trustee advising Lessee of the
existence of such incorrectness, or (ii) knowledge of such incorrectness by a
responsible finance officer of Lessee; or
(f) Lessee shall not be a Certificated Air Carrier; or
(g) Subject to Section 7(a)(3), Lessee shall fail to cause the
Aircraft to be duly registered in the name of Lessor under the Federal Aviation
Act (except to the extent such registration cannot be effected because of
Lessor's or the Owner Participant's failure to comply with the citizenship or
other eligibility requirements for registration of aircraft under such
69
<PAGE>
[Lease Agreement (1995 777 C)]
Act or because Lessor or the Owner Participant shall fail to execute and deliver
all such documents as Lessee (or any Sublessee) may reasonably request for the
purpose of effecting and continuing such registration); or
(h) 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 60 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 60 consecutive days after the
date of entry thereof; or
(i) 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;
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, and does 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 the same shall be continuing, Lessor may, at its
option, declare by written notice
70
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[Lease Agreement (1995 777 C)]
to Lessee this Lease Agreement to be in default (provided that no such
declaration shall be a condition to any suit against Lessee for specific
performance of a defaulted covenant or for damages in respect of such default
upon such occurrence or at any time thereafter and provided further than upon
the occurrence of an Event of Default specified in Section 14(h) or (i), this
Lease shall automatically be deemed to be in default without the necessity of a
declaration); and at any time thereafter, so long as any such Event of Default
shall not have been remedied, 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 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, 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, Airframe or any Engine as Lessor, in
its sole
71
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[Lease Agreement (1995 777 C)]
discretion, may determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 15;
(c) the Lessor may hold, keep idle or lease to others the Aircraft,
Airframe or any Engine or any part thereof, as the Lessor in its sole discretion
may determine, free and clear of any rights of the Lessee and without any duty
to account to the Lessee with respect to such action or inaction or for any
proceeds with respect thereto, except that the Lessee's obligation to pay Basic
Rent with respect to the Aircraft on Lease Period Dates subsequent to the date
upon which the 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 the
Lessor from leasing the Aircraft, Airframe or any Engine or any part thereof to
any Person other than the 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, 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 after the date specified in such notice), any
unpaid Basic Rent due on or before Lease Period Dates on or prior to the payment
date so specified (other than Basic Rent payable in advance on such date) plus
whichever of the following amounts Lessor, in its sole discretion, shall specify
in such notice (together with interest, if any, on such amount 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 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 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 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 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
72
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[Lease Agreement (1995 777 C)]
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 Rent with respect
to the Aircraft due on or prior to such date (other than Basic Rent payable in
advance on 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 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 (d) 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, net of all costs and expenses of
recovering the Aircraft, Airframe or any Engine and restoring its condition to
the condition required hereunder, 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, Airframe or
any Engine, 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.
Unless Lessee shall have objected in writing within ten days after its receipt
of Lessor's notice, Lessor's nomination shall be conclusive and binding. If
Lessee shall object, however, Lessor and Lessee shall endeavor, within ten days
after such objection is made, to select a mutually acceptable appraiser;
provided, that if Lessee shall not so endeavor to make such selection, Lessor's
nomination referred to in the second preceding sentence hereof shall be
conclusive and binding. If Lessor and Lessee fail to reach agreement (except
for the reason referred to in the proviso in the preceding sentence), or if any
appraiser selected fails to act for any reason, then the question shall be
determined by an appraisal (applying the definitions of "fair market rental
value" and "fair market sales value" as set forth above based upon the actual
condition of the Aircraft) 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
73
<PAGE>
[Lease Agreement (1995 777 C)]
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 twenty 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
twenty-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 New York, New York, for the appointment of such third appraiser.
The decision of the third appraiser so appointed shall be given within twenty
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. The cost of any such appraisal or any such 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 (other than Basic Rent due after the exercise of any of the foregoing
remedies), Break Amount, 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; provided, however, that Lessee
may not bid at any such public sale. Except as otherwise expressly provided
above, no remedy referred to in this Section 15 is intended to be exclusive, but
74
<PAGE>
[Lease Agreement (1995 777 C)]
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 Event of Default shall in any way
be, or be construed to be, a waiver of any future or subsequent Event of
Default. To the extent permitted by applicable law, Lessee hereby waives any
rights now or hereafter conferred by statute or otherwise which may require the
Lessor to sell, lease, or otherwise use the Aircraft, Airframe or any Engine or
any part thereof in mitigation of the Lessor's damages as set forth in this
Section 15 or which may otherwise limit or modify any of the 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 Indenture and the Trust Agreement 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, and all financing statements and continuation
statements, and all similar notices required by applicable law at all times to
be kept recorded and filed in such manner and such places as the Lessor may
request.
(b) The Lessee will furnish to Lessor, the Indenture Trustee, the
Original Loan Participant (but in regard to the Original Loan Participant, only
so long as the Original Loan Participant is a Certificate Holder) and the Owner
Participant:
(i) Quarterly Statements - As soon as practicable after the end of
--------------------
the first, second, and third quarterly
75
<PAGE>
[Lease Agreement (1995 777 C)]
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
(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 standards (except
as set forth in the auditor's opinion) 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 Lessee's parent 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
76
<PAGE>
[Lease Agreement (1995 777 C)]
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 June 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.
(d) The Lessee agrees at its own expense to furnish to the Lessor
promptly after execution and delivery of any supplement and amendment hereto
(except for any such supplement or amendment which does not require or receive
the approval of Lessee pursuant to the Operative Documents and is not required
pursuant to the terms of the Operative Documents), an opinion of counsel
satisfactory to the Lessor stating that in the opinion of such counsel, such
supplement or amendment to the Lease (or a financing statement, continuation
statement or similar notice thereof if and to the extent permitted or required
by applicable law) has been properly recorded or filed for record in all public
offices in which such recording or filing is necessary to protect the right,
title and interest of the Lessor hereunder.
(e) Lessee shall promptly give to Lessor such other information
relating to the matters referred to above as Lessor shall reasonably request.
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, (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 answerback 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 courier or 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 Algonquin Road, Elk Grove
Township, Illinois 60007) Attention: Vice President and Treasurer,
telecopier number (708) 952-7117, or to such other address or telecopier
77
<PAGE>
[Lease Agreement (1995 777 C)]
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: Corporate Trust Department,
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 (a
copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant); and
(iii) if to the Indenture Trustee, the Owner Participant or the
Original Loan Participant, addressed to the Indenture Trustee, the Owner
Participant or the Original Loan Participant at such address or telex or
telecopier number as the Indenture Trustee, the Owner Participant or the
Original Loan Participant 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 the Original Loan Participant at its
address or telecopier number set forth in Schedule I to the Participation
Agreement.
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc.
----------------------------------------
(a) This Lease is a net lease, and it is intended that 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. The Rent which Lessee is obligated to pay shall be paid
without notice or demand and without set-off, counterclaim, abatement,
suspension, deduction or defense. Notwithstanding anything contained in this
Section 18(a) to the contrary, all payments of Rent made to the Indenture
Trustee shall be in an amount which 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 Break
Amount, if any, thereon and any other amounts due the Original Loan Participant
under the Trust Indenture, if any, and, in any event, such amounts shall not be
subject to set-off hereunder.
(b) Except as otherwise expressly provided, this Lease shall not
terminate, nor shall 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
78
<PAGE>
[Lease Agreement (1995 777 C)]
hereunder, nor shall the obligations hereunder of 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 Lessee the
Airframe or any Engine or any portion thereof, (F) 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 or any purpose of the Airframe or any
Engine or any portion thereof, (H) any defect in the title to, 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 Lessee, (J) any breach, default or
misrepresentation by the Lessor, any Participant or the Indenture Trustee of
their respective warranties, agreements and covenants contained in 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, it being the intention of the parties hereto
that the obligations of Lessee shall be absolute and unconditional and shall be
separate and independent covenants and agreements and shall continue unaffected
unless and until the covenants have been terminated pursuant to an express
provision of this Lease.
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 or 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 of any assignee of the Lessor 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.
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[Lease Agreement (1995 777 C)]
Except as expressly provided herein, 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 Term. So long as neither a Section 14(a), (b), (h)
------------------
or (i) Default nor an Event of Default has occurred and is continuing,
then, not more than 365 days and not less than 120 days, before the
end of the Basic Term, Lessee may deliver to Lessor a written notice
irrevocably electing to renew this Lease for a term having a duration
and at a Basic Rent as determined below (any such renewal term, a
"Fixed Renewal Term"). Not more than 365 days, but at least 270 days,
before the end of the Basic Term Lessee shall, as a condition to its
exercise of the 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). The appraiser(s) so appointed shall
determine, as evidenced by an appraisal reasonably satisfactory to the
Owner Participant's counsel, the total useful life, the remaining
useful life and the future residual value of the Aircraft on the
expiration date for the Fixed Renewal Term as may be set by reason of
the maximum period therefor in accordance with the constraints set
forth in the following sentence. The duration of the Fixed Renewal
Term shall be a period specified by Lessee before the end of the Basic
Term which is (a) not less than one year nor more than two years and
(b) not more than the longest period of time (i) which would cause the
Term, after giving effect to such Fixed Renewal Term, to be equal to
80% of the total 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). Each semi-annual installment of Basic
Rent during the Fixed Renewal Term shall be equal to one-half of the
average annual Basic Rent during the Basic Term divided by two.
(2) Fair Market Renewal Term. So long as neither a Section 14(a),
------------------------
(b), (h) or (i) Default nor an Event of Default has occurred and is
continuing, then Lessee
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<PAGE>
[Lease Agreement (1995 777 C)]
shall have the right to renew this Lease for two additional periods of
one year each commencing at the end of the Basic Term or the Fixed
Renewal Term for a Basic Rent equal to the Fair Market Rental Value of
the Aircraft for such period (any such renewal term, a "Fair Market
Renewal Term"). Each such option to renew shall be exercised by
Lessee providing irrevocable notice at least 120 days prior to the
commencement of such Fair Market Renewal Term.
(3) Waiver. If no written notice is delivered by Lessee to Lessor
------
pursuant to Section 19(a)(1) or 19(a)(2) on or before the day
specified therefor, 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 payable in semi-annual installments in
arrears, each such installment being due and payable on each Lease
Period Date occurring during the Renewal Term, commencing with the
Lease Period Date immediately following the commencement of the
Renewal Term, provided that Basic Rent for such Renewal Term shall be
payable at such other frequency of payment consistent with the length
of the Renewal Term as Lessor may reasonably designate in the event
that such period is not divisible into whole semi-annual periods.
(5) Stipulated Loss Value. The amounts which are payable during
---------------------
any Renewal Term in respect of 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
81
<PAGE>
[Lease Agreement (1995 777 C)]
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. So long as neither a Section 14(a), (b), (h)
----------------
or (i) Default nor an Event of Default has occurred and is continuing, Lessee
shall have the option, upon at least 120 days irrevocable prior written notice
to Lessor prior to the relevant purchase date (each a "Purchase Option Date"),
to terminate this Lease and to purchase the Aircraft:
(1) on the EBO Date, for a purchase price equal to that percentage
of Lessor's Cost set forth on Exhibit H hereto as the EBO Percentage;
(2) 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
(3) 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, 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 Break Amount, if any) of and accrued and unpaid
interest on the Loan Certificates then outstanding. Upon payment to Lessor in
immediately available funds in Dollars of the full amount of the purchase price
and payment of any other amounts then due hereunder (including all Rent and all
reasonable costs or expenses of 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. Notwithstanding the
foregoing, Lessee may, in accordance with Section 8(l) of the Participation
Agreement, assume the principal amount of the Loan Certificates then outstanding
on any applicable Purchase Option Date in which event Lessee shall receive a
credit against the purchase price otherwise payable pursuant to the preceding
two sentences in an amount equal to the principal amount so assumed.
(c) Valuation. At any time not earlier than 365 days prior to the
---------
date on which Lessee may purchase the Aircraft pursuant to Section 9(b) or
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 any
renewal
82
<PAGE>
[Lease Agreement (1995 777 C)]
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 the terms of Section 5(f) hereof) 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 Section 8, (ii) on the basis of the value which would
obtain in an arm's-length transaction between an informed and willing buyer-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, disregarding the
purchase and renewal options of Lessee provided in this Lease, and (iii) in the
case of such valuation for determining Fair Market Rental Value, assuming such
lessee would have substantially the same obligations and rights 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, in the case of a purchase of the Aircraft
pursuant to Section 9(b) or Section 19(b) or a renewal pursuant to Section
19(a)(2), 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 (or by 240 days prior to the
Termination Date, in the case of Section 9(b)), 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
twenty 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 twenty Business Days' 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 New
York, New York for the appointment of such third appraiser. The decision of the
third appraiser so appointed shall be given within twenty 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
83
<PAGE>
[Lease Agreement (1995 777 C)]
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 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
(except for Excluded Payments) 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 6.08 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
84
<PAGE>
[Lease Agreement (1995 777 C)]
the case of failure to pay Rent or in the case of failure to maintain insurance
as required hereunder, no earlier than five days after written 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 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 that a
Default or Event of Default has occurred and is continuing, Lessor) may from
time to time direct in writing (and in the 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
$750,000,000 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, and (iv) repurchase agreements with any financial
institution having combined capital and surplus of at least $750,000,000 with
any of the obligations described in clause (i) through (iii) as collateral.
Such investments shall mature no later than one year from the date on which they
were invested. 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, commissions and other
expenses, if any, incurred in connection with such investment) unless a Section
14(a), (b), (h) or (i) Default or an Event of Default shall have occurred and be
continuing. If an Event of Default or a Section 14(a), (b), (h) or (i) Default
shall have occurred and be continuing, Lessor or if the Trust
85
<PAGE>
[Lease Agreement (1995 777 C)]
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 and Lessee. 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. Neither Lessee nor any Affiliate of Lessee will file
any tax returns in a manner inconsistent with the foregoing fact or with
Lessor's ownership of the Aircraft. 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.
86
<PAGE>
[Lease Agreement (1995 777 C)]
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.
* * *
87
<PAGE>
[Lease Agreement (1995 777 C)]
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 herein, 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 is contained in the original counterpart only.
88
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT A
to Lease Agreement
------------------
LEASE SUPPLEMENT NO. 1 (1995 777 C)
LEASE SUPPLEMENT No. 1 (1995 777 C), 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 C) 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 C), 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 C) dated May __, 1995, to the Lease Agreement, has been recorded by
the Federal Aviation Administration on _______________, 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 777-222 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
- ---------------------
/2/ This language is for Lease Supplement No. 1.
/3/ This language is for other Lease Supplements.
<PAGE>
[Lease Agreement (1995 777 C)]
(i) Airframe: U.S. Registration No. N767UA; manufacturer's
serial no. 26918; and (ii) Engines: two (2) Pratt & Whitney Model
PW4077 engines bearing, respectively, manufacturer's serial nos.
P777020 and P777024 (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. The Stipulated Loss Value Date shall mean the respective dates set
forth in Exhibit C to the Lease.
4. 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.
5. 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, any affiliate thereof, or any subcontractor or supplier of The Boeing
Company or any affiliate thereof, under the Purchase Agreement or otherwise.
6. 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.
7. 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>
[Lease Agreement (1995 777 C)]
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:______________________________
Title:____________________________
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged this ___ day of May, 1995./4/
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By:______________________________
Its:_____________________________
/4/ This language is contained in the original counterpart only.
A-3
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT B to Lease Agreement
SCHEDULE OF ALLOCATION OF BASIC RENT; EXCESS AMOUNT
---------------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT B TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE AT THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT C to Lease Agreement
STIPULATED LOSS VALUE SCHEDULE
------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT C TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE AT THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT D to Lease Agreement
TERMINATION VALUE SCHEDULE
--------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT D TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE AT THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT E to Lease Agreement
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Basic Rent, Excess Amount, EBO Percentage,
Stipulated Loss Value percentages and Termination Value percentages 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
Excess Amount, EBO Percentage, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages 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 Lessee shall notify the Owner Participant of such belief and shall make a
good faith effort to reconcile the calculations referred to in (A) above with
those of the Owner Participant, provided, that if within ten Business Days after
such notification of the Owner Participant, the Lessee and the Owner Participant
are unable to reach such a reconciliation, 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 indemnity payment in the Owner
Participant's original statement in the Owner Participant's favor, the Owner
Participant shall pay the reasonable costs and expenses of such verification
process. Such recalculated Basic Rent, Excess Amount, EBO Percentage,
Stipulated Loss Value percentages and Termination Value percentages shall be set
forth in a Lease Supplement or an amendment to the Lease.
<PAGE>
[Lease Agreement (1995 777 C)]
EXHIBIT F to Lease Agreement
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Australia Netherlands
Austria New Zealand
Bahamas Norway
Belgium People's Republic of China
Brunei Philippines
Canada Singapore
Denmark Spain
Finland Portugal
France Sweden
Germany Switzerland
Greece Thailand
Iceland United Kingdom
India
Ireland
Italy
Japan
Luxembourg
Malaysia
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
EXHIBIT G to Lease Agreement
SCHEDULE OF REGISTRATION COUNTRIES
----------------------------------
Australia Netherlands
Austria New Zealand
Bahamas Norway
Belgium People's Republic of China
Brunei Philippines
Canada Singapore
Denmark Spain
Finland Portugal
France Sweden
Germany Switzerland
Greece Thailand
Iceland United Kingdom
India
Ireland
Italy
Japan
Luxembourg
Malaysia
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
EXHIBIT H
LESSOR'S COST, EBO DATE, EBO PERCENTAGE AND ENGINE COST
-------------------------------------------------------
Lessor's Cost: $
Engine Cost: $
EBO Date
EBO Percentage/5/
(expressed as a percentage
of Lessor's Cost)
- ------------------------------
/5/ Alternatively, the Lessee may elect to purchase the Aircraft pursuant to
Section 19(b)(1) of the Lease in the installment amounts and on the
dates given below.
Payment Date Amount (expressed as a percentage
of Lessor's Cost)
May 29, 2014 43.55241298%
June 15, 2014 5.96755971%
September 15, 2014 5.96755971%
December 15, 2014 5.96755971%
In the event that the Lessee shall so elect, the Lessee shall, as of the EBO
Date purchase the Aircraft and receive title to the Aircraft, and shall grant,
as of the EBO Date, a first priority mortgage in favor of the Lessor of all of
its right, title and interest, on and after such date, in the Aircraft to secure
the due and punctual payment of all installment amounts payable under this
Exhibit H and shall promptly and duly execute and deliver any and all such
further instruments and documents, and shall take such further action, at its
own expense, as is necessary or desirable to perfect, preserve and protect the
mortgage and security interest intended to be so created, including, without
limitation, the execution and delivery of a mortgage or other security agreement
and the filing thereof with the Federal Aviation Administration and the
execution, delivery and filing of Uniform Commercial Code financing statements,
or similar instruments relating to the perfection of the mortgage and security
interest intended to be so created; provided, however, that such first priority
mortgage shall be considered a Permitted Lien; and provided, further that if any
Original Loan Participant is a Certificate Holder on the EBO Date, Lessee agrees
that if it elects to assume the principal amount of the Loan Certificates in
accordance with Section 8(l) of the Participation Agreement it shall not so
elect to purchase the Aircraft in installments.
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
EXHIBIT H
LESSOR'S COST, EBO DATE, EBO PERCENTAGE AND ENGINE COST
-------------------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT H TO THE LEASE AGREEMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THE LEASE AGREEMENT ON FILE AT THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
Aircraft N767UA
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO LEASE AGREEMENT
(1995 777 C)
Dated February __, 1996
Between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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 C Equipment Trust
One Boeing 777-222 Aircraft
__________________________________
- --------------------------------------------------------------------------------
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any, that
this First Amendment to 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 herein 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>
[First Amendment to Lease Agreement (1995 777 C)]
TABLE OF CONTENTS
Page
----
SECTION 1. Amendment to Exhibits........................................... 1
SECTION 2. Amendments to Section 1......................................... 2
SECTION 3. Amendments to Section 3......................................... 9
SECTION 4. Amendments to Section 7......................................... 11
SECTION 5. Amendments to Section 9......................................... 12
SECTION 6. Amendments to Section 10........................................ 15
SECTION 7. Amendment to Section 11......................................... 16
SECTION 8. Amendment to Section 14......................................... 18
SECTION 9. Amendment to Section 15......................................... 18
SECTION 10. Amendment to Section 17......................................... 18
SECTION 11. Amendments to Section 18........................................ 19
SECTION 12. Amendment to Section 19......................................... 19
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
FIRST AMENDMENT TO LEASE AGREEMENT
(1995 777 C)
THIS FIRST AMENDMENT TO LEASE AGREEMENT (1995 777 C) dated February
__, 1996 (this "Amendment") between STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under that certain Trust Agreement (1995 777 C) dated as of May 1, 1995
(in such capacity, "Lessor"), as successor to State Street Bank and Trust
Company ("Original Lessor"), and UNITED AIR LINES, INC., a corporation organized
and existing pursuant to the laws of the State of Delaware ("Lessee"), amends
that certain Lease Agreement (1995 777 C) dated as of May 1, 1995 (the "Original
Lease") between Lessee and Original Lessor (the Original Lease, as supplemented
by Lease Supplement No. 1 (1995 777 C) dated May 31, 1995 ("Lease Supplement No.
1") between Lessor and Lessee, being referred to herein as the "Lease").
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor the
Aircraft, which consists of the following components: (i) Airframe: FAA
Registration No. N767UA, Manufacturer's serial no. 26918; and (ii) Engines: two
(2) Pratt & Whitney model PW4077 aircraft engines bearing, respectively,
manufacturer's serial numbers P777020 and P777024; and
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 May 31, 1995 and assigned Conveyance No.
P02549;and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1. Amendment to Exhibits. Exhibits B, C, D and H to the
---------------------
Lease are hereby deleted in their entirety and replaced with Exhibits B, C, D
and H respectively, to this Amendment.
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
SECTION 2. Amendments to Section 1. Section 1 of the Lease is hereby
-----------------------
amended in the following manner:
(a) The following defined terms are hereby added to Section 1 in
alphabetical order:
""Assignment and Assumption Agreement" means that certain
Assignment and Assumption Agreement (1995 777 C) dated as of January
16, 1996 between the Owner Trustee and the Original Owner Trustee."
""Effective Date" means the Section 20 Refinancing Date."
""First Amendment to Lease Agreement" means that certain First
Amendment to Lease Agreement (1995 777 C) dated February __, 1996 by
and between Lessee and Lessor."
""First Amendment to Participation Agreement" means that certain
First Amendment to Participation Agreement (1995 777 C) dated February
__, 1996 by and among Lessee, the Owner Participant, the Owner
Trustee, the Indenture Trustee and each Pass Through Trustee."
""First Amendment to Tax Indemnity Agreement" means that certain
First Amendment to Tax Indemnity Agreement (1995 777 C) dated February
__, 1996 by and between Lessee and the Owner Participant."
""First Amendment to Trust Agreement" means that certain First
Amendment to Trust Agreement (1995 777 C) dated February __, 1996 by
and between the Owner Trustee and the Owner Participant."
""Original Certificate Holder" has the meaning ascribed to the
term "Certificate Holder" in the Original Indenture."
""Original Indenture" means the Trust Indenture and Security
Agreement (1995 777 C) dated as of May 1, 1995, as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement
(1995 777 C) No. 1 dated May 31, 1995, in each case between Original
Owner Trustee and the Indenture Trustee."
""Original Loan Certificates" has the meaning ascribed to the
term "Loan Certificates" in the Original Indenture."
2
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
""Original Owner Trustee" means State Street Bank and Trust
Company, a Massachusetts trust company, not individually except as
expressly set forth, but solely as Trustee under the Trust Agreement."
""Owner Trustee Parent" means State Street Bank and Trust
Company, a Massachusetts trust company."
""Owner Trustee Parent Guaranty" means the guarantee of the Owner
Trustee's obligations under the Operative Documents as delivered by
the Owner Trustee Parent in connection with the assumption by the
Owner Trustee of the Original Owner Trustee's obligations under the
Trust Agreement."
""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 a 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, in each case between the Lessee and State Street Bank and
Trust Company of Connecticut, National Association, as supplemented by
each of the two separate 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" means 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. 1996-A1 and 1996-A2, in each case dated as of
February 1, 1996 between Lessee and the Pass Through Trustee."
""Premium" has the meaning ascribed to the term in Section
6.01(b) of the Trust Indenture."
3
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
""Redemption and Refinancing Agreement" means that certain
Redemption and Refinancing Agreement (1995 777 C) dated as of February
1, 1996 by and among Lessee, the Owner Participant, the Original Loan
Participant, the Owner Trustee, the Indenture Trustee and each Pass
Through 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."
""Section 20 Refinancing Date" means February __, 1996."
""Series 1995 777 C Certificate" has the meaning set forth in the
Trust Indenture."
""Trust Indenture" means that certain Amended and Restated Trust
Indenture and Security Agreement (1995 777 C) dated as of February 1,
1996 between the Owner Trustee and the Indenture Trustee, which amends
and restates the Original Indenture, 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."
(b) The definition of "Additional Insured" is hereby amended to be and
read in its entirety as follows:
""Additional Insured" means Lessor, in its individual capacity
and as owner of the Aircraft, the Indenture Trustee, the Owner
Participant, so long as the Pass Through Trustees are Certificate
Holders, each Pass Through Trustee and Lessee in its capacity as
sublessor under any Sublease and each of their respective Affiliates,
successors and permitted assigns, and the respective directors,
officers, employees, servants and agents of each of the foregoing."
(c) The definition of "Assumed Interest Rate" is hereby deleted in its
entirety.
(d) The definition of "Basic Rent" is hereby amended to be and read in
its entirety as follows:
4
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
""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 hereof."
(e) The definition of "Break Amount" is hereby amended to be and read
in its entirety as follows:
""Break Amount" has the meaning set forth in the Original
Indenture."
(f) The definition of "Business Day" is hereby amended to be and read
in its entirety as follows:
""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 principal place of business of the Indenture
Trustee is located and the city and state in which the Indenture
Trustee receives and disburses funds."
(g) The definition of "Certificate Holder" is hereby amended to be and
read in its entirety as follows:
""Certificate Holder" has the meaning ascribed to the term
"Holder" in the Trust Indenture."
(h) The definition of "Excess Amount" is hereby amended by deleting
the words "Assumed Interest Rate" which appear therein and inserting the
words "assumed interest rate" in lieu thereof.
(i) The definition of "Expenses" is hereby amended by deleting the
words "Break Amount" which appear therein and inserting the word "Premium"
in lieu thereof.
(j) The definition of "Indemnitees" is hereby amended to be and read
in its entirety as follows:
""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
5
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
Indenture, each Pass Through Trustee, and each of their respective
Affiliates, successors and permitted assigns and the directors,
officers, employees, servants and agents of each of the foregoing."
(k) The definition of "Indenture Trustee Documents" is hereby amended
to be and read in its entirety as follows:
""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."
(l) The definition of "Lease Expiry Date" is hereby amended to be and
read in its entirety as follows:
""Lease Expiry Date" has the meaning specified therefor in
Exhibit H hereto."
(m) The definition of "Lease Period Date" is hereby amended to be and
read in its entirety as follows:
""Lease Period Date" means January 30, 1996, and each July 30 and
January 30 thereafter to but not including the last such date in the
Term."
(n) The definition of "Lessee Documents" is hereby amended to be and
read in its entirety as follows:
""Lessee Documents" means the Participation Agreement, the
Redemption and Refinancing 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."
(o) The definition of "Lessor Liens" is hereby amended to be and read
in its entirety as follows:
6
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
""Lessor Liens" means any Lien on, or disposition of title
arising as a result of (i) claims against Lessor, State Street Bank
and Trust Company of Connecticut, National Association, 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 of Connecticut, National Association, 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 of Connecticut,
National Association, 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
of Connecticut, National Association, 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 the Trust
Indenture (other than a transfer pursuant to Section 8 of the Trust
Indenture not attributable to a Lease Event of Default) or a transfer
pursuant to Sections 9, 10 or 19 hereof, or pursuant to the exercise
of the remedies set forth in Section 15 hereof); provided, however,
that any Lien which is attributable solely to the Lessor, State Street
Bank and Trust Company of Connecticut, National Association 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 of
Connecticut, National Association 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
7
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
interruption in the payment of Rent assigned to the Indenture Trustee
for the benefit of the Certificate Holders."
(p) The definition of "Loan Certificate" is hereby amended to be and
read in its entirety as follows:
""Loan Certificate" has the meaning assigned to the term
"Certificate" in the Trust Indenture."
(q) The definition of "Operative Documents" is hereby amended to be
and read in its entirety as follows:
""Operative Documents" means this Lease (including any Lease
Supplement); the Participation Agreement; the Redemption and
Refinancing Agreement; the Tax Indemnity Agreement; the Trust
Agreement; the Trust Indenture; any Trust Supplement; the Purchase
Agreement; the Owner Trustee's Purchase Agreement; the Manufacturer's
Bill of Sale; the Manufacturer's FAA Bill of Sale; the Owner Trustee's
Bill of Sale; the Owner Trustee's FAA Bill of Sale; an acceptance
certificate covering the Aircraft in the form agreed to by the
Participants and Lessee; the Owner Participant Guaranty; the Owner
Trustee Parent Guaranty; the Loan Certificates outstanding at the time
of reference; the Consent and Agreement; the Assignment and Assumption
Agreement; and any other documents executed in connection with the
transactions contemplated by the Participation Agreement."
(r) The definition of "Rent Differential Amount" is hereby deleted in
its entirety.
(s) The definition of "Stipulated Loss Value" is hereby amended by
deleting in its entirety the third sentence thereof.
(t) The definition of "Supplemental Rent" is hereby amended by
deleting the words "Break Amount" which appear therein and inserting the
word "Premium" in lieu thereof.
(u) The definition of "Termination Value" is hereby amended by
deleting the last sentence thereof.
(v) The definition of "Transaction Expenses" is hereby amended in the
following manner:
8
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
(1) Clause (i) of the definition of "Transaction Expenses" is
hereby amended to be and read in its entirety as follows:
"(i) with respect to the closing on the Delivery Date and
the subsequent placement of the permanent debt pursuant to
Section 20 of the Participation Agreement, the reasonable and
actual fees, expenses and disbursements of (1) Bingham, Dana &
Gould, counsel for the Original Owner Trustee, the Owner Trustee
and the Owner Trustee Parent, (2) Ray, Quinney & Nebeker, special
counsel for the Indenture Trustee and each Pass Through Trustee,
(3) Lytle, Soule & Curlee, special counsel in Oklahoma City,
Oklahoma, (4) White & Case, special counsel for the Owner
Participant, (5) Shearman & Sterling, special counsel for the
underwriters (to the extent not payable by the underwriters, if
any), (6) Vedder, Price, Kaufman & Kammholz, special counsel for
Lessee, and (7) Coudert Brothers, special counsel for the
Original Loan Participant,"
(2) Clause (iv) of the definition of "Transaction Expenses" is
hereby amended to be and read in its entirety as follows:
"(iv) the initial fee and initial reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture
and the initial fee and initial reasonable and actual
disbursements of each Pass Through Trustee under its respective
Pass Through Trust Agreement,"
(w) The definition of "Trust Office" is hereby amended to be and read
in its entirety as follows:
""Trust Office" means the principal corporate trust office of the
Owner Trustee located at 750 Main Street, Suite 1114, Hartford,
Connecticut 06103, Attention: Corporate Trust Department, or 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 Lessee, the Owner Participant, the Indenture
Trustee and each Certificate Holder."
SECTION 3. Amendments to Section 3. Section 3 of the Lease is hereby
-----------------------
amended in the following manner:
9
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
(a) The second paragraph of Section 3(b) (other than the last sentence
thereof) is hereby deleted in its entirety.
(b) Section 3(c)(i)(A) is hereby amended by deleting the reference to
"0.75%" which appears therein and inserting a reference to "[1.414]%" in
lieu thereof.
(c) The first sentence of Section 3(c)(iv) is hereby amended by
deleting the words "Break Amount" which appear therein and inserting the
word "Premium" in lieu thereof.
(d) Section 3(d) is hereby amended to be and read in its entirety as
follows:
"(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 or the EBO Percentage 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 of Premium, if any, as and when such Premium shall
be due and payable; provided, however, that Lessee shall have no
obligation to pay to Lessor any Premium payable under Section 6.01 or
6.02 of the Trust Indenture due to the occurrence of an "Indenture
Event of Default" (as defined in the Trust Indenture) if no Lease
Event of Default has occurred and is continuing. 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 when due for any period for
which the same shall be overdue and on any payment of Supplemental
Rent not paid when due for the period until the same shall be paid."
10
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
(e) Section 3(e) is hereby amended to be and read in its entirety as
follows:
"(e) Payments in General. All payments of Rent (other than
-------------------
Excluded Payments) payable to Lessor shall be made directly by Lessee
by wire transfer in 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 750 Main Street, Hartford, Connecticut 06103, Attention:
Corporate Trust Department (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, however, that so long as the Trust
Indenture shall not have been fully discharged, Lessor hereby directs
and Lessee hereby agrees, that all Basic Rent, Prepaid Rent and
Supplemental Rent (to the extent payable to the Indenture Trustee or
the Holders pursuant to the terms of the Operative Documents) and all
other amounts (other than Excluded Payments) to be paid or held by the
Lessor pursuant to the Operative Documents shall be paid directly to
the Indenture Trustee at the times and in funds specified in this
Section 3(e) or otherwise at the offices of the Indenture Trustee at
79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate
Trust Department (or such other office of the Indenture Trustee in the
continental United States or such other account as the Indenture
Trustee shall direct in a notice to Lessee at least 10 Business Days
prior to the date such payment 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) Section 3(g) is hereby deleted in its entirety.
SECTION 4. Amendments to Section 7. Section 7 of the Lease is hereby
-----------------------
amended in the following manner:
11
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
(a) Clause (f) and the immediately succeeding sentence thereafter of
Section (7)(b)(viii) of the Lease is hereby amended to be and read in its
entirety as follows:
"(f) to such further effect with respect to such other matters as
the Owner Participant may reasonably request or unless the Owner
Participant shall otherwise approve."
(b) Section 7(c) of the Lease is hereby amended by deleting the
reference to "State Street Bank and Trust Company" which appears therein
and inserting a reference to "State Street Bank and Trust Company of
Connecticut, National Association," in lieu thereof.
SECTION 5. Amendments to Section 9. Section 9 of the Lease is hereby
-----------------------
amended as follows:
(a) Section 9(a)(1) of the Lease is hereby amended to be and read in
its entirety as follows:
"(1) So long as neither a Section 14(a), (b), (h) or (i) Default
nor an Event of Default shall have occurred and be continuing, Lessee
shall have the right at its option to elect to terminate this Lease on
the Lease Period Date occurring on July 30, 2008, July 30, 2010 and
July 30, 2012."
(b) Section 9(a)(2) is hereby amended by inserting the phrase "the
third Business Day prior to" immediately prior to the phrase "any Lease
Period Date" which appears therein.
(c) The first sentence of Section 9(a)(3) is hereby amended by
deleting the words "Lease Period Date" which appears therein and inserting
the word "date" in lieu thereof.
(d) Section 9(c) is hereby amended to be and read in its entirety as
follows:
"(c) Optional Sale of the Aircraft. In the event that Lessee
-----------------------------
shall have terminated this Lease under Section 9(a)(1) but shall not
have elected to purchase the Aircraft pursuant to Section 9(b), or
Lessee shall have terminated this Lease under Section 9(a)(2), then
during the period commencing with the date of the Termination Notice
until the proposed Termination Date Lessee, as agent for Lessor and at
no expense to Lessor, shall use its reasonable best efforts to obtain
12
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
bids in Dollars for the cash 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 so 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 two 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: (1) Lessee
shall deliver the Aircraft, or cause the Aircraft to be delivered to
Lessor, 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 Acceptable Alternate Engine installed on the
Airframe and not owned by Lessor, all in accordance with the terms of
Section 5 (but subject to the terms of Section 5(f) hereof), (2)
Lessor 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 highest bidder(s) (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), the sum of (A) if the proceeds
of the sale of the Aircraft so sold, net of reasonable costs and
expenses incurred by Lessor and the Owner Participant in connection
therewith, are less than the Termination Value for the Aircraft
computed as of the applicable Redemption Date, the difference in
Dollars; (B) all unpaid Basic Rent due on or prior to such
13
<PAGE>
[First Amendent to Lease Agreement (1995 777 C)]
Redemption Date (other than Basic Rent payable in advance and due on
such Redemption Date) and all unpaid Supplemental Rent with respect to
the Aircraft due on or prior to such Redemption Date, and (C) the
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 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 five but no more than
nineteen 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 applicable Redemption Date, Lessor shall pay in full
the unpaid Original Amount of the Loan Certificates outstanding on
such Redemption Date, plus any interest accrued to but excluding such
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, simultaneously with the payment of the Loan Certificates as
aforesaid, Lessee shall deliver the Airframe and Engines or Acceptable
Alternate Engines to Lessor in accordance with Section 5 and shall pay
all Basic Rent due on or prior to such Redemption Date (other than
Basic Rent payable in advance on such Redemption Date) and all unpaid
Supplemental Rent due on or prior to such Termination Date and
Premium, if any, due on the Loan Certificates. If no sale shall have
occurred on the
14
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
Termination Date, this Lease shall continue in full force and effect
as to the Aircraft, Lessee shall pay the reasonable costs and expenses
incurred by the Owner Participant, Indenture Trustee and Lessor, if
any, in connection with preparation for such sale and Lessee may give
one or more additional Termination Notices. 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 other than Supplemental Rent which by the terms of the
Operative Documents survives the termination of this Lease. Upon
payment of all amounts that may then be due hereunder, this Lease
shall terminate. Lessor 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. Lessor may solicit bids or inquire into the efforts
of Lessee to obtain bids."
SECTION 6. Amendments to Section 10. Section 10 of the Lease is
------------------------
hereby amended in the following manner:
(a) Clause (i) of the first sentence of the first paragraph of Section
10(a) is hereby amended to be and read in its entirety as follows:
"(i) 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) interest on such Stipulated Loss Value at the Debt Rate with
respect to the portion of Stipulated Loss Value payable to the
Indenture Trustee and at 10% with respect to the portion of Stipulated
Loss Value payable to the Lessor, in each case, 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
15
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
excluding, the date such Stipulated Loss Value is paid in full, plus
(C) any amount referred to in Section 7(a)(2) hereof due in respect of
such Event of Loss; provided, however, that if the Commencement Date
or 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) and (C) above, Lessee shall pay on the
Commencement Date or such Lease Period Date an amount equal to the
Basic Rent that would have been due on the Commencement Date or 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) and (C) above; or"
(b) The first sentence of the second paragraph of clause (a) is hereby
amended by deleting the words "(A), (B), (C) and (D)" which appear therein
and inserting the words "(A), (B) and (C)" in lieu thereof.
(c) Clause (4) of the third paragraph of Section 10(a) is hereby
amended by deleting the words "Section 5.06" which appear therein and
inserting the words "Section 5.01(b)" in lieu thereof.
(d) Clause (v) of the second sentence of Section 10(b) is hereby
amended by deleting the words "Section 5.06" which appear therein and
inserting the words "Section 5.01(b)" in lieu thereof.
SECTION 7. Amendment to Section 11. Section 11(c) of the Lease is
-----------------------
hereby amended to be and read in its entirety as follows:
"(c) Reports, Etc. Lessee will furnish, or cause to be furnished, to
------------
Lessor, the Indenture Trustee and the Owner Participant on or before the
Delivery Date and during each calendar year thereafter on or before the
anniversary of the Delivery Date a report, signed by (x) Rollins Hudig Hall
of Illinois, Inc., or (y) 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 such insurance complies with the
terms hereof and that such insurance together with any self-insurance
permitted
16
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
hereby is adequate ("adequate" being defined as coverage which is in
substantially similar form, is of such type and has limits within the range
of limits as is customarily carried by United States air carriers and is
normally considered adequate for the protection of trustees, owners,
lessors and their assignees in similar transactions) for the protection of
the interests of Lessor and the Owner Participant; provided, that no
information contained in the foregoing report shall be made available by
Lessor, the Indenture Trustee, the Pass Through Trustee or the Owner
Participant to anyone except (A) to prospective and permitted transferees
of Lessor's, the Indenture Trustee's, any Pass Through Trustee's or the
Owner Participant's interest, who agree to hold such information
confidential, (B) to Lessor's, the Indenture Trustee's, any Pass Through
Trustee's or the Owner Participant'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
interests of any such person or for enforcement of this Lease by the Lessor
or the Indenture Trustee; provided, however, that any and all disclosures
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. Lessee will cause such Insurance Brokers
to agree to advise Lessor, the Owner Participant and the Indenture Trustee
in writing of any default in the payment of any premium and of any other
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 (but not scheduled expiration) 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 Brokers shall provide for as long a period of prior notice as
shall then be reasonably obtainable. In addition, Lessee will also cause
such Insurance Brokers to deliver to Lessor, the Owner Participant and the
Indenture 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 changes in the
report or the coverage consistent
17
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
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 Owner Participant or the Indenture Trustee may at its sole
option provide such insurance and, in such event, Lessee shall, upon
demand, reimburse Lessor, the Owner Participant or the Indenture Trustee as
the case may be, as Supplemental Rent, for the cost thereof to Lessor, the
Owner Participant or the Indenture Trustee as the case may be; provided,
however, that no exercise by the Lessor, the Owner Participant or the
Indenture Trustee of said option shall affect the provisions of this Lease,
including the provisions that failure by the Lessee to maintain the
prescribed insurance shall constitute an Event of Default."
SECTION 8. Amendment to Section 14. Section 14 to the Lease is
-----------------------
hereby amended in the following manner:
(a) Section 14(a) of the Lease is hereby amended to be and read in its
entirety as follows:
"(a) Lessee shall not have made a payment of Basic Rent,
Stipulated Loss Value, Termination Value or Premium, if any, within 10
days after the same shall have become due; or"
(b) Section 14(b) of the Lease is hereby amended to be and read in its
entirety as follows:
"(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value, Termination Value or Premium,
if any, after the same shall have become due and such failure shall
continue for 15 days after Lessee's receipt of written demand
therefor; or"
SECTION 9. Amendment to Section 15. The penultimate paragraph of
-----------------------
Section 15 of the Lease is hereby amended by deleting the words "Break Amount,
if any," which appear therein.
SECTION 10. Amendment to Section 17. Clauses (ii) and (iii) of
-----------------------
Section 17 are hereby amended to be and read in their entirety as follows:
"(ii) if to Lessor, at 750 Main Street, Hartford, Connecticut
06103, Attention: Corporate Trust Department, telecopier number (203)
244-1899, or to such other address or telecopier number as Lessor
shall from time to time designate in writing to Lessee (a
18
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
copy of each notice to Lessor shall be given by the sender thereof to
the Owner Participant); and
(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."
SECTION 11. Amendments to Section 18. The last sentence of Section
------------------------
18(a) of the Lease is hereby amended by deleting the words "Break Amount, if
any, thereon and any other amounts due the Original Loan Participant under the
Trust Indenture" which appear therein and inserting the word "Premium" in lieu
thereof.
SECTION 12. Amendment to Section 19. The last paragraph of Section
-----------------------
19(b) is hereby amended by deleting the words "Break Amount" which appear
therein and inserting the word "Premium" in lieu thereof.
SECTION 13. Amendment to Section 20. The last sentence of Section 20
-----------------------
of the Lease is hereby amended by deleting the reference to "Section 6.08" which
appears therein and inserting a reference to "Section 11.06" in lieu thereof.
SECTION 14. Ratification; References to Lease. Except as amended
---------------------------------
hereby, the Lease continues and shall remain in full force and effect in all
respects. From and after the date of this Amendment, each and every reference
in the Lease to "this Lease," "this Agreement," "herein," "hereof" or similar
words and phrases referring to this Lease or any word or phrase referring to a
section or provision of the Lease is deemed for all purposes to be a reference
to the Lease or such section or provision as amended pursuant to this Amendment.
SECTION 15. Miscellaneous. Any provision of this Amendment 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
19
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
jurisdiction. No term or provision of this Amendment 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. The 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 headings in this Amendment are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof. This Amendment 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 Amendment may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of such counterparts shall
together constitute but one and the same instrument.
* * *
20
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Lease Agreement to be duly executed on the day and year first
above written.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner
Trustee,
Lessor
By:________________________________
UNITED AIR LINES, INC.,
Lessee
By:________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing First Amendment
to Lease Agreement is hereby acknowledged on this __ day of February, 1996. /6/
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
as Indenture Trustee
By:________________________________
Its: __________________________
- -----------------------
/6/ This language contained in the original counterpart only.
21
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
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 THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[First Amendment to Lease Agreement (1995 777 C)]
EXHIBIT C
STIPULATED LOSS VALUE SCHEDULE
------------------------------
STIPULATED LOSS VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT C TO THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT 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 THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
EXHIBIT H
LEASE EXPIRY DATE, LESSOR'S COST, EBO DATE, EBO PERCENTAGE
AND ENGINE COST
---------------
FOR PURPOSES OF CONFIDENTIALITY, THE INFORMATION CONTAINED IN EXHIBIT
H TO THIS AMENDMENT IS INTENTIONALLY OMITTED FROM THE COPY OF THIS
AMENDMENT ON FILE WITH THE FEDERAL AVIATION ADMINISTRATION.
<PAGE>
EXHIBIT H
LEASE EXPIRY DATE, LESSOR'S COST, EBO DATE, EBO PERCENTAGE
AND ENGINE COST
---------------
<TABLE>
<CAPTION>
<S> <C>
Lessor's Cost: $89,000,000
Engine Cost: 6,500,000
EBO Date: July 30, 2014
EBO Percentage /1/ [61.45509211%]
(expressed as a percentage
of Lessor's Cost)
Lease Expiry Date: [November 29, 2019]
</TABLE>
- -----------------
/1/ Alternatively, the Lessee may elect to purchase the Aircraft pursuant to
Section 19(b)(1) of the Lease in the installment amounts and on the dates
given below.
Payment Date Amount (express as a percentage
of Lessor's Cost)
July 30, 2014 [__________%]
September 15, 2014 [__________%]
December 15, 2014 [__________%]
In the event that the Lessee shall so elect, the Lessee shall, as of the
EBO Date, purchase the Aircraft and receive title to the Aircraft, and
shall grant, as of the EBO Date, a first priority mortgage in favor of the
Lessor of all of its right, title and interest, on and after such date, in
the Aircraft to secure the due and punctual payment of all installment
amounts payable under this Exhibit H and shall promptly and duly execute
and deliver any and all such further instruments and documents, and shall
take such further action, at its own expense, as is necessary or desirable
to perfect, preserve and protect the mortgage and security interest
intended to be so created, including, without limitation, the execution and
delivery of a mortgage or other security agreement and the filing thereof
with the Federal Aviation Administration and the execution, delivery and
filing of Uniform Commercial Code financing statements, or similar
instruments relating to the perfection of the mortgage and security
interest intended to be so created; provided, however, that such first
priority mortgage shall be considered a Permitted Lien.
<PAGE>
*
Doc. No. 1.02
Aircraft N106UA
- --------------------------------------------------------------------------------
LEASE AGREEMENT
(1994 747 B)
Dated as of August 1, 1994
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
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.
1994 747 B Equipment Trust
One Boeing Model 747-451 Aircraft
----------------------------
Manufacturer's Serial No. 26474
- --------------------------------------------------------------------------------
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
-----------------
Page
----
SECTION 1. Definitions..................................................... 1
SECTION 2. Acceptance and Lease............................................ 17
SECTION 3. Term and Rent................................................... 17
(a) Interim Term and Basic Term............................. 17
(b) Interim Rent and Basic Rent............................. 17
(c) Adjustments to Interim Rent, Basic Rent, Excess Amount,
Stipulated Loss Value, Termination Value Percentages
and the EBO Percentage.................................. 18
(d) Supplemental Rent....................................... 21
(e) Payments in General..................................... 21
(f) Prepayments of Certain Rent Payments.................... 22
(g) Rent Rebate............................................. 23
SECTION 4. Lessor's Representations and Warranties......................... 23
SECTION 5. Return of the Aircraft.......................................... 25
(a) Condition Upon Return................................... 25
(b) Return of Other Engines................................. 28
(c) Fuel and Manuals........................................ 28
(d) Storage Upon Return..................................... 29
(e) Severable Parts......................................... 29
(f) Special Redelivery Provision............................ 29
SECTION 6. Liens........................................................... 30
SECTION 7. Registration, Maintenance and Operation; Possession and
Subleases; Insignia.......................................... 31
(a)(1) Registration and Maintenance......................... 31
(2) Operation............................................ 32
(3) Reregistration....................................... 33
(4) Operating Certificates............................... 33
(b) Possession and Subleases............................... 33
(c) Insignia............................................... 38
SECTION 8. Replacement and Pooling of Parts; Alterations, Modifications
and Additions................................................ 39
(a) Replacement of Parts................................... 39
(b) Pooling of Parts....................................... 39
i
<PAGE>
(c) Alterations, Modifications and Additions............... 40
SECTION 9. Early Termination............................................... 41
(a) [Intentionally reserved for potential future use]...... 41
(b) Termination for Obsolescence/Surplus................... 41
(c) Sale of the Aircraft................................... 42
(d) Termination as to Engines.............................. 45
SECTION 10. Loss, Destruction, Requisition, etc............................ 45
(a) Event of Loss with Respect to the Aircraft............. 45
(b) Event of Loss with Respect to an Engine................ 48
(c) Application of Payments from Governmental Authorities
for Requisition of Title, etc.......................... 50
(d) Requisition for Use or Grounding of the Aircraft....... 50
(e) Requisition for Use of an Engine by the United States
Government or the Government of Registry of the
Aircraft............................................... 52
(f) Application of Payments During Existence of Events of
Default................................................ 52
SECTION 11. Insurance...................................................... 52
(a) Public Liability and Property Damage Insurance......... 52
(b) Insurance Against Loss or Damage to the Aircraft....... 53
(c) Reports, etc........................................... 55
(d) Self-Insurance......................................... 57
(e) Additional Insurance by Lessor and Lessee.............. 57
(f) Indemnification by Government in Lieu of Insurance..... 57
(g) Application of Payments During Existence of a Default.. 58
(h) Terms of Insurance Policies............................ 58
SECTION 12. Inspection..................................................... 59
SECTION 13. Assignment..................................................... 61
SECTION 14. Events of Default.............................................. 61
SECTION 15. Remedies....................................................... 63
ii
<PAGE>
SECTION 16. Lessee's Cooperation Concerning Certain Matters................ 67
SECTION 17. Notices........................................................ 69
SECTION 18. Net Lease; No Set-Off, Counterclaim, Etc....................... 70
SECTION 19. Renewal Options; Purchase Options;
Valuation.................................................... 72
(a) Renewal Options......................................... 72
(1) Fixed Renewal Term................................. 72
(2) Fair Market Renewal Term........................... 72
(3) Waiver............................................. 73
(4) Conditions Precedent, Payment of Basic Rent........ 73
(5) Stipulated Loss Value.............................. 73
(b) Purchase Options........................................ 73
(c) Valuation............................................... 74
SECTION 20. Security for Lessor's Obligation to Certificate Holders........ 76
SECTION 21. Lessor's Right to Perform for Lessee........................... 76
SECTION 22. Investment of Security Funds; Liability of Lessor Limited
(a) Investment of Security Funds............................ 77
(b) Liability of Lessor Limited............................. 78
SECTION 23. Miscellaneous.................................................. 78
SECTION 24. Successor Trustee.............................................. 78
SECTION 25. Bankruptcy..................................................... 79
iii
<PAGE>
EXHIBITS
--------
EXHIBIT A Form of Lease Supplement
EXHIBIT B Interim Rent, 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, EBO Date and EBO Percentage
iv
<PAGE>
LEASE AGREEMENT (1994 747 B)
This LEASE AGREEMENT (1994 747 B), dated as of August 1, 1994, between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, 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 PW4056
engine or an engine of the same or another manufacturer (provided that an engine
manufactured by a foreign (non-U.S.) manufacturer may be an Acceptable Alternate
Engine only if (i) at the time of replacement, there are no domestic U.S.
manufacturers of engines approved by the FAA (or the applicable regulatory
agency or other body of any other jurisdiction in which the Aircraft may then be
registered) for use on the Airframe and otherwise meeting Lessee's operating
specifications, and (ii) such engine is of the type used on a substantial
portion of Lessee's fleet of Boeing 747-400 aircraft) 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 engines installed on the Airframe and shall be an engine of a type
then being utilized by Lessee on a substantial portion of other Boeing 747-400
aircraft operated by Lessee.
"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 or the Corporate Trust Department, 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 having responsibility for administration of the
transaction, 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
<PAGE>
[Lease Agreement (1994 747 B)]
Owner Trustee or the Indenture Trustee, such notice having been given 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, the Original Loan Participant (so
long as it holds any Loan Certificate), and each of their respective Affiliates,
successors and permitted assigns, and the respective directors, officers,
employees and agents 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" (including the terms "control by" and "under common control
with") 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.
"After-Tax Basis" means (i) with regard to any payment required or
deemed to be made by Lessee to any Indemnitee, a total amount which after (A)
taking into account any current Tax benefit, deduction or credit which arises
from the payment by the Indemnitee of any amount, including Taxes, for which the
payment to be received by the Indemnitee is made and which actually reduces any
Taxes for which the Lessee is not required to indemnify such Indemnitee under
either Section 7(b) of the Participation Agreement or the Tax Indemnity
Agreement, and (B) deduction of all Taxes required to be paid by the recipient
in respect of the receipt or accrual of such total amount, shall be equal to the
payment required or deemed to be made by Lessee to such Indemnitee, and (ii)
with regard to any payment required to be made by any Indemnitee to Lessee, a
total amount which after (A) taking into account any Taxes required to be paid
by the Indemnitee on account of the receipt or accrual of the amount, if any,
which causes the Indemnitee to make a payment to Lessee, and (B) deduction of
all Taxes saved by the total amount, shall be equal to the payment required to
be made by such Indemnitee to Lessee.
2
<PAGE>
[Lease Agreement (1994 747 B)]
"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 747-451 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; and (iii) any Replacement Airframe.
"Assumed Interest Rate" has the meaning set forth in Section 3(b)
hereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time or any successor statute.
"Base Rate" means the rate of interest announced from time to time by
The Mitsubishi Trust and Banking Corporation at its New York Branch as its
"prime or base rate" (or its equivalent successor rate if the "prime or 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 increased or decreased, as the case
may be, by the Rent Differential Amount (as defined in Section 3(b) hereof), and
as adjusted as provided in Section 3(c) hereof and, for a Renewal Term, Basic
Rent determined pursuant to Section 19 hereof.
"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
July 30, 2018, or such earlier date as this Lease may be terminated in
accordance with the terms hereof.
"Break Amount" has the meaning set forth in the Trust Indenture.
"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, 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; provided, however, that so long
as the Original Loan Participant holds any of the Loan Certificates, such day
must also constitute a Eurodollar Business Day (as defined in
3
<PAGE>
[Lease Agreement (1994 747 B)]
Section 1.01 to the Trust Indenture) in order to be deemed a Business Day
hereunder.
"Certificate Holder" has the meaning set forth in the Trust Indenture.
"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 January 30, 1995.
"Commitment" means the commitment of the Original Loan Participant or
of the Owner Participant, as the case may be, to finance the Owner Trustee's
payment of Lessor's Cost for the Aircraft.
"Consent and Agreement" means the Consent and Agreement (1994 747 B),
dated as of the date hereof, executed by the Manufacturer, as the same may be
amended, modified or supplemented from time to time in accordance with the
applicable provisions thereof.
"Corporate Trust Department" means the principal office of the
Indenture Trustee located at 750 Main Street, Suite 1114, Hartford, Connecticut
06103, Attention: Corporate Trust Department, or such other office at which the
Indenture Trustee's corporate trust business shall be administered which the
Indenture Trustee shall have specified by notice in writing to Lessee, the Owner
Participant, the Owner Trustee and each Certificate Holder.
"Debt Rate" means, at any time, the interest rate borne by the Loan
Certificates then outstanding.
"Default" means any event or condition 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 sold by Lessee to Lessor
and leased by Lessor to Lessee and accepted by Lessee hereunder.
"Dollars" and "$" mean the lawful currency of the United States of
America.
4
<PAGE>
[Lease Agreement (1994 747 B)]
"EBO Date" has the meaning set forth in Exhibit H.
"EBO Percentage" has the meaning set forth in Exhibit H; provided,
however, in no event shall the EBO Percentage be less than the estimate of the
fair market value of the Aircraft on the EBO Date as determined by Aero
Economics, Inc. on the Delivery Date in accordance with Section 4(a)(xx) of the
Participation Agreement.
"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 Lessee's delivery to Lessor 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 or
Replacement Engine which may from time to time be substituted for 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means any Event of Default described 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 any 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 for any reason
whatsoever renders such property permanently unfit for normal use by Lessee;
(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 for a
period in excess of 90 consecutive days or, if earlier, until the end of the
Term; (iv) the confiscation, condemnation, or seizure of, or requisition of, or
taking of title to, such property by any governmental or purported governmental
authority, which shall have resulted in the loss of title or loss of possession
of such property by Lessee for a period in excess of 90 consecutive days or, if
earlier until the end of the Term, (v) the requisition of 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
5
<PAGE>
[Lease Agreement (1994 747 B)]
agency or instrumentality thereof), which shall have resulted in the loss of
title or loss of possession of such property by Lessee for a period in excess of
90 consecutive days or, if earlier, until beyond the end of the Term; (vi)
unless waived by the Lessor as an Event of Loss, 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 Lessee's entire fleet of Boeing 747-400 aircraft
registered in such country, (B) Lessee, prior to the expiration of such 180-day
period (or such shorter period prior to the end of the Term), 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) or, if earlier, beyond the expiration of the Term; (vii) the
requisition for use of such property by the United States Government or any
government of registry of the Aircraft or any agency or instrumentality thereof,
which shall have occurred during the 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; (viii) in the case of any Engine, any divestiture of title
thereto treated as an Event of Loss pursuant to Section 7(b) hereof; and (ix)
the operation of or location of the Aircraft, while under requisition for use by
any government (or any agency or instrumentality thereof), 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 in
accordance with Section 11(f). 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
6
<PAGE>
[Lease Agreement (1994 747 B)]
under the heading "Excess Amount" (as such Exhibit B may be adjusted from time
to time as provided in Section 3(c) hereof); provided, however, to the extent
that the aggregate amount of interest due and payable for the period from, and
including, the Delivery Date to, but excluding, the Commencement Date on the
Loan Certificates is less than the aggregate amount of interest on the Loan
Certificates that would have been due and payable for such period if such Loan
Certificates had borne interest at the Assumed Interest Rate during the Interim
Term, such percentage shall be decreased to compensate for such differential.
"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 the
violation of laws or regulatory requirements of any kind), actions, suits,
costs, expenses and disbursements of any kind or nature whatsoever (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, but
excluding internal costs and expenses such as salaries, any amounts that would
be included in Break Amount and overhead of whatsoever kind and nature).
"Fair Market Renewal Term" has the meaning set forth in Section
19(a)(2) hereof.
"Fair Market Rental Value" means the fair market rental value of the
Aircraft determined as provided in Section 19(c) hereof.
"Fair Market Sales Value" means the fair market sales value of the
Aircraft determined as provided in Section 19(c) hereof.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as
amended.
"Federal Aviation Administration" and "FAA" mean the United States
Federal Aviation Administration and any successor agency or agencies thereto.
"Fixed Renewal Term" has the meaning set forth in Section 19(a)(1)
hereof.
7
<PAGE>
[Lease Agreement (1994 747 B)]
"Indemnitees" means (i) 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 Certificate Holder, (ii)
each of their respective Affiliates and (iii) the respective successors,
permitted assigns, directors, officers, employees, servants and agents of the
Persons described in clauses (i) and (ii).
"Indenture Trustee" has the meaning set forth in the Trust Indenture.
"Indenture Trustee Documents" means the Participation Agreement and
the Trust Indenture.
"Indenture Trustee Parent" means State Street Bank and Trust Company,
a Massachusetts corporation.
"Indenture Trustee Parent Guarantee" means the guarantee of the
Indenture Trustee's obligations under the Operative Documents as delivered by
the Indenture Trustee Parent pursuant to Section 4(a)(v) of the Participation
Agreement.
"Interim Rent" means the amount determined by multiplying Lessor's
Cost by the percentage specified in Exhibit B hereto opposite the Commencement
Date under the heading "Interim Rent" (as such Exhibit B may be adjusted from
time to time as provided in Section 3(c) hereof); provided, however, to the
extent that the aggregate amount of interest due and payable for the period
from, and including, the Delivery Date to, but excluding, the Commencement Date
on the Loan Certificates is less or more than the aggregate amount of interest
on the Loan Certificates that would have been due and payable for such period if
such Loan Certificates had borne interest at the Assumed Interest Rate during
the Interim Term, such percentage shall be decreased or increased, as the case
may be, to compensate for such differential.
"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,
8
<PAGE>
[Lease Agreement (1994 747 B)]
supplementation hereof by any Lease Supplement entered into in accordance with
the applicable provisions hereof and the terms of the Trust Indenture.
"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 July 30, 1995 and each succeeding January 30
and July 30 thereof to and including the last such date in the Term.
"Lease Supplement" means a Lease Supplement (1994 747 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.
"Lessee Documents" means the Participation Agreement, the Lease, any
Lease Supplement, the Purchase Agreement, 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 any other document executed by Lessee in
connection with the transactions contemplated by the Participation Agreement.
"Lessor Lien" means any Lien on, or disposition of title to, the
Aircraft or the Trust Estate arising as a result of (i) claims against Lessor,
First Security Bank of Utah, National Association, 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 First Security Bank of Utah, National Association, 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 First Security Bank of
Utah, National Association, in its individual capacity, with respect to Taxes or
Expenses against which Lessee is not required to indemnify the Owner
Participant, Lessor or First Security Bank of Utah, National Association, in its
individual capacity under the Participation Agreement, Lease Agreement or the
Tax Indemnity Agreement 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
9
<PAGE>
[Lease Agreement (1994 747 B)]
Aircraft by Lessor pursuant to the Trust Indenture (other than a transfer
pursuant to Section 4.04 of the Trust Indenture not attributable to a Lease
Event of Default) or a transfer pursuant to Sections 8, 9, 10 or 19 hereof or
pursuant to the exercise of the remedies set forth in Section 15 hereof);
provided, however, that any Lien which is attributable solely to First Security
Bank of Utah, National Association 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 or 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) First Security Bank of Utah,
National Association 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.
"Lien" means any mortgage, pledge, lien, charge, claim, encumbrance,
exercise of rights, lease or security interest.
"Loan Certificate" has the meaning set forth 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, including Boeing Domestic Sales
Corporation, a corporation organized under the laws of the State of Washington.
"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 Participation Agreement.
"Net Economic Return" means the Owner Participant's net after-tax book
yield, aggregate after-tax cash flow and the net present value of after-tax cash
flow over the Term, provided that book income shall not be increased or
decreased by more than 10% for each year of the Term, utilizing the multiple
investment sinking fund method of analysis, computed on the basis of the
10
<PAGE>
[Lease Agreement (1994 747 B)]
same methodology and assumptions as were utilized by the Owner Participant in
determining the foregoing 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.
"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; 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; any
Trust Supplement; the Indenture Trustee Parent Guarantee; the Loan Certificates
outstanding at the time of reference; and the Consent and Agreement.
"Original Amount" means, with respect to a Loan Certificate, the
stated original principal amount of such Loan Certificate plus any amounts of
interest added to principal amount pursuant to the terms of said Loan
Certificate and with respect to all the Loan Certificates means the aggregate
stated original principal amounts of such Loan Certificates, including any
amounts of interest added to principal amount as aforesaid, as the case may be.
"Original Loan Participant" means The Mitsubishi Trust and Banking
Corporation, New York Branch, and if such bank or other Original Loan
Participant sells, transfers, assigns or otherwise conveys its Loan Certificates
(or any portion thereof) in accordance with Section 8(w) of the Participation
Agreement (other than pursuant to Section 17 or 20 of the Participation
Agreement and other than as a participation interest) to any Person, shall also
mean and include any such Person.
"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
11
<PAGE>
[Lease Agreement (1994 747 B)]
any other documents executed by the Owner Participant in connection with the
transactions contemplated by the Participation Agreement and the other 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 and the Loan Certificates
and any other document executed by the Owner Trustee in connection with the
transactions contemplated by the Participation Agreement and the other 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 (1994 747 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 Original Loan Participant and
the Owner Participant.
"Participation Agreement" means that certain Participation Agreement
(1994 747 B), dated as of the date hereof, among Lessee, the Indenture Trustee,
the Owner Participant, the Original Loan Participant 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) appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
which Lessee is entitled to use pursuant to a lease, license or other similar
12
<PAGE>
[Lease Agreement (1994 747 B)]
arrangement with a third party (other than Lessor)), 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.
"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), the greater of a fluctuating rate per annum
equal to (a) 2% over the Base Rate and (b) 2% over the Debt Rate; provided,
however, in no event shall the Past Due Rate exceed the highest rate allowed
under applicable law.
"Permitted Lien" means any Lien referred to in clauses (i)
through (vi) of Section 6 hereof.
"Permitted Sublessee" means any air carrier domiciled and principally
located 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.
"Prepaid Rent" has the meaning set forth in Section 3(f) 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(b)
hereof.
"Reimbursement Amount" has the meaning set forth in Section 3(f)
hereof.
"Renewal Term" means the Fair Market Renewal Term or Fixed Renewal
Term.
"Rent" means Interim Rent, Basic Rent, Prepaid Rent and Supplemental
Rent, collectively.
13
<PAGE>
[Lease Agreement (1994 747 B)]
"Rent Differential Amount" has the meaning set forth in Section 3(b)
hereof.
"Replacement Airframe" means any airframe substituted for the Airframe
in accordance with Section 10(a) of the Lease.
"Replacement Engine" means any engine substituted for an Engine in
accordance with Section 9(d), 10(a) or 10(b) of the Lease.
"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 the
actual amount of interest paid and to be paid on the Loan Certificates during
the Lease Period in which such Stipulated Loss Value Date occurs up to and
including such Stipulated Loss Value Date is greater or less than the amount
included in calculating the percentage set forth in Exhibit C with respect to
such Stipulated Loss Value Date on account of such interest, such percentage
shall be adjusted appropriately to compensate for such differential.
"Stipulated Loss Value Date" has the meaning set forth in the initial
Lease Supplement.
"Stipulated Loss Value Percentages" has the meaning set forth in
Section 3(c)(i) hereof.
"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.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Interim Rent and 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, Termination Value, EBO Percentage
and amounts calculated by reference thereto, an amount equal to the Break
Amount, if any, amounts payable under Section 2.17 of the
14
<PAGE>
[Lease Agreement (1994 747 B)]
Trust Indenture 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
(1994 747 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").
"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)(i)
hereof.
"Termination Notice" 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). "Termination 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 the actual amount of
interest paid and to be paid on the Loan Certificates during the Lease Period in
which such Termination Date occurs up to and including such Termination Date is
greater or less than the amount included in calculating the percentage set forth
in Exhibit D hereto with respect to such Termination Date on account of such
interest, such percentage shall be adjusted appropriately to compensate for such
differential.
15
<PAGE>
[Lease Agreement (1994 747 B)]
"Termination Value Percentages" has the meaning set forth in Section
3(c)(i) hereof.
"Transaction Expenses" has the meaning set forth in Section 16 of the
Participation Agreement.
"Trust Agreement" means that certain Trust Agreement (1994 747 B),
dated as of the date hereof, between the Owner Participant and First Security
Bank of Utah, National Association, 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.
"Trust Estate" has the meaning set forth in the Trust Agreement.
"Trust Indenture" means that certain Trust Indenture and Security
Agreement (1994 747 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 set forth in the Trust
Indenture.
"Trust Office" means the principal corporate trust office of the Owner
Trustee located at 79 South Main Street, Salt Lake City, Utah 84111, Attention:
Corporate Trust Department, or 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 Lessee, the Owner Participant, the
Indenture Trustee and each Certificate Holder.
"Trust Supplement" means a supplement to the Trust Indenture and to
the Trust Agreement, in substantially the form of Exhibit A to the Trust
Indenture.
"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.
16
<PAGE>
[Lease Agreement (1994 747 B)]
"United States Government" means the federal government of the United
States of America or any instrumentality or agency 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
--------------------
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 from Lessee. 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 July 30, 2018 or such earlier date as this Lease may be
terminated in accordance with the provisions hereof.
(b) Interim Rent and Basic Rent.
---------------------------
(i) Lessee shall pay Interim Rent in Dollars on the Commencement
Date.
(ii) 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 forty-seven (47)
17
<PAGE>
[Lease Agreement (1994 747 B)]
consecutive installments in the respective amounts for each Lease Period
Date determined in accordance with Exhibit B hereto.
Although the Basic Rent amounts set forth in Exhibit B hereto have
been computed on the assumption that the rate of interest on the Loan
Certificates throughout the Basic Term will be 10.80% per annum, compounded
semiannually and computed on the basis of a 360-day year of twelve 30-day months
(the "Assumed Interest Rate"), Lessor and Lessee recognize that the actual rate
and method of computing interest on the Loan Certificates may, from time to time
during the Basic Term, be different from the Assumed Interest Rate.
Accordingly, each installment of Basic Rent shall be increased or decreased (but
not below zero), as the case may be, by the Rent Differential Amount (as defined
herein). For purposes hereof, "Rent Differential Amount" shall mean, as of any
Lease Period Date the absolute value of the difference between (i) the aggregate
amount of interest due and payable on such Lease Period Date on the Loan
Certificates (or due and payable on the next following Business Day if such date
shall not constitute a Business Day) and (ii) the aggregate amount of interest
on the Loan Certificates that would have been due and payable on such Lease
Period Date if the Loan Certificates had borne interest at the Assumed Interest
Rate. If, as of such Lease Period Date, the amount determined in accordance
with clause (i) of the immediately preceding sentence shall be greater than the
amount determined in accordance with clause (ii) of such sentence, the amount of
Basic Rent due and payable on such Lease Period Date shall be increased by the
Rent Differential Amount. If, as of such Lease Period Date the amount
determined in accordance with such clause (ii) shall exceed the amount
determined in accordance with such clause (i), the amount of Basic Rent due on
such Lease Period Date shall be decreased (but not below zero) by the Rent
Differential Amount. Exhibit B hereto indicates in regard to each payment of
Basic Rent whether such payment is payable in advance or in arrears. Lessee
shall specify the interest actually accruing with respect to the Loan
Certificates to the Lessor.
(c) Adjustments to Interim Rent, Basic Rent, Excess Amount, Stipulated
------------------------------------------------------------------
Loss Value, Termination Value Percentages and the EBO Percentage.
- ----------------------------------------------------------------
(i) In the event (A) that Transaction Expenses paid by Lessor are
determined to be other than 0.75% of Lessor's Cost, (B) that there shall be
an optional refinancing or a refunding of the Loan Certificates in
accordance with Section 17 or 20 of the Participation Agreement, (C) that
the Delivery Date occurs other than on August 1, 1994, (D) that there is an
optimization in
18
<PAGE>
[Lease Agreement (1994 747 B)]
accordance with Section 18 of the Participation Agreement, (E) the amount
of the Excess Amount is less than $4,897,440, or (F) the interest rate on
or amortization schedule of the Loan Certificates is not as set forth in
the pricing assumptions; then in each case the Interim Rent, Basic Rent and
Excess Amount set forth in Exhibit B, the Stipulated Loss Value percentages
set forth in Exhibit C (the "Stipulated Loss Value Percentages"), the
Termination Value percentages set forth in Exhibit D (the "Termination
Value Percentages") and the EBO Percentage shall be adjusted (upwards or
downwards, as the case may be); provided, however, in the case of an
adjustment to the EBO Percentage, in no event shall such EBO Percentage be
less than the estimate of the fair market value of the Aircraft on the EBO
Date as determined by Aero Economics, Inc. on the Delivery Date in
accordance with Section 4(a)(xx) of the Participation Agreement) using the
same methods and assumptions (as modified on account of the occurrence of
any of the events referred to in clauses (A)-(D) above) used to calculate
Interim Rent, Basic Rent and Excess Amount and Stipulated Loss Value and
Termination Value Percentages and the EBO Percentage as set forth in
Exhibits B, C, D and H, respectively, in each case in compliance with
clause (iv) of this paragraph (c) and the second paragraph of clause
(b)(ii) hereof and in order to: (1) maintain the Owner Participant's Net
Economic Return and (2) minimize the Net Present Value of Rents to the
extent possible consistent with clause (1) hereof. Any adjustment pursuant
to this Section 3(c)(i) shall be made as soon as practicable after the
occurrence of the event giving rise to such adjustment.
(ii) Any recalculation of Interim Rent, Basic Rent and Excess
Amount, Stipulated Loss Value Percentages, Termination Value Percentages
and EBO Percentage pursuant to this Section 3(c) shall be determined by the
Owner Participant and shall, upon request by Lessee made within 30 days of
any such recalculation, be subject to the verification procedures set forth
in Exhibit E hereto. Such recalculated Interim Rent, Basic Rent and Excess
Amount, Stipulated Loss Value, Termination Value and EBO Percentage shall
be set forth in an amendment hereto; provided, however, that the
effectiveness of any recalculation required hereunder and otherwise made in
compliance herewith shall not be conditioned on the execution and delivery
of such an amendment.
(iii) Anything contained in the Participation Agreement or this
Lease to the contrary notwithstanding, each installment of Interim Rent and
Basic Rent payable hereunder, whether or not adjusted in accordance with
this
19
<PAGE>
[Lease Agreement (1994 747 B)]
Section 3(c), together with the amount of the Excess Amount and
Supplemental Rent, if any, in respect of the date on which such installment
is payable, and each payment of Stipulated Loss Value, Termination Value
and the EBO Percentage, 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 Break
Amount, if any) of and accrued and unpaid interest on the Loan Certificates
then outstanding. It is agreed that no installment of Interim Rent or
Basic Rent or payment of Excess Amount, Termination Value, Stipulated Loss
Value or the EBO Percentage 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 other than as
required or expressly permitted by the Participation Agreement, the Lease
and any Lease Supplement thereto and the Trust Indenture and any Trust
Supplement thereto, 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.
(iv) 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 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 amended and then in effect on the date of such
adjustment 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 (but only to the extent) the Lease
would have been a Section 467 Agreement if no such adjustment to Basic Rent
had occurred).
20
<PAGE>
[Lease Agreement (1994 747 B)]
(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 or the
EBO Percentage as the same shall become due and owing and all other amounts of
Supplemental Rent within five (5) 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 Break
Amount as and when any such Break Amount and such other amounts shall be due and
payable and amounts payable under Section 2.17 of the Trust Indenture; provided,
however, that Lessee shall have no obligation to pay to Lessor any Break Amount
payable under Section 2.14 or 4.04(b) 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. In the event that the
aggregate amount of interest actually due and payable on the Loan Certificates
on the Commencement Date exceeds the aggregate amount of interest on the Loan
Certificates that would have been due and payable if such Loan Certificates had
borne interest at the Assumed Interest Rate, Lessee agrees to pay Lessor on the
Commencement Date, as Supplemental Rent, an amount equal to such excess. 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 Interim Rent or Basic Rent not paid when due for any period for which the
same shall be overdue and on any payment of Supplemental Rent not paid 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 City time, on the date
of payment in Dollars, to Lessor at its office at First Security Bank of Utah,
National Association, 79 South Main Street, Salt Lake City, Utah, 84111,
Attention: Corporate Trust Department (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 ten (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 agrees, that all Rent
(other than Excluded Payments) and all other amounts which are required to be
paid to or deposited with
21
<PAGE>
[Lease Agreement (1994 747 B)]
the Owner Trustee hereunder (other than Excluded Payments) 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 750 Main Street,
Hartford, Connecticut 06103, 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 ten
(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 (unless, so long
as the Original Loan Participant shall hold any Loan Certificate, such
succeeding Business Day is in the next calendar month, in which case the payment
date shall be the next preceding Business Day) and (except, with respect to any
Loan Certificate held by the Original Loan Participant in regard to the amount
of Rent attributable to the corresponding payments on the Loan Certificates held
by the Original Loan Participant) no interest shall accrue on the amount of such
payment, if such payment is made on such next succeeding Business Day.
(f) Prepayments of Certain Rent Payments. 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 12:00 noon, 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. If the Owner Participant has defaulted in
its obligation set forth in the last paragraph of Section 2 of the Participation
Agreement, any Rent (to the extent the Owner Participant has so defaulted)
shall, to the extent not reimbursed pursuant to the next sentence, be offset
against installments of Basic Rent in the order in which they become due,
subject to the last sentence of this paragraph. 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
22
<PAGE>
[Lease Agreement (1994 747 B)]
Supplemental Rent so paid by Lessee pursuant to this Section 3(f), plus (z)
accrued interest on the unreimbursed portion thereof at a rate per annum equal
to the Past Due Rate 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 Event of Default
or Section 14(a), (b), (f) or (g) 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, Supplemental Rent payable to the
Owner Participant or the Owner Trustee or EBO Percentage 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 Break Amount, if any) of and accrued and unpaid
interest on the Loan Certificates then outstanding.
(g) Rent Rebate. Lessor agrees to pay to Lessee, as a rebate of Rent,
-----------
an amount equal to any amount paid to Lessor by a Certificate Holder as a Break
Amount (other than Break Amount paid to Lessor by a Certificate Holder in
connection with Section 2.14 or Section 4.04(b) 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); provided, however,
that if at the time of any such payment by Lessor to Lessee, a Section 14(a),
(b), (f) or (g) Default or any Event of Default shall have occurred and be
continuing hereunder, such amount shall be held by Lessor as security for the
obligations of Lessee under this Lease and applied against Lessee's obligations
hereunder with respect to such Section 14(a), (b), (f) or (g) Default or any
Event of Default as and when due, and at such time as there shall not be
continuing any Section 14(a), (b), (f) or (g) Default or any Event of Default,
such amount shall be paid to Lessee to the extent not previously applied in
accordance with this sentence.
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 LESSEE AND LESSOR (A) THE AIRFRAME AND EACH ENGINE ARE OF A
SIZE, DESIGN, CAPACITY
23
<PAGE>
[Lease Agreement (1994 747 B)]
AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (B) LESSEE IS SATISFIED
THAT THE AIRFRAME AND EACH ENGINE ARE SUITABLE FOR THEIR PURPOSES, (C) NEITHER
LESSOR NOR OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH
KIND, AND (D) NEITHER LESSOR, 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 QUALITY OF THE MATERIALS OR WORKMANSHIP WITH RESPECT TO 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)(v) (in the case of the Owner Participant) and 8(p)(ii) (in the
case of Lessor) of the Participation Agreement as to title and except that First
Security Bank of Utah, National Association, 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 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 and (iv) agrees that
it will not directly or indirectly create, incur, assume or suffer to exist any
Lessor Lien attributable to it on or with respect to the Airframe or any Engine
or any portion of the Trust Estate. 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 an 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
24
<PAGE>
[Lease Agreement (1994 747 B)]
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 (including termination as a result of a
rejection hereof pursuant to any provision of the Bankruptcy Code), Lessee will,
at its expense (except as set forth below) 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 Lessor
given to Lessee at least thirty (30) days prior to the date of such return,
Lessee shall return the Aircraft to Lessor at a location on Lessee's route
system selected by Lessor, provided that such location can accommodate a Boeing
747-451 aircraft, and Lessor shall reimburse Lessee for Lessee's out-of-pocket
Expenses and any incremental costs resulting from Lessee's return of the
Aircraft to such alternate return location to the extent that such out-of-pocket
Expenses and costs exceed the out-of-pocket Expenses and costs Lessee would have
incurred in returning the Aircraft to Lessee's 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 (unless Lessor
shall have selected an alternate return location in which case Lessee shall not
be required to provide any storage pursuant to Section 5(d) hereof). 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) 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
25
<PAGE>
[Lease Agreement (1994 747 B)]
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 shall be
in as good a condition as when delivered by Manufacturer to Lessee, 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 have terminated
all mandatory FAA airworthiness directives applicable to the Aircraft that are
issued prior to the date of return and which require termination prior to such
date, (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 Engine or 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 Engine or
Engines)) on such Engines (or Acceptable Alternate Engine or 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 Engine or Engines), (vi) shall have all Lessee's and
any Sublessee's exterior marking removed or painted over in a workmanlike manner
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 the event the Lessor shall have reasonable grounds to believe
that the Aircraft shall have been discriminated against with respect to its
maintenance as such maintenance relates to the United Air Lines 747-451
maintenance program in effect from time to time, Lessee shall provide to Lessor
upon request a summary of
26
<PAGE>
[Lease Agreement (1994 747 B)]
all material maintenance work performed on the Aircraft and all other Boeing
model 747-451 aircraft in Lessee's fleet for the two-year period preceding the
expiration of the Term.
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 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.
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) 120% of the
direct cost to Lessee (based upon the direct cost to Lessee for similar aircraft
in the fleet of Lessee) during the preceding 12 months of performing an airframe
block overhaul of the type referred to in such clause (iv) 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 Engine or 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) 120% of the direct cost to Lessee (based upon the
direct cost to Lessee for similar aircraft in the fleet of Lessee) during the
preceding 12 months of performing for an engine of the same model as the Engines
(or Acceptable Alternate Engine or Engines) 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 Engine or Engines) 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 Engine or Engines) over the actual average
number of hours or cycles of operation of such
27
<PAGE>
[Lease Agreement (1994 747 B)]
Engines (or Acceptable Alternate Engine or 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 four 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.
(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 against receipt from Lessor of 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
28
<PAGE>
[Lease Agreement (1994 747 B)]
(a) of this Section 5, (i) Lessee shall have no obligation with respect to the
amount of fuel or oil contained in the Airframe, and all fuel or oil remaining
on board the Airframe shall be the property of the Lessor without charge and
(ii) Lessee shall deliver or cause to be delivered to Lessor all original logs,
manuals and data and inspection, modification and overhaul records required to
be maintained in English or with English translation with respect to the
Airframe, the Engines or any Part thereof in accordance with Section 7(a)
hereof.
(d) Storage Upon Return. If, at any time at least thirty (30) days
-------------------
prior to the end of the Basic Term or any Renewal Term, Lessee receives from
Lessor a written request for storage of the Aircraft upon its return hereunder,
Lessee will (unless Lessor shall have selected an alternate return location
pursuant to Section 5(a) hereof) 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 and Lessee's reasonable out-of-pocket expenses for maintenance
other than storage fees) for a period not exceeding forty-five (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 attributable to the Aircraft.
(e) 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
written 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 (6)
months and which Lessee has or intends to remove from the Aircraft as permitted
by Section 8 hereof. Lessor may, at its option, upon thirty (30) days prior
written notice to Lessee, purchase any or all of such Parts that are non-
proprietary (or, if proprietary, which Lessee sells or otherwise makes
available) from Lessee upon the expiration of the Term at their then fair market
value. The term "non-proprietary" shall mean any Parts other than Parts
developed or produced by Lessee.
(f) Special Redelivery Provision. Not less than 90 days (which time
----------------------------
limitation shall not apply in the case of any redelivery or purchase pursuant to
Section 15) 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 of the
Aircraft by the Lessee 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 (but
29
<PAGE>
[Lease Agreement (1994 747 B)]
shall be under no obligation to) 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 comparable
successor exempt or excluded income from the sale or re-lease of the Aircraft,
and Lessee shall (i) arrange delivery at Lessor's cost (unless travel costs to
such delivery site is at Lessee's cost pursuant to 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 (to the extent Lessee is not otherwise
responsible for such amount) 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 proceedings 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 therein, (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 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, so long as during such 45-day period there is not, or any such judgment or
award does not involve, any material risk of the sale, forfeiture or loss of the
Airframe or any Engine or any interest therein 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 (1994 747 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 or other
eligibility 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 at all times to keep the Aircraft in as good a
condition as when delivered by Manufacturer to Lessee, ordinary wear and
tear excepted, and so as 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 747-451
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 the Lessee to maintain, service, repair or
overhaul the Aircraft in accordance with the terms of 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 747-451 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 the Lessee to maintain, service, repair or overhaul the Aircraft
in accordance with the terms of this Lease and (y) in substantially the
same manner as
31
<PAGE>
[Lease Agreement (1994 747 B)]
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; (iii) maintain or cause to be
maintained in the English language (or with English translation of) all
records, logs and other materials required to be maintained in respect of
the Aircraft by the FAA and 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 hereof); and (iv) promptly furnish or cause to
be furnished to Lessor or the Owner Participant such information as may be
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 (and will not 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 over the Aircraft, 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 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 provided that the
Lessor, the Indenture Trustee and the Owner Participant and their
respective legal and economic interests in and to the Aircraft or any
Operative Document are not significantly adversely affected, but only so
long as such proceedings do not involve any risk of civil liability to
Lessor, the Indenture Trustee or the Owner Participant or their respective
Affiliates for which any such Person is not indemnified to its reasonable
satisfaction or any risk of criminal liability. If the indemnities or
insurance specified in Section 11(f) hereof, or some combination thereof in
amounts equal to amounts
32
<PAGE>
[Lease Agreement (1994 747 B)]
required by Section 11(f), have not been obtained, Lessee will not operate
the Aircraft, or permit any Sublessee or any other Person 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 close of the calendar
--------------
year in which occurs the seventh anniversary of the Delivery Date, 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 upon compliance by Lessee with all of the terms of Section 8(e) of
the Participation Agreement.
(4) Operating Certificates. So long as no Event of Default has
----------------------
occurred and is continuing, Lessor hereby authorizes Lessee to act as its
agent for the purpose of obtaining any required replacement operating
certificates from the FAA. This authority includes, but is not limited to,
obtaining Registration Certificates, Airworthiness Certificates,
Certificates of Sanitary Construction, Ferry Permits and Experimental
Operating 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 notify Lessor of any action that it has taken in
accordance with this Section 7(a)(4) as agent for the Lessor.
(b) Possession and Subleases. Lessee will not, without the prior
------------------------
written consent of Lessor and the Indenture Trustee (but in regard to the
Indenture Trustee, only so long as an Original Loan Participant is a Certificate
Holder), 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 (1994 747 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 perfected 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 6, 7(a) and 11 hereof, Lessee
may, without the prior written consent of Lessor:
(i) subject any Engines to normal interchange agreements or
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; provided, that if Lessor's title to any
Engine shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be an Event of Loss with respect to such
Engine and Lessee shall (or shall cause 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 or
otherwise until compliance by Lessee with such Section 9(d);
(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 lien of such mortgage or security interest,
notwithstanding the installation thereof on such airframe;
34
<PAGE>
[Lease Agreement (1994 747 B)]
(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 clause (iii) of this paragraph (b) and (y) such lease,
conditional sale or other security agreement expressly 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 clause (iii) nor clause (iv) of this
paragraph (b) is applicable, provided that such installation shall be
deemed an Event of Loss with respect to such Engine 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 or otherwise 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 (including any irrevocably elected
Renewal Term) so long as Lessee (or any Sublessee) shall promptly notify
Lessor 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 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 (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 a contract, a copy of which
shall be provided to Lessor provided that the term of such contract,
35
<PAGE>
[Lease Agreement (1994 747 B)]
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 (including any irrevocably elected Renewal 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 (subject
to the notice requirements specified in the second to last paragraph of
this clause (b)), enter into a Sublease with (1) a U.S. Air Carrier, (2)
after the close of the calendar year in which there occurs the seventh
anniversary of the Delivery Date, any Permitted Sublessee or (3) after the
close of the calendar year in which there occurs the seventh anniversary of
the Delivery Date, any other Person approved in writing by the Owner
Participant and the Indenture Trustee (but, in regard to the Indenture
Trustee, only so long as the Original Loan Participant is a Certificate
Holder), which approval shall not be unreasonably withheld; provided,
however, that (A) 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) in the case of a Sublease
under subclause (2) or (3) above, on the date of such Sublease, the United
States and the country in which such Permitted Sublessee or Person, as the
case may be, is domiciled and principally located maintain normal
diplomatic relations (which for purposes of this clause (viii) shall
include Taiwan and any other country that is similarly situated), (C) prior
to entering into such Sublease, Lessee shall provide assurances reasonably
satisfactory to Lessor and the Indenture Trustee to the effect that the
provisions of Section 11 hereof have been complied with after giving effect
to such Sublease and (D) in the case of a Sublease described in subclause
(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 an opinion of counsel, which counsel and opinion shall be reasonably
satisfactory to Lessor, 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
36
<PAGE>
[Lease Agreement (1994 747 B)]
"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 an Event of Loss)
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) 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 this 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 this Lease with respect to the Aircraft. No pooling
agreement, sublease or other relinquishment of possession shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder the 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. Lessee shall provide the Owner Participant and the
Indenture Trustee (A) written notice (which notice shall be given (i) no later
than 30 days prior to entering into any Sublease with a term of more than one
year or (ii) at any time prior to (to the extent the giving of prior notice is
reasonably possible) or promptly after entering into any Sublease with a term of
one 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
37
<PAGE>
[Lease Agreement (1994 747 B)]
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 any Event of Default.
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
First Security Bank of Utah, National Association, 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
State Street Bank and Trust Company of Connecticut, 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
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.
38
<PAGE>
[Lease Agreement (1994 747 B)]
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 at least as good operating condition as, and
shall have a value and utility and, with respect to any life-limited Part
replaced during the last year of the Term (unless Lessee has irrevocably
committed to purchase the Aircraft), remaining useful life 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, and shall remain subject to the Lien of the Trust
Indenture 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 shall become subject to the Lien of the Trust
Indenture 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
39
<PAGE>
[Lease Agreement (1994 747 B)]
promptly thereafter as practicable (but in no event later than the end of the
Term), 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 the FAA or 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 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
Owner Participant's or the Lessor's right, title or interest in and to the
Airframe and/or the Engines or Operative Documents, result in a claim, loss or
expense for which the Lessee is not required to indemnify the Owner Participant
pursuant to the Operative Documents and for which the Lessee is not then willing
to indemnify the Owner Participant in a manner reasonably satisfactory to the
Owner Participant 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 civil liability to Lessor or the Owner Participant or
its Affiliates for which Lessor is, or the Owner Participant and its Affiliates
are, not indemnified to their reasonable satisfaction or any risk of criminal
liability. 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 in its reasonable judgment 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,
individually or in the aggregate, impairs the condition or airworthiness of the
Airframe or such Engine, or materially diminishes the value or utility or, in
regard to the Airframe, remaining useful life of the Airframe or such Engine
below the value, 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
40
<PAGE>
[Lease Agreement (1994 747 B)]
in the condition required to be maintained by the terms of this Lease. In
addition, the value (but not the utility) of the Airframe or any Engine may be
reduced by the value of Obsolete Parts which have been removed so long as the
aggregate value of all Obsolete Parts so removed and not replaced shall not
exceed $600,000. 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 is entitled to use pursuant to a
lease, license or similar arrangement with a third party or 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) may,
at any time during the Term, so long as no 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, 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 Default or
------------------------------------
Event of Default shall have occurred and be continuing, Lessee shall have the
right to terminate this Lease on any Lease Period Date during the Basic Term
occurring on or after the close of the calendar year in which occurs the seventh
anniversary of the Delivery Date if Lessee shall have made a good faith
determination 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 eighty (180) days and not more than 360 days'
revocable advance written
41
<PAGE>
[Lease Agreement (1994 747 B)]
notice of Lessee's intention to so terminate this Lease (any such notice, a
"Termination Notice") (i) specifying the Lease Period Date on which Lessee
intends to terminate this Lease in accordance with this Section 9(b) (such
specified date, a "Termination Date") and (ii) attaching a certificate of the
Treasurer or any more senior financial officer of Lessee which states that the
Aircraft is surplus to Lessee's requirements or economically obsolete to Lessee
and sets forth the basis for such determination. If Lessee revokes such
Termination Notice, Lessee shall pay to Lessor any and all out-of-pocket
expenses of Lessor or the Owner Participant attributable to such revocation.
Lessee shall, on not more than two occasions, have the right to revoke a
Termination Notice by giving notice to Lessor at least thirty (30) days prior to
the proposed Termination Date and, if such Termination Notice is not so revoked,
such Termination Notice shall become irrevocable thirty (30) 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
(5) Business Days after receipt thereof and at least ten (10) 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 eight (8) 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 hereof, and Lessee shall duly transfer to
Lessor title to any engine installed on the Airframe and not owned by Lessor,
all in
42
<PAGE>
[Lease Agreement (1994 747 B)]
accordance with the terms of Section 5 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 the basis of
---- ----
maximizing the net after-tax cash proceeds to Lessor) 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) the difference in Dollars, if any, between the proceeds of the
sale of the Aircraft so sold, net of 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, and the
Termination Value for the Aircraft computed as of the Termination Date, (B) all
unpaid Basic Rent due on or prior to such Termination Date (other than Basic
Rent payable in advance on such Termination Date, if any) and all unpaid
Supplemental Rent with respect to the Aircraft due on or prior to such
Termination Date, and (C) the Break Amount, if any, due on the Loan Certificates
and upon receiving all such payments referred to in clauses (2) and (3) above
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 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 fifteen (15) 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 Termination Date
together with all other amounts due on such Termination 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 aforesaid
Termination Date as set forth below) pay in full the unpaid Original Amount of
the Loan Certificates outstanding
43
<PAGE>
[Lease Agreement (1994 747 B)]
on the Termination Date, plus interest accrued to, or to accrue thereon to but
excluding the Termination Date together with all other amounts due thereunder
less any amounts to be paid by Lessee as a result of the payment thereof and,
simultaneously with the payment of the Loan Certificates as aforesaid, Lessee
shall deliver the Airframe and Engines or engines to Lessor in accordance with
Section 5 hereof and shall pay all Basic Rent due on or prior to the Termination
Date (other than Basic Rent payable in advance on the Termination Date, if any)
and all unpaid Supplemental Rent due on or prior to such Termination Date, and
Break Amount, if any, due on the Loan Certificates. If no sale shall have
occurred on the Termination Date 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 the
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 two such notices may be given during the Term (not counting 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 (except with respect to amounts that
may become payable after such termination date pursuant to Section 7 of the
Participation Agreement and the Tax Indemnity Agreement). 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.
44
<PAGE>
[Lease Agreement (1994 747 B)]
(d) Termination as to Engines. So long as no Event of Default shall
-------------------------
have occurred and be continuing, Lessee shall have the right at its option at
any time during the Term, on at least thirty (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) as if an Event of Loss had occurred
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
(15) 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 an election of the option set
forth in clause (i) below) on the date first occurring after the earlier of (x)
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 65th day following the
occurrence of such Event of Loss)(the "Loss Payment Date"), Lessee shall:
(i) to the extent not previously 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, but only 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 such Stipulated Loss
Value Date plus (D) Break Amount, if any, due on the Loan Certificates,
plus (E) interest on the amounts described in clauses (A) and (B) above at
the Past Due Rate from and including such Stipulated Loss Value Date to,
but not including, the date of payment.
(ii) provided that no Event of Default or Section 14(a), (b), (f)
or (g) Default shall have occurred and be
45
<PAGE>
[Lease Agreement (1994 747 B)]
continuing, and subject to satisfaction of the conditions set forth in the
next succeeding paragraph below, 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, or shall
not be entitled, to make such substitution in accordance with the terms
hereof and of the Trust Indenture, 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), (D) and (E) of subparagraph (i) above,
together with all other amounts that then may be due or accrued hereunder
(including, without limitation, all Basic Rent due on or accrued before the date
of such payment and all Supplemental Rent due on or before the date of such
payment, including Break Amount, if any, payable in regard to the Loan
Certificates), under the Participation Agreement and under the Tax Indemnity
Agreement, (1) the obligation of Lessee to pay the installments of Interim Rent,
Basic Rent, Supplemental Rent (except with respect to amounts that may become
payable after such Loss Payment Date pursuant to Section 7 of the Participation
Agreement and the Tax Indemnity Agreement), 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) as
specified in subparagraph (ii) above, Lessee shall, at its own cost and expense,
not later than the Business Day next succeeding the 100th day following the
occurrence of such Event of Loss (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
46
<PAGE>
[Lease Agreement (1994 747 B)]
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 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, airframe or engine so substituted hereunder
shall be of the same make and same or improved model (or in regard to an engine,
the same or improved make and model, which engine shall be an Acceptable
Alternative Engine) as those initially leased hereunder 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 (as to title) bill of sale
and an FAA bill of sale, in form and substance reasonably satisfactory to
Lessor, 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 was registered at the time of such
Event of Loss, 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 Lessor with such evidence of
Lessor's title to such replacement aircraft or airframe or airframe and one or
more engines, as the case may be, and of compliance with the insurance
provisions of Section 11 with respect to such substituted property as Lessor or
the Indenture Trustee may reasonably request, (4) provide an opinion of
independent tax counsel, selected by Lessor and reasonably satisfactory to
Lessee, that such substitution will not result in any adverse Federal income tax
consequences to Lessor or Owner Participant, (5) provide Lessor and the
Indenture Trustee an opinion of counsel, which counsel and opinion shall be
reasonably acceptable to Lessor, the Owner Participant and the Indenture
Trustee, 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 or airframe or airframe and one or more engines, as the case may
be, substituted hereunder to the same extent as the Aircraft and (6) provide an
opinion of counsel to Lessor and the Indenture Trustee, which counsel and
opinion shall be reasonably acceptable to the Lessor and the Indenture Trustee,
to the effect that title to such replacement aircraft or airframe or airframe
and one or more engines, as the case may be, has been duly conveyed to Lessor
free and clear of all Liens except Permitted Liens and that such replacement
aircraft or airframe or airframe and one or more
47
<PAGE>
[Lease Agreement (1994 747 B)]
engines, as the case may be, is duly subjected to the Lien 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 the Indenture Trustee together with a
certificate of an independent aircraft engineer or appraiser certifying that the
replacement aircraft (or airframe or airframe and one or more engines, as the
case may be) has a value, utility and remaining useful life at least equal to
the replaced Aircraft or Airframe or Airframe and one or more Engines, as the
case may be, assuming such Aircraft or Airframe or Airframe and one or more
Engines, as the case may be, was in the condition and repair required by the
terms hereof immediately prior to the occurrence of such Event of Loss. 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 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 Interim Rent or 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 (15) days after such occurrence)
give Lessor written notice thereof and shall, within the earlier of (x) forty-
five (45) days after the occurrence of such Event of Loss and (y) the last day
of the Term, 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
Acceptable Alternate 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
48
<PAGE>
[Lease Agreement (1994 747 B)]
good an operating condition as, the Engine subject to such Event of Loss
(assuming that such Engine had been maintained in accordance with this Lease).
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 Acceptable
Alternate 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 Acceptable Alternate Engine as Lessor may
reasonably request, (iv) provide an opinion of counsel, which counsel shall be
reasonably acceptable to Lessor and the Indenture Trustee, to the Lessor and the
Indenture Trustee 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. Lessor will (I) 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 the Engine
with respect to which such Event of Loss occurred and (II) 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. 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
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 Acceptable
Alternate Engine shall, after such conveyance, be deemed part of the property
leased hereunder, and shall be deemed an "Engine." 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 Interim Rent or Basic Rent.
49
<PAGE>
[Lease Agreement (1994 747 B)]
(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, 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, so much of such
payments remaining after reimbursement of Lessor (as provided for in
Section 7.01 of the Trust Agreement) and the Owner Participant for
reasonable costs and expenses 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 or Grounding 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 described in clause (v) or clause (vii) of the
definition of Event of Loss or a grounding described in clause (vi) of such
definition which Lessor has waived as an Event of Loss pursuant to said clause
(vi) Lessee shall promptly notify Lessor of such
50
<PAGE>
[Lease Agreement (1994 747 B)]
requisition or grounding, 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 or grounding had not occurred. If Lessee shall fail to return
the Aircraft (i) on or before the end of the Term as a result of such
requisition or grounding 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 or grounding 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 event 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 or if such grounding shall be so
continuing, such event 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 or the
continuation of such grounding at such time, 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
(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 a requisitioning governmental
authority 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 a requisitioning
governmental authority for the use of such Airframe and Engines or engines after
the end of the Term shall
51
<PAGE>
[Lease Agreement (1994 747 B)]
be paid over to, or retained by, Lessor unless Lessee shall have exercised its
purchase option hereunder, or there is deemed an 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 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)), 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)
hereof to the same extent as if an Event of Loss had occurred with respect to
such Engine as of the requisition date. 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 an Event of Default or a
Section 14(a), (b), (f) or (g) 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 throughout the Term 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 including, without limitation, aircraft war risk 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) 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
52
<PAGE>
[Lease Agreement (1994 747 B)]
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 747-400 aircraft owned or
leased, and operated by Lessee.
(2) During any period that the Airframe or any 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 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 similar components (including, without limitation, aircraft
war risk, allied perils 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
53
<PAGE>
[Lease Agreement (1994 747 B)]
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 or (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. 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 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
54
<PAGE>
[Lease Agreement (1994 747 B)]
(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
Original Loan Participant shall hold any Loan Certificate, the Original Loan
Participant 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 act as Lessee's insurance brokers on a
regular basis (the "Insurance Broker"), 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, insure
against such risks 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 only for material
additional cost; and provided that all information contained in the foregoing
report shall not be made available by Lessor, the
55
<PAGE>
[Lease Agreement (1994 747 B)]
Indenture Trustee, the Original Loan Participant or the Owner Participant to
anyone except (A) prospective and permitted transferees of Lessor's, the Owner
Participant's, the Original Loan Participant's or the Indenture Trustee's
interest or their respective Affiliates, counsel, independent certified public
accountants, independent insurance brokers or other agents, who agree to hold
such information confidential, (B) Lessor's, Owner Participant's, the Original
Loan Participant'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 clause (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 Original Loan Participant shall hold any
Loan Certificate, the Original Loan Participant 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 (10 days in the
case of lapse for nonpayment of premium and 7 days in the case of war risk and
allied perils coverage) prior to the cancellation, lapse 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 Original Loan Participant shall hold any Loan Certificate, the
Original Loan Participant 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 Owner Participant, the Indenture Trustee or, so long as
the Original Loan Participant shall hold any Loan Certificate, the Original Loan
Participant 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
Owner Participant, the Indenture Trustee or the Original Loan Participant, as
Supplemental Rent, for the cost thereof to
56
<PAGE>
[Lease Agreement (1994 747 B)]
Lessor, the Owner Participant, the Original Loan Participant or the Indenture
Trustee, as the case may be; provided, however, that no exercise by Lessor, the
Owner Participant, the Original Loan Participant 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 Lessor or the Owner Participant 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 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 and with terms that are at least as favorable to
the beneficiaries as, insurance against such risk
57
<PAGE>
[Lease Agreement (1994 747 B)]
otherwise required by this Section 11 (taking into account self-insurance
permitted by Section 11(d) hereof).
(g) Application of Payments During Existence of a 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 an Event of Default or a Section 14(a),
(b), (f) or (g) 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 Default or 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 Event of Default or Section
14(a), (b), (f) or (g) 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 (30) days (ten (10) days in the case of
lapse for nonpayment of premium and seven (7) 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 or any
application thereof 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
58
<PAGE>
[Lease Agreement (1994 747 B)]
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 $4,000,000, 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 $4,000,000 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 Section 14(a), (b), (f) or (g)
Default or any 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 reasonable
----------
prior notice (or, during the continuance of an Event of Default or a Section
14(a), (b), (f) or (g) Default upon three day's 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 or the Indenture Trustee or their
respective authorized representatives 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 and (if Lessee has not
irrevocably committed to purchase the Aircraft or renew the Lease) except as may
be required to permit prospective purchasers to inspect the Aircraft during the
period commencing 120 days before the end of the Term, 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, as the case may be
(unless a Section 14(a), 14(b), 14(f) or 14(g) Default or any Event of Default
shall have occurred and
59
<PAGE>
[Lease Agreement (1994 747 B)]
be continuing in which case such inspection shall be at Lessee's expense)) and
shall keep any information or copies obtained thereby confidential and shall not
disclose the same to any Person, except (A) to Lessor and to prospective and
permitted transferees of Lessor's, the Owner Participant'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 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, and (D) as may be necessary for purposes of protecting the interest
of any such Person or for enforcement of this Lease by Lessor, the Owner
Participant or the Indenture Trustee; provided, however, that any such Person
shall in good faith endeavor to limit any and all disclosures permitted by
clauses (C) and (D) above 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 normal 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 "C" check or maintenance visit
when a panel, bay or the like is scheduled or required to be opened), 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 a "C"
check or a 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 "C" check or 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 "C"
check or heavy maintenance visit; provided that the Owner Participant's
authorized representative shall merely observe such "C" check or heavy
maintenance visit, shall not interfere with or extend in any manner the normal
conduct or duration of the "C" check or heavy maintenance visit, and shall not
be entitled to direct any of the work performed in connection with such "C"
check or 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
60
<PAGE>
[Lease Agreement (1994 747 B)]
liability or obligations by reason of making or 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 or obligations hereunder. Lessor agrees that
it will not assign or convey its right, title and interest in and to this Lease
or the Aircraft or its obligations under the Lease 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 Interim Rent, Basic Rent,
Stipulated Loss Value, Termination Value or Break Amount or payments with
respect to the purchase price of the Aircraft pursuant to Section 19(b) within 5
days (or in the event that the Original Loan Participant shall no longer hold
any Loan Certificates, 10 days) after the same shall have become due; or
(b) Lessee shall have failed to make a payment of Supplemental Rent
(other than Stipulated Loss Value, Termination Value and Break Amount) after the
same shall have become due and such failure shall continue for 10 days (or in
the event that the Original Loan Participant shall no longer hold any Loan
Certificates 15 days) after Lessee's receipt of written demand therefor by the
party entitled thereto; or
(c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft (or cause to be carried and maintained) insurance, or government
indemnities, as the case may be, required to be maintained in accordance with
the provisions of Section 11 hereof; or
(d) Lessee shall have failed to perform or observe (or cause to be
performed and observed) in any material respect 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 (30) days after written notice
61
<PAGE>
[Lease Agreement (1994 747 B)]
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 (30) day period but is curable with future
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 90 days (or in the event that the Original Loan
Participant shall no longer hold any Loan Certificates 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 60 consecutive days (or in the event that the Original Loan
Participant shall no longer hold any Loan Certificates, 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 60 consecutive (or in the event that the Original
Loan Participant shall no longer hold any Loan Certificates, 90 consecutive
days) days after the date of entry thereof; or
62
<PAGE>
[Lease Agreement (1994 747 B)]
(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 fail to maintain its status as a U.S. Air Carrier,
and such failure shall continue for five (5) consecutive Business Days;
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 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:
63
<PAGE>
[Lease Agreement (1994 747 B)]
(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 hereof 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 at Lessee's expense 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) 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 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 (10) 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
64
<PAGE>
[Lease Agreement (1994 747 B)]
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
aggregate unpaid Basic Rent for the Aircraft, discounting such aggregate
unpaid Basic Rent to present value as of the Lease Period Date specified as
the payment date in such notice at an annual rate equal to the Debt Rate,
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;
(f) rescind or terminate this Lease Agreement; and/or
(g) 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 purposes of paragraph (d) 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,
65
<PAGE>
[Lease Agreement (1994 747 B)]
which would be obtained in an arm's-length transaction between an informed and
willing lessee or purchaser (it being understood that any appraiser will not
assume that such a lessee or purchaser exists), 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. The cost of such appraisal shall be borne by
the 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, Break Amount, 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 ten (10) days' prior 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; provided,
however, that Lessee may not bid at any such public 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 Lessor to sell, lease, or otherwise use the Aircraft
or Parts thereof in mitigation of Lessor's damages as set forth
66
<PAGE>
[Lease Agreement (1994 747 B)]
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 deem advisable; provided, however, that any such document will not
expand any obligations or limit any rights of Lessee in respect of the
transactions contemplated by any Operative Document.
(b) Lessee will furnish to Lessor, the Indenture Trustee, the Original
Loan Participant (but in regard to the Original Loan Participant, only so long
as the Original Loan Participant is a Certificate Holder) and the Owner
Participant:
(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 amounts 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,
67
<PAGE>
[Lease Agreement (1994 747 B)]
setting forth in comparative form the amounts 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 amounts 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 1995, 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
68
<PAGE>
[Lease Agreement (1994 747 B)]
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 upon receipt, (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, 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 telex or
telecopier number as Lessee shall from time to time designate in writing to
Lessor;
(ii) if to Lessor, at 79 South Main Street, Salt Lake City, Utah,
84111, Attention: Corporate Trust Department, telecopier number (801) 246-
5053 or telex number 3789450 (Answerback: FIRSTSECBK), or to such other
address or telex or telecopier number as Lessor shall from time to time
designate in writing to Lessee; and
(iii) if to the Indenture Trustee, the Owner Participant or the
Original Loan Participant, addressed to the Indenture Trustee, the Owner
Participant or the Original Loan Participant at such address or telex or
telecopier number as the Indenture Trustee, the Owner Participant or the
Original Loan Participant 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 the Original Loan Participant at its
address or telecopier number set forth in Schedule I to the Participation
Agreement.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant.
69
<PAGE>
[Lease Agreement (1994 747 B)]
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. All Rent shall be paid by Lessee to Lessor in funds of the
type specified in Section 3(e). Except as provided in Section 3(f) hereof,
Lessee's obligation to pay all Rent payable hereunder shall be absolute and
unconditional and Lessee shall have no right to reduce or set-off against
payments of Rent except as expressly set forth in Section 3(f) hereof.
Notwithstanding anything contained in this Section 18(a) to the contrary, all
payments of Rent made to the Indenture Trustee shall be in an amount which 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 Break Amount, if any, thereon and any other amounts
due the Original Loan Participant under the Trust Indenture, if any, and, in any
event, such amounts 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 any circumstance, including, without limitation, (A) any
set-off, counterclaim, abatement, recoupment, deduction, defense or other right
which Lessee may have against Lessor (in its individual capacity or as Owner
Trustee under the Trust Agreement), the Indenture Trustee, the Participants, the
Certificate Holders, or anyone else for any reason whatsoever (whether in
connection with the transactions contemplated hereby or any other transactions),
(B) any damage to or the destruction or loss of all or any portion of the
Airframe or any Engine from whatever cause, (C) the loss or theft of any portion
of the Airframe or any Engine, (D) the taking of the Airframe or any Engine or
any portion thereof by condemnation, confiscation, requisition or otherwise, (E)
the cessation, prohibition, limitation or restriction of the Lessee's (or any
Sublessee's) use of all or any part of the Airframe or any Engine, or the
interference with such use by any Person, (F) 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, (G) the Lessee's acquisition or ownership of all or any part of the
Airframe or any Engine otherwise than pursuant to an express
70
<PAGE>
[Lease Agreement (1994 747 B)]
provision of this Lease, (H) 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, (I) 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, (J) any insolvency, bankruptcy,
reorganization or similar proceedings by or against any Sublessee or any Person,
(K) any breach, default or misrepresentation by the Lessor, any Participant or
the Indenture Trustee of their respective warranties, agreements or covenants
contained in this Lease or any other Operative Document or any of the documents
referred to herein or therein, (L) 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 (M)
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.
Except as expressly provided herein, the Lessee waives, to the fullest
extent permitted by law, 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.
71
<PAGE>
[Lease Agreement (1994 747 B)]
SECTION 19. Renewal Options; Purchase Options; Valuation. (a)
--------------------------------------------
Renewal Options.
- ---------------
(1) Fixed Renewal Term. Not less than 120 days, and not more
------------------
than 360 days, before the end of the Basic Term, Lessee may, so long as no
Event of Default or Section 14(a), (b), (f) or (g) 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 30 days prior to the end of
the Basic Term may be deemed a notice to exercise the applicable purchase
option set forth in Section 19(b) hereof) electing to renew this Lease for
a single term having a duration of one year commencing at the end of the
Basic Term for a Basic Rent as determined below (such term being herein
referred to as the "Fixed Renewal Term"). The annual Basic Rent payable
during the 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 Event of Default or
------------------------
Section 14(a), (b), (f) or (g) Default has occurred and is continuing,
Lessee shall have the right to renew this Lease for additional periods of
one or more years each (provided any such period shall be in six month
increments), commencing at the end of the Basic Term, the Fixed Renewal
Term or the preceding Fair Market Renewal Term, as the case may be, each
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"). Lessee
shall not be entitled to elect to renew this Lease for any Fair Market
Renewal Term if, based upon an appraisal delivered 10 days prior to the end
of the Basic Term, Fixed Renewal Term or preceding Fair Market Renewal
Term, as the case may be, at the expiration of such Fair Market Renewal
Term, (i) the remaining useful life of the Aircraft would be less than 20%
of the total useful life of the Aircraft at the commencement of such Fair
Market Renewal Term as determined by the appraiser or (ii) the residual
value of the Aircraft, as determined by the appraiser, would be less than
20% of the fair market sales value of the Aircraft as of the commencement
of such Fair Market Renewal Term. Each such option to renew shall be
exercised upon delivery by Lessee to Lessor of an irrevocable written
notice of Lessee's intent to renew the Lease at least 120 days, and not
more than 360 days, prior to the commencement of such Fair Market Renewal
Term (which at the option of Lessee made at any time prior to 30 days prior
to the anticipated commencement of the Fair Market Renewal Term may be
deemed a
72
<PAGE>
[Lease Agreement (1994 747 B)]
notice to exercise the applicable purchase option in Section 19(b) hereof).
(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
therefor, 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 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 in 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) Stipulated Loss Value. The amounts payable in respect of
---------------------
Stipulated Loss Value during any Renewal Term 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 for any Renewal Term no
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, upon at least 120
----------------
days, and not more than 360 days, prior written irrevocable notice to Lessor
(each a "Purchase Option Date"), to terminate this Lease and to purchase the
Aircraft (which, with respect to clauses (2) and (3) below, at the option of
Lessee made at any time prior to 30 days prior to the applicable Purchase Option
Date may be deemed a notice to exercise the applicable renewal option pursuant
to Section 19(a)(1) or 19(a)(2) as Lessee may designate):
(1) on the EBO Date for a purchase price equal to that percentage
of Lessor's Cost set forth on Exhibit H hereto as the EBO Percentage (the
"EBO Percentage");
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<PAGE>
[Lease Agreement (1994 747 B)]
(2) 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
(3) 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, 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 Break Amount, if any) of and accrued and unpaid interest
on the Loan Certificates then outstanding. Upon payment to Lessor in
immediately available funds of the full amount of the purchase price 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 Option Date
(including amounts equal to Break Amount, if any) and payment of any other
amounts then due hereunder (including all reasonable costs or expenses of Lessor
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. Notwithstanding the foregoing, Lessee may, in accordance with
Section 8(r) of the Participation Agreement, assume the principal amount of the
Loan Certificates then outstanding on any applicable Purchase Option Date in
which event Lessee shall receive a credit against the purchase price otherwise
payable pursuant to the preceding two sentences in an amount equal to the
principal amount so assumed.
(c) Valuation. At any time not earlier than 360 days prior to the
---------
date on which Lessee may purchase the Aircraft pursuant to Section 9(a) or 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, Fair
Market Sales Value or the permissible length of a Fair Market Renewal Term, the
Aircraft shall be valued (i) as if in the condition and otherwise in compliance
with the terms of Section 5 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 Section 8, (ii) on the basis of the value which would obtain
in an arm's-length transaction between an informed and willing buyer-user or
lessee (other than a lessee or an Affiliate of a lessee currently in possession
or a used equipment scrap dealer)
74
<PAGE>
[Lease Agreement (1994 747 B)]
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 giving no effect to the purchase and renewal options of Lessee
provided in this 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, Fair Market Sales Value or the permissible length of a Fair Market
Renewal Term of the Aircraft. If the parties have not so agreed by 180 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 its 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 shall pay all expenses relating to such appraisal procedure, except that
Lessee and Lessor shall equally bear all expenses relating to such appraisal
procedure if such appraisal is conducted in connection with Lessee's exercise of
any purchase option pursuant to Section 19(b)(2) or 19(b)(3) or any renewal
option under Section 19(a).
75
<PAGE>
[Lease Agreement (1994 747 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
(except for Excluded Payments) 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 6.08 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
shall not be obligated to continue to so perform or notify any party that it is
to cease to so perform), and the amount of such payment and the amount of the
reasonable expenses of Lessor incurred in connection with such payment or the
76
<PAGE>
[Lease Agreement (1994 747 B)]
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 an Event
of Default or a Section 14(a), (b), (f) or (g) 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 $750,000,000 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 $750,000,000 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,
commissions and other expenses, if any, incurred in connection with such
investment) unless a Default or an Event of Default shall have occurred and be
continuing. If an Event of Default or a Section 14(a), (b), (f) or (g) 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
77
<PAGE>
[Lease Agreement (1994 747 B)]
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, except as expressly set forth herein and in the other Operative
Documents, 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. Neither Lessee nor
any Affiliate of Lessee shall file any tax returns in a manner inconsistent with
the foregoing or with Lessor's ownership of the Aircraft. 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
78
<PAGE>
[Lease Agreement (1994 747 B)]
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. 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.
SECTION 26. Article 2A. Lessee hereby waives any and all rights and
----------
remedies conferred upon a lessee under Sections 2A-501 through 2A-532 of Article
2A of the Uniform Commercial Code (810 ILCS 5/2A-501 through 5/2A-532);
provided, however, that this waiver does not waive any of the rights and
remedies of Lessee expressly set forth herein and in the other Operative
Documents.
* * *
79
<PAGE>
[Lease Agreement (1994 747 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.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, except as
expressly provided herein, but
solely as Owner Trustee,
Lessor
By_________________________________
UNITED AIR LINES, INC.,
Lessee
By_________________________________
Vice President and Treasurer
80
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT A
LEASE SUPPLEMENT NO. 1 (1994 747 B)
-----------------------------------
LEASE SUPPLEMENT No. 1 (1994 747 B), dated August __, 1994, between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee under the Trust Agreement (1994 747 B),
dated as of August 1, 1994, between the beneficiary named therein, as Owner
Participant, and such Owner Trustee (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 (1994 747 B), dated as of August 1, 1994, relating to one Boeing 747-
451 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./1/
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
(1994 747 B) dated August __, 1994, has been recorded by the Federal Aviation
Administration on August __, 1994, as one document and assigned Conveyance No.
______./2/
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 747-451 aircraft (the "Aircraft"), which
Aircraft as of the date hereof consists of the following components:
____________________
/1/This language for Lease Supplement No. 1.
/2/This language for other Lease Supplements.
<PAGE>
[Lease Agreement (1994 747 B)]
(i) Airframe: U.S. Registration No. N106UA and
manufacturer's serial no. 26474; and
(ii) Engines: four (4) Pratt & Whitney Model PW4056 engines
bearing, respectively, manufacturer's serial nos. P727348, P727349,
P727350 and P727351 (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 July 30, 2018.
3. The Stipulated Loss Value Date shall mean the last calendar
day of each calendar month during the Interim Term, Basic Term and any
Renewal Term.
4. Lessee hereby confirms its agreement to pay Lessor Interim
Rent and Basic Rent for the Aircraft throughout the Term therefor in
accordance with Section 3 of the Lease.
5. 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.
6. 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.
7. 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>
[Lease Agreement (1994 747 B)]
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed on the day and year first above written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, 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 August, 1994./3/
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
Indenture Trustee
By_________________________________
Authorized Officer
____________________
/3/This language contained in the original counterpart only.
A-3
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT B
INTERIM RENT, BASIC RENT AND EXCESS AMOUNT SCHEDULE
---------------------------------------------------
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 (1994 747 B)]
EXHIBIT C
STIPULATED LOSS VALUE SCHEDULE
------------------------------
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 (1994 747 B)]
EXHIBIT D
TERMINATION VALUE SCHEDULE
--------------------------
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 (1994 747 B)]
EXHIBIT E
RENT RECALCULATION AND
INDEMNIFICATION VERIFICATION
----------------------------
Any recalculation of Interim Rent, Basic Rent, Excess Amount,
Stipulated Loss Value Percentages, 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 Interim Rent, Basic Rent, Excess Amount,
Stipulated Loss Value Percentages, 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 Lessee shall notify
the Owner Participant of such belief and shall make a good faith effort to
reconcile the calculations referred to in (A) above with those of the Owner
Participant, provided, that if within ten Business Days after such notification
of the Owner Participant, the Lessee and the Owner Participant are unable to
reach such a reconciliation, a nationally recognized firm of accountants
selected by the Owner Participant and reasonably acceptable to Lessee 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, EBO Percentage or the
indemnity payment in the Owner Participant's last proposed statement in the
Owner Participant's favor, the Owner Participant shall pay the reasonable costs
and expenses of such verification process. Such recalculated Interim Rent,
Basic Rent, Excess Amount, Stipulated Loss Value Percentages,
<PAGE>
[Lease Agreement (1994 747 B)]
Termination Value Percentages and EBO Percentage shall be set forth in an
amendment to the Lease.
E-2
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT F
SCHEDULE OF COUNTRIES AUTHORIZED
FOR DOMICILE OF PERMITTED SUBLESSEES
------------------------------------
Australia Japan
Austria Luxembourg
Belgium * Mexico
Canada Netherlands
Denmark Norway
Finland Portugal
France Singapore
Germany Spain
Iceland Sweden
Ireland Switzerland
Italy United Kingdom
*Only so long as the Original Loan Participant is not a Certificate Holder.
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT G
SCHEDULE OF COUNTRIES AUTHORIZED FOR AIRCRAFT REGISTRATION
----------------------------------------------------------
Australia Japan
Austria Luxembourg
Belgium * Mexico
Canada Netherlands
Denmark Norway
Finland * Portugal
France Singapore
Germany * Spain
Iceland Sweden
Ireland Switzerland
Italy United Kingdom
*Only so long as the Original Loan Participant is not a Certificate Holder.
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT H
LESSOR'S COST, EBO DATE AND EBO PERCENTAGE
------------------------------------------
Lessor's Cost:
EBO Date/(1)/
EBO Percentage/(1)/
(expressed as a percentage
of Lessor's Cost)
- --------------------------------
<PAGE>
[Lease Agreement (1994 747 B)]
EXHIBIT H
LESSOR'S COST, EBO DATE AND EBO PERCENTAGE,
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>
*
Aircraft N106UA
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO LEASE AGREEMENT
(1994 747 B)
Dated January 31, 1995
Between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
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.
1994 747 B Equipment Trust
One Boeing 747-451 Aircraft
__________________________________
- --------------------------------------------------------------------------------
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any, that
this First Amendment to 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 herein 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>
FIRST AMENDMENT TO LEASE AGREEMENT
(1994 747 B)
THIS FIRST AMENDMENT TO LEASE AGREEMENT (1994 747 B) dated January 31,
1995 (this "Amendment") between FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity,
except as expressly provided herein, but solely as Owner Trustee under the Trust
Agreement (in such capacity, "Lessor"), and UNITED AIR LINES, INC., a
corporation organized and existing pursuant to the laws of the State of Delaware
("Lessee"), amends that certain Lease Agreement (1994 747 B) dated as of August
1, 1994 (the "Original Lease"), as supplemented by Lease Supplement No. 1 (1994
747 B) dated August 1, 1994 ("Lease Supplement No. 1"), in each case, between
Lessor and Lessee (the Original Lease as supplemented by Lease Supplement No. 1
being referred to herein as the "Lease").
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease as amended hereby;
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor the
Aircraft, being one (1) Boeing 747-451 aircraft which consists of the following
components: (i) Airframe: U.S. Registration No. N106UA, manufacturer's serial
no. 26474 and (ii) Engines: four (4) Pratt & Whitney model PW4056 aircraft
engines bearing, respectively, manufacturer's serial numbers P727348, P727349,
P727350 and P727351;
WHEREAS, the Lease was recorded by the Federal Aviation Administration
on August 8, 1994 and assigned Conveyance No. Y39809;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1. Amendment to Exhibit C. Exhibit C to the Lease is hereby
----------------------
deleted in its entirety and replaced with Exhibit C attached hereto.
SECTION 2. Ratification; References to Lease. Except as amended
---------------------------------
hereby, the Lease continues and shall remain in full force and effect in all
respects. From and after the date of this Amendment, each and every reference
in the Lease to "this Lease", "this Agreement", "herein", "hereof" or similar
words and phrases referring to the Lease or any word or phrase referring to a
section or provision of the Lease is deemed for all purposes to
<PAGE>
[First Amendment to Lease Agreement (1994 747 B)]
be a reference to the Lease or such section or provision as amended pursuant to
this Amendment.
SECTION 3. Miscellaneous. Any provision of this Amendment 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 Amendment 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 under the Lease. The section and paragraph headings in this
Amendment are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof. This Amendment 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 Amendment
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all of such
counterparts shall together constitute but one and the same instrument.
* * *
2
<PAGE>
[First Amendment to Lease Agreement (1994 747 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First Amendment
to Lease Agreement to be duly executed on the day and year first above
written.
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, not in its
individual capacity, except as
expressly provided herein, but
solely as Owner Trustee,
Lessor
By:________________________________
Its:_____________________________
UNITED AIR LINES, INC.,
Lessee
By:________________________________
Its: Vice President and Treasurer
Approved and Consented to:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, Indenture Trustee
By:________________________________
Its:_____________________________
/1/ Receipt of this original counterpart of the foregoing First Amendment
to Lease Agreement is hereby acknowledged on this ____ day of __________, 1995.
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, Indenture Trustee
By:________________________________
Its:_____________________________
______________________
/1/ This language contained in the original counterpart only.
3
<PAGE>
[First Amendment to Lease Agreement (1994 747 B)]
EXHIBIT C
Stipulated Loss Value Schedule
[FOR PURPOSES OF CONFIDENTIALITY EXHIBIT C IS INTENTIONALLY OMITTED FROM
THE COPY OF THE FIRST AMENDMENT TO LEASE AGREEMENT FILED WITH THE FEDERAL
AVIATION ADMINISTRATION]
4
<PAGE>
[Lease Agreement (1994 747 B)]
Aircraft N106UA
________________________________________________________________________________
SECOND AMENDMENT TO LEASE AGREEMENT
(1994 747 B)
Dated February __, 1996
Between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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.
1994 747 B Equipment Trust
One Boeing 747-451 Aircraft
__________________________________
________________________________________________________________________________
As set forth in Section 20 of the Lease, Lessor has assigned to the Indenture
Trustee (as defined in the Lease) certain of its right, title and interest in
and to the Lease, including all amendments thereto. To the extent, if any, that
this Second Amendment to 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 herein 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>
[Lease Agreement (1994 747 B)]
TABLE OF CONTENTS
Page
----
SECTION 1. Amendment to Exhibits........................................... 2
SECTION 2. Amendments to Section 1......................................... 2
SECTION 3. Amendments to Section 3......................................... 9
SECTION 4. Amendments to Section 7......................................... 11
SECTION 5. Amendments to Section 9......................................... 13
SECTION 6. Amendments to Section 10........................................ 17
SECTION 7. Amendment to Section 11......................................... 20
SECTION 8. Amendments to Section 14........................................ 21
SECTION 9. Amendment to Section 15......................................... 22
SECTION 10. Amendment to Section 17........................................ 22
SECTION 11. Amendments to Section 18....................................... 23
SECTION 12. Amendment to Section 19........................................ 23
SECTION 13. Amendment to Section 20........................................ 23
SECTION 14. Amendment to Section 22........................................ 23
SECTION 15. Ratification; References to Lease.............................. 23
SECTION 16. Miscellaneous.................................................. 24
<PAGE>
[Lease Agreement (1994 747 B)]
SECOND AMENDMENT TO LEASE AGREEMENT
(1994 747 B)
THIS SECOND AMENDMENT TO LEASE AGREEMENT (1994 747 B) dated February
__, 1996 (this "Amendment") between STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under that certain Trust Agreement (1994 747 B) dated as of August 1,
1994 (in such capacity, "Lessor"), as assignee of First Security Bank of Utah,
National Association ("Original Lessor"), and UNITED AIR LINES, INC., a
corporation organized and existing pursuant to the laws of the State of Delaware
("Lessee"), amends that certain Lease Agreement (1994 747 B) dated as of August
1, 1994 (the "Original Lease") between Lessee and Original Lessor (the Original
Lease, as supplemented by Lease Supplement No. 1 (1994 747 B) dated August 1,
1994 ("Lease Supplement No. 1") and as amended by that certain First Amendment
to Lease Agreement (1994 747 B) dated January 31, 1995 (the "First Amendment to
Lease Agreement"), in each case between Original Lessor and Lessee, being
referred to herein as the "Lease").
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor the
Aircraft, which consists of the following components: (i) Airframe: FAA
Registration No. N106UA, Manufacturer's serial no. 26474; and (ii) Engines: four
(4) Pratt & Whitney model PW4056 aircraft engines bearing, respectively,
manufacturer's serial numbers P727348, P727349, P727350 and P727351; and
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 August 8, 1994 and assigned Conveyance
No. Y39809; and
WHEREAS, the Original Lease was amended by the First Amendment to
Lease Agreement, a counterpart of which was recorded by the Federal Aviation
Administration on April 12, 1995 and assigned Conveyance No. KK19947;
WHEREAS, pursuant to that certain Assignment and Assumption Agreement
(1994 747 B) dated January __, 1996 between the Owner Trustee and the Original
Owner Trustee, the Original Owner Trustee assigned to the Owner Trustee, and the
Owner
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
Trustee assumed, all of the obligations of the Original Owner Trustee under the
Operative Documents); and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1. Amendment to Exhibits. Exhibits B, C, D and H to the
---------------------
Lease are hereby deleted in their entirety and replaced with Exhibits B, C, D
and H respectively, to this Amendment.
SECTION 2. Amendments to Section 1. Section 1 of the Lease is hereby
-----------------------
amended in the following manner:
(a) The following defined terms are hereby added to Section 1 in
alphabetical order:
""Assignment and Assumption Agreements" means each of (i) that
certain Owner Trustee Assignment and Assumption Agreement (1994 747 B)
dated as of January __, 1996, between the Owner Trustee and the
Original Owner Trustee and (ii) that certain Indenture Trustee
Assignment and Assumption Agreement (1994 747 B) dated as of January
__, 1996 between the Original Indenture Trustee and the Indenture
Trustee."
""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."
""Effective Date" means the Section 20 Refinancing Date."
""First Amendment to Participation Agreement" means that certain
First Amendment to Participation
2
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
Agreement (1994 747 B) dated February __, 1996 by and among Lessee,
the Owner Participant, the Owner Trustee, the Indenture Trustee and
each Pass Through Trustee."
""First Amendment to Tax Indemnity Agreement" means that certain
First Amendment to Tax Indemnity Agreement (1994 747 B) dated February
__, 1996 by and between Lessee and the Owner Participant."
""First Amendment to Trust Agreement" means that certain First
Amendment to Trust Agreement (1994 747 B) dated February __, 1996 by
and between the Owner Trustee and the Owner Participant."
""Original Certificate Holder" has the meaning ascribed to the
term "Certificate Holder" in the Original Indenture."
""Original Indenture" means the Trust Indenture and Security
Agreement (1994 747 B) dated as of August 1, 1994 as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement
(1994 747 B) No. 1 dated August 1, 1994, between the Original Owner
Trustee and the Original Indenture Trustee."
""Original Indenture Trustee" means State Street Bank and Trust
Company of Connecticut, National Association."
""Original Loan Certificates" has the meaning ascribed to the
term "Loan Certificates" in the Original Indenture."
""Original Owner Trustee" means First Security Bank of Utah,
National Association, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement, except as otherwise expressly
stated."
""Owner Trustee Parent" means State Street Bank and Trust
Company, a Massachusetts trust company.
""Owner Trustee Parent Guaranty" means the guaranty of the Owner
Trustee's obligations under the Operative Documents as delivered by
the Owner Trustee Parent in connection with the assumption by the
Owner Trustee of the Original Owner Trustee's obligations under the
Trust Agreement.
3
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
""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 a 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, in each case between the Lessee and State Street Bank and
Trust Company of Connecticut, National Association, as supplemented by
each of the two separate 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, 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. 1996-A1 and 1996-A2, in each case dated as of
February 1, 1996 between Lessee and the Pass Through Trustee."
""Premium" has the meaning assigned to the term in Section
6.01(b) of the Trust Indenture."
""Redemption and Refinancing Agreement" means that certain
Redemption and Refinancing Agreement (1994 747 B) dated as of February
1, 1996 by and among Lessee, the Owner Participant, the Original Loan
Participant, the Owner Trustee, the Indenture Trustee and each Pass
Through 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."
""Second Amendment to Lease Agreement" means that certain Second
Amendment to Lease Agreement (1994 747
4
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
B) dated February __, 1996 by and between Lessee and Lessor."
""Section 20 Refinancing Date" means February __, 1996."
""Series 1994 747 B Certificate" has the meaning set forth in the
Trust Indenture."
(b) The definition of "Additional Insured" is hereby amended to be and
read in its entirety as follows:
""Additional Insured" means Lessor, in its individual capacity
and as owner of the Aircraft, the Indenture Trustee, the Owner
Participant, so long as the Pass Through Trustees are Certificate
Holders, each Pass Through Trustee and Lessee in its capacity as
sublessor under any Sublease and each of the respective Affiliates,
directors, officers, employees, servants and agents of each of the
foregoing."
(c) The definition of "Basic Rent" is hereby amended to be and read in
its entirety as follows:
""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 hereof."
(d) The definition of "Break Amount" is hereby amended to be and read
in its entirety as follows:
""Break Amount" has the meaning set forth in the Original
Indenture."
(e) The definition of "Business Day" is hereby amended to be and read
in its entirety as follows:
""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, and 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 principal place of
business of the Indenture Trustee is located and the city and state in
which the Indenture Trustee receives and disburses funds."
5
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
(f) The definition of "Certificate Holder" is hereby amended to be and
read in its entirety as follows:
""Certificate Holder" has the meaning ascribed to the term
"Holder" in the Trust Indenture."
(g) The definition of "Corporate Trust Department is hereby amended to
be and read in its entirety as follows:
""Corporate Trust Department" means the principal office of the
Indenture Trustee located at 79 S. Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Department, or such other office at
which the Indenture Trustee's corporate trust business shall be
administered which the Indenture Trustee shall have specified by
notice in writing to Lessee, the Owner Participant, the Owner Trustee
and each Certificate Holder."
(h) The definition of "Expenses" is hereby amended by deleting the
words "Break Amount" which appear therein and inserting the word "Premium"
in lieu thereof.
(i) The definition of "Federal Aviation Act" is hereby amended to be
and read in its entirety as follows:
""Federal Aviation Act" means the sections of Title 49 of the
United States Code relating to aviation, as amended."
(j) The definition of "Indemnitees" is hereby amended to be and read
in its entirety as follows:
""Indemnitees" means (i) 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 and each Pass Through Trustee (so long as the Pass Through
Trustees are Certificate Holders), (ii) each of their respective
Affiliates, and (iii) the respective successors, permitted assigns,
directors, trustees, officers, employees, servants and agents of the
Persons described in clauses (i) and (ii)."
(k) The definition of "Lessee Documents" is hereby amended to be and
read in its entirety as follows:
6
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
""Lessee Documents" means the Participation Agreement, the
Redemption and Refinancing Agreement, the Lease, any Lease Supplement,
the Purchase Agreement, 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 any other document executed by Lessee
in connection with the transactions contemplated by the Participation
Agreement."
(l) The definition of "Lessor Liens" is hereby amended to be and read
as follows:
""Lessor Lien" 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 of Connecticut, National
Association, 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 of Connecticut, National Association, 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 of
Connecticut, National Association, 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, National Association, in its individual capacity under the
Participation Agreement, Lease Agreement or the Tax Indemnity
Agreement 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 the Trust Indenture (other than a transfer pursuant
to Article VIII of the Trust Indenture not attributable to a Lease
Event of Default) or a transfer pursuant to Section 8, 9, 10 or 19
hereof 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 of
Connecticut, National Association or the Owner Participant and would
otherwise constitute a
7
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
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 of
Connecticut, National Association 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."
(m) The definition of "Loan Certificate" is hereby amended to be and
read in its entirety as follows:
""Loan Certificate" has the meaning assigned to the term
"Certificate" in the Trust Indenture."
(n) The definition of "Operative Documents" is hereby amended to be
and read in its entirety as follows:
""Operative Documents" means this Lease (including any Lease
Supplement); the Participation Agreement; the Redemption and
Refinancing Agreement; the Tax Indemnity Agreement; the Trust
Agreement; 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; any Trust Supplement; the Owner
Trustee Parent Guaranty; the Loan Certificates outstanding at the time
of reference; the Assignment and Assumption Agreements; and the
Consent and Agreement."
(o) The definition of "Stipulated Loss Value Date" is hereby amended
by deleting the last sentence thereof in its entirety.
(p) The definition of "Supplemental Rent" is hereby amended by
deleting the words "Break Amount, if any, amounts payable under Section
2.17 of the Trust Indenture" which
8
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
appear therein and inserting the words "Premium, if any," in lieu thereof.
(q) The definition of "Termination Value" is hereby amended by
deleting the last sentence thereof in its entirety.
(r) The definition of "Trust Indenture" is hereby amended to be and
read in its entirety as follows:
""Trust Indenture" means that certain Amended and Restated Trust
Indenture and Security Agreement (1994 747 B) dated as of February 1,
1996 between the Owner Trustee and the Indenture Trustee, which amends
and restates the Original Indenture, 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."
(s) The definition of "Trust Office" is hereby amended to be and read
in its entirety as follows:
""Trust Office" means the principal corporate trust office of the
Owner Trustee located at 750 South Main Street, Suite 1114, Hartford,
Connecticut 06103, Attention: Corporate Trust Department, or 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 Lessee, the Owner Participant, the Indenture
Trustee and each Certificate Holder."
(t) The definition of "U.S. Air Carrier" is hereby deleted in its
entirety.
SECTION 3. Amendments to Section 3. Section 3 of the Lease is hereby
-----------------------
amended in the following manner:
(a) The final paragraph of Section 3(b) is hereby deleted in its
entirety.
(b) Section 3(c)(i)(A) is hereby amended by deleting the reference to
"0.75%" which appears therein and inserting a reference to "[1.480]%" in
lieu thereof.
9
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
(c) The first sentence of Section 3(c)(iii) is hereby amended by
deleting the words "Break Amount" which appear therein and inserting the
word "Premium" in lieu thereof.
(d) Section 3(d) is hereby amended to be and read in its entirety as
follows:
"(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 or EBO Percentage as the same shall become due and
owing and all other amounts of Supplemental Rent within five (5)
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, if any, as and when
any such Premium shall be due and payable; provided, however, that
Lessee shall have no obligation to pay to 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 Interim Rent or Basic Rent
not paid when due for any period for which the same shall be overdue
and on any payment of Supplemental Rent not paid when due for the
period until the same shall be paid."
(e) Section 3(e) is hereby amended to be and read in its entirety as
follows:
"(e) Payments in General. All payments of Rent (other than
-------------------
Excluded Payments) payable to Lessor shall be made directly by Lessee
by wire transfer in 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 750 Main Street, Hartford, Connecticut
10
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
06103, Attention: Corporate Trust Department (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, however,
that so long as the Trust Indenture shall not have been fully
discharged, Lessor hereby directs and Lessee hereby agrees, that all
Basic Rent, Prepaid Rent and Supplemental Rent (to the extent payable
to the Indenture Trustee or the Holders pursuant to the terms of the
Operative Documents) and all other amounts (other than Excluded
Payments) to be paid or held by the Lessor pursuant to the Operative
Documents shall be paid directly to the Indenture Trustee at the times
and in funds specified in this Section 3(e) or otherwise at the
offices of the Indenture Trustee at 79 South Main Street, Salt Lake
City, Utah 84111, Attention: Corporate Trust Department (or such other
office of the Indenture Trustee in the continental United States or
such other account as the Indenture Trustee shall direct in a notice
to Lessee at least 10 Business Days prior to the date such payment 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) Section 3(g) is hereby amended to be and read in its entirety as
follows:
"(g) [Intentionally Reserved for Potential Future Use.]"
SECTION 4. Amendments to Section 7. Section 7 of the Lease is hereby
-----------------------
amended as follows:
(a) Clause (viii) of Section 7(b) is hereby amended to be and
read in its entirety as follows:
"(viii) so long as the Sublessee is not subject to a proceeding
or final order under applicable
11
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
bankruptcy, insolvency or reorganization laws on the date the Sublease
is entered into, Lessee may, at any time (subject to the notice
requirements specified in the second to last paragraph of this clause
(b)), enter into a Sublease with (1) a Certificated Air Carrier, (2)
after the close of the calendar year in which there occurs the seventh
anniversary of the Delivery Date, any Permitted Sublessee or (3) after
the close of the calendar year in which there occurs the seventh
anniversary of the Delivery Date, any other Person approved in writing
by the Owner Participant, which approval shall not be unreasonably
withheld; provided, however, that (A) 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) in the case of a Sublease under subclause
(2) or (3) above, on the date of such Sublease, the United States and
the country in which such Permitted Sublessee or Person, as the case
may be, is domiciled and principally located maintain normal
diplomatic relations (which for purposes of this clause (viii) shall
include Taiwan and any other country that is similarly situated), (C)
prior to entering into such Sublease, Lessee shall provide assurances
reasonably satisfactory to Lessor to the effect that the provisions of
Section 11 hereof have been complied with after giving effect to such
Sublease and (D) in the case of a Sublease described in subclause (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 an opinion of counsel, which counsel and
opinion shall be reasonably satisfactory to Lessor, 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."
(b) The first paragraph of Section 7(c) is hereby amended to be and
read in its entirety as follows:
12
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
"(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 of
Connecticut, National Association, 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)."
SECTION 5. Amendments to Section 9. Section 9 of the Lease is hereby
-----------------------
amended as follows:
(a) Section 9(b) is hereby amended to be and read in its entirety as
follows:
"(b) Termination for Obsolescence/Surplus. So long as no
------------------------------------
Default or 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 during the Basic Term
occurring on or after the close of the calendar year in which occurs
the seventh anniversary of the Delivery Date if Lessee shall have made
a good faith determination 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 eighty (180) days
and not more than 360 days' revocable advance written notice of
Lessee's intention to so terminate this Lease (any such notice, a
"Termination Notice") (i) specifying the date on
13
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
which Lessee intends to terminate this Lease in accordance with this
Section 9(b) (such specified date, a "Termination Date") and (ii)
attaching a certificate of the Treasurer or any more senior financial
officer of Lessee which states that the Aircraft is surplus to
Lessee's requirements or economically obsolete to Lessee and sets
forth the basis for such determination. If Lessee revokes such
Termination Notice, Lessee shall pay to Lessor any and all out-of-
pocket expenses of Lessor or the Owner Participant attributable to
such revocation. Lessee shall, on not more than two occasions, have
the right to revoke a Termination Notice by giving notice to Lessor at
least thirty (30) days prior to the proposed Termination Date and, if
such Termination Notice is not so revoked, such Termination Notice
shall become irrevocable thirty (30) days prior to the Termination
Date."
(b) Section 9(c) is hereby amended to be and read in its entirety as
follows:
"(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 (5) Business Days after
receipt thereof and at least ten (10) 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 eight (8) 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,
14
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
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 hereof, 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 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 the basis of maximizing the net
---- ----
after-tax cash proceeds to Lessor) 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) the difference in Dollars, if any,
between the proceeds of the sale of the Aircraft so sold, net of 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, and the Termination
Value for the Aircraft computed as of the applicable Redemption Date,
(B) all unpaid Basic Rent due on or prior to such Redemption Date
(other than Basic Rent payable in advance on such Redemption Date, if
any) and all unpaid Supplemental Rent with respect to the Aircraft due
on or prior to such Redemption Date, and (C) the Premium, if any, due
on the Loan Certificates and upon receiving all such payments referred
to in clauses (2) and (3) above 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 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
15
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
Aircraft. If Lessor so elects, Lessor shall give to Lessee written
notice of such election at least fifteen (15) 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 aforesaid 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, simultaneously
with the payment of the Loan Certificates as aforesaid, Lessee shall
deliver the Airframe and Engines or engines to Lessor in accordance
with Section 5 hereof 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, due on the Loan
Certificates. If no sale shall have occurred on the Termination Date
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
16
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
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 two such notices may be given during the Term (not
counting 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 (except with respect
to amounts that may become payable after such termination date
pursuant to Section 7 of the Participation Agreement and the Tax
Indemnity Agreement). 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."
SECTION 6. Amendments to Section 10. Section 10 of the Lease is
------------------------
hereby amended in the following manner:
(a) Clause (i) of the first sentence of the first paragraph of Section
10(a) is hereby amended to be and read in its entirety as follows:
"(i) to the extent not previously 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, but only 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
17
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
respect to the Aircraft due on or prior to such Stipulated Loss Value
Date plus (D) interest on the amounts described in clauses (A) and (B)
above at the Past Due Rate from and including such Stipulated Loss
Value Date to, but not including, the date of payment; or"
(b) The first sentence of the second paragraph of clause 10(a) is
hereby amended by deleting the words "(A), (B), (C), (D) and (E)" which
appear therein and inserting the words "(A), (B), (C) and (D)" in lieu
thereof.
(c) The first sentence of the third paragraph of Section 10(a) is
hereby amended to be and read as follows:
"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)
as specified in subparagraph (ii) above, Lessee shall, at its own cost
and expense, not later than the Business Day next succeeding the 100th
day following the occurrence of such Event of Loss (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 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, airframe or engine so substituted hereunder shall
be of the same make and same or improved model (or in regard to an
engine, the same or improved make and model, which engine shall be an
Acceptable Alternative Engine) as those initially leased hereunder 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 (as to title) bill of sale and an 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 was
registered at the time of such Event of Loss, and cause a financing
18
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
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 Lessor with such
evidence of Lessor's title to such replacement aircraft or airframe or
airframe and one or more engines, as the case may be, and of
compliance with the insurance provisions of Section 11 with respect to
such substituted property as the Owner Participant may reasonably
request, (4) provide an opinion of independent tax counsel, selected
by the Owner Participant and reasonably satisfactory to Lessee, that
such substitution will not result in any adverse Federal income tax
consequences to Lessor or Owner Participant, (5) provide Lessor 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 or
airframe or airframe and one or more engines, as the case may be,
substituted hereunder to the same extent as the Aircraft and (6)
provide an opinion of counsel to Lessor, in its individual capacity,
the Owner Participant and the Indenture Trustee, which counsel and
opinion shall be reasonably acceptable to the Owner Participant, to
the effect that title to such replacement aircraft or airframe or
airframe and one or more engines, as the case may be, has been duly
conveyed to Lessor free and clear of all Liens except Permitted Liens
and that such replacement aircraft or airframe or airframe and one or
more engines, as the case may be, is duly subjected to the Lien 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
19
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
sale in form and substance reasonably satisfactory to the Lessee
together with a certificate of an independent aircraft engineer or
appraiser certifying that the replacement aircraft (or airframe or
airframe and one or more engines, as the case may be) has a value,
utility and remaining useful life at least equal to the replaced
Aircraft or Airframe or Airframe and one or more Engines, as the case
may be, assuming such Aircraft or Airframe or Airframe and one or more
Engines, as the case may be, was in the condition and repair required
by the terms hereof immediately prior to the occurrence of such Event
of Loss."
SECTION 7. Amendment to Section 11. Section 11(c) of the Lease is
-----------------------
hereby amended to be and read in its entirety as follows:
"(c) Reports, etc. Lessee will furnish, or cause to be
-------------
furnished, to Lessor, the Indenture Trustee and the Owner Participant
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 act as Lessee's
insurance brokers on a regular basis (the "Insurance Broker"),
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, insure against such risks 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 only for material
additional cost; and provided that no information contained in the
foregoing report shall be made available by Lessor, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant to anyone
except (A) 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 Affiliates, counsel,
independent certified public accountants, independent insurance
brokers or other
20
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
agents, who agree to hold such information confidential, (B) 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 clause (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 and the Owner Participant 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
(10 days in the case of lapse for nonpayment of premium and 7 days in
the case of war risk and allied perils coverage) prior to the
cancellation, lapse 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 and
the Owner Participant 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 Owner Participant or the Indenture 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 Owner Participant or the Indenture Trustee, as
Supplemental Rent, for the cost thereof to Lessor, the Owner
Participant or the Indenture Trustee, as the case may be; provided,
21
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
however, that no exercise by Lessor, the Owner Participant 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."
SECTION 8. Amendments to Section 14. Section 14 to the Lease is
------------------------
hereby amended in the following manner:
(a) Section 14(a) of the Lease is hereby amended to be and read in its
entirety as follows:
"(a) Lessee shall not have made a payment of Basic Rent,
Stipulated Loss Value, Termination Value, Premium, if any, payable by
the Lessee pursuant to the penultimate sentence of Section 3(d) hereof
within 10 days after the same shall have become due; or"
(b) Section 14(b) of the Lease is hereby amended to be and read in its
entirety as follows:
"(b) Lessee shall have failed to make a payment of Supplemental
Rent (other than Stipulated Loss Value, Termination Value, Premium, if
any, payable by the Lessee pursuant to the penultimate sentence of
Section 3(d) hereof) after the same shall have become due and such
failure shall continue for 15 days after Lessee's receipt of written
demand therefor; or"
(c) Section 14(h) of the Lease is hereby amended by deleting the words
"U.S. Air Carrier" which appear therein and inserting the words
"Certificated Air Carrier" in lieu thereof.
SECTION 9. Amendment to Section 15. The penultimate paragraph of
-----------------------
Section 15 of the Lease is hereby amended by deleting the words "Break Amount,
if any" which appear therein.
SECTION 10. Amendment to Section 17. Section 17 of the Lease is
-----------------------
hereby amended to be and read in its entirety as follows:
"SECTION 17. Notices. All notices required under the terms and
-------
provisions hereof shall be in writing (including 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,
22
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
(b) if given by certified mail upon receipt and, if given by other
means, when received, 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 750 Main Street, Hartford, Connecticut
06103, Attention: Corporate Trust Department, telecopier number (203)
244-1899, or to such other address or telex or telecopier number as
Lessor shall from time to time designate in writing to Lessee; and
(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.
A copy of each notice to Lessor shall be given by the sender thereof to the
Owner Participant."
SECTION 11. Amendments to Section 18. The last sentence of Section
------------------------
18(a) of the Lease is hereby amended by deleting the words "Break Amount, if
any, thereon and any other amounts due the Original Loan Participant under the
Trust Indenture" which appear therein and inserting the word "Premium" in lieu
thereof.
SECTION 12. Amendment to Section 19. The last paragraph of Section
-----------------------
19(b) is hereby amended by deleting the words "Break Amount" which appear
therein and inserting the word "Premium" in lieu thereof.
SECTION 13. Amendment to Section 20. The last sentence of Section 20
-----------------------
of the Lease is hereby amended by deleting the reference to "Section 6.08" which
appears therein and inserting a reference to "Section 11.06" in lieu thereof.
23
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
SECTION 14. Amendment to Section 22. Section 22 of the Lease is
-----------------------
hereby amended by deleting the reference to "Standard and Poor's Corporation"
which appears therein and inserting a reference to "Standard and Poor's Ratings
Services" in lieu thereof.
SECTION 15. Ratification; References to Lease. Except as amended
---------------------------------
hereby, the Lease continues and shall remain in full force and effect in all
respects. From and after the date of this Amendment, each and every reference
in the Lease to "this Lease," "this Agreement," "herein," "hereof" or similar
words and phrases referring to this Lease or any word or phrase referring to a
section or provision of the Lease is deemed for all purposes to be a reference
to the Lease or such section or provision as amended pursuant to this Amendment.
SECTION 16. Miscellaneous. Any provision of this Amendment 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 Amendment 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. The 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
headings in this Amendment are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof. This
Amendment 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 Amendment may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
such counterparts shall together constitute but one and the same instrument.
* * *
24
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Second
Amendment to Lease Agreement to be duly executed on the day and year first above
written.
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee,
Lessor
By: ________________________________
UNITED AIR LINES, INC.,
Lessee
By: ________________________________
Vice President and Treasurer
Receipt of this original counterpart of the foregoing Second Amendment
to Lease Agreement is hereby acknowledged on this ____ day of February __, 1996.
/4/
FIRST SECURITY BANK OF UTAH
NATIONAL ASSOCIATION,
as Indenture Trustee
By: ________________________________
Its: _______________________________
____________________
/4/ This language contained in the original counterpart only.
25
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
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 THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amendment to Lease Agreement (1994 747 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 THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
EXHIBIT D
TERMINATION VALUE SCHEDULE
--------------------------
TERMINATION VALUE
DATE (as a percentage of Lessor's Cost)
---- ----------------------------------
FOR PURPOSES OF CONFIDENTIALITY, EXHIBIT D TO THIS AMENDMENT IS
INTENTIONALLY OMITTED FROM THE COPY OF THIS AMENDMENT ON FILE WITH THE
FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
EXHIBIT H
LESSOR'S COST, EBO DATE AND EBO PERCENTAGE
------------------------------------------
FOR PURPOSES OF CONFIDENTIALITY, THE INFORMATION CONTAINED IN EXHIBIT
H TO THIS AMENDMENT IS INTENTIONALLY OMITTED FROM THE COPY OF THIS
AMENDMENT ON FILE WITH THE FEDERAL AVIATION ADMINISTRATION.
<PAGE>
[Second Amendment to Lease Agreement (1994 747 B)]
EXHIBIT H
LESSOR'S COST, EBO DATE
AND EBO PERCENTAGE
------------------
Lessor's Cost: $120,000,000
EBO Date: /1/ [July 30, 2011]
EBO Percentage/1/ [_______%]
(expressed as a percentage
of Lessor's Cost)
____________________
/1/ Alternatively, the Lessee may elect to purchase the Aircraft pursuant to
Section 19(b)(1) of the Lease in the installment amounts and on the dates
given below.
Payment Date Amount (express as a percentage
of Lessor's Cost)
[July 30, 2011] [48.43163684%]
[September 15, 2011] [9.25293158%]
[December 15, 2011] [9.25293158%]
In the event that the Lessee shall so elect, the 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 grant a first priority mortgage in
favor of the Lessor of all of its right, title and interest, on and after
such date, in the Aircraft to secure the due and punctual payment of all
installment amounts payable under this Exhibit H; provided, however, that
such first priority mortgage shall be considered a Permitted Lien.
<PAGE>
Reg. No. 33-57192 Reg. No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(n)(5) Exhibit 4(b)(46)
<PAGE>
*
Doc. No. 1.05
Aircraft N767UA
- --------------------------------------------------------------------------------
TRUST AGREEMENT
(1995 777 C)
Dated as of May 1, 1995
between
_______________________________,
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY,
Owner Trustee
--------------------
United Air Lines, Inc.
1995 777 C Equipment Trust
One Boeing 777-222 Aircraft
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
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.............. 4
SECTION 3.02. Conditions Precedent.................................... 5
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 the Owner Trustee; Other Parties............... 6
(c) Certain Distributions to the Owner Participants............ 6
(d) Excluded Payments.......................................... 6
SECTION 4.02. Method of Payments...................................... 6
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01. Notice of Event of Default.............................. 7
SECTION 5.02. Action Upon Instructions................................ 8
SECTION 5.03. Indemnification......................................... 8
<PAGE>
[Trust Agreement (1995 777 C)]
SECTION 5.04. No Duties Except as Specified in Trust
Agreement or Instructions......................................... 9
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......................... 10
SECTION 6.02. Absence of Certain Duties............................... 10
SECTION 6.03. No Representations or Warranties as to Certain
Matters........................................................... 11
SECTION 6.04. No Segregation of Monies Required;
No Interest....................................................... 12
SECTION 6.05. Reliance Upon Certificates, Counsel and
Agents............................................................ 12
SECTION 6.06. Not Acting in Individual Capacity....................... 13
SECTION 6.07. Fees; Compensation...................................... 13
SECTION 6.08. Tax Returns............................................. 14
ARTICLE VII
INDEMNIFICATION OF STATE STREET BANK AND TRUST COMPANY
BY OWNER PARTICIPANTS
SECTION 7.01. Owner Participants to Indemnify State Street Bank
and Trust Company................................................. 14
ARTICLE VIII
TRANSFER OF AN OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interests................................... 16
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of Owner Trustee; Appointment of
Successor......................................................... 16
ii
<PAGE>
[Trust Agreement (1995 777 C)]
(a) Resignation or Removal....................................... 16
(b) Execution and Delivery of Documents, etc..................... 17
(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) Supplement 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. Absence of Requirements as to Form..................... 20
SECTION 10.04. Distribution of Documents.............................. 21
SECTION 10.05. No Request Needed as to Lease Supplement and
Trust Supplement.................................................. 21
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement.......................... 21
SECTION 11.02. Owner Participants Have 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................................................ 23
SECTION 11.07. Severability............................................ 23
SECTION 11.08. Waivers, etc........................................... 23
iii
<PAGE>
[Trust Agreement (1995 777 C)]
SECTION 11.09. Counterparts............................................ 23
SECTION 11.10. Binding Effect, etc.................................... 23
SECTION 11.11. Headings; References................................... 24
SECTION 11.12. Governing Law.......................................... 24
iv
<PAGE>
[Trust Agreement (1995 777 C)]
TRUST AGREEMENT
(1995 777 C)
This TRUST AGREEMENT (1995 777 C) dated as of May 1, 1995 between
______________________________, a Delaware corporation (the "Original 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 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:
"Excluded Payments" has the meaning ascribed to such term in the Trust
Indenture.
"Indenture Event of Default" has the meaning which the term "Event of
Default" has in the Trust Indenture.
"Lease" means that certain Lease Agreement (1995 777 C), 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>
[Trust Agreement (1995 777 C)]
"Majority in Interest of Owner Participants" at any time means,
subject to Section 11.05, the Owner Participant or Owner Participants which then
hold more than 50% of the Ownership Interests of all Owner Participants.
"Owner Participants" shall mean the Original Owner Participant and
each Subsequent Owner Participant, to the extent that the same shall, at the
relevant time, have an Ownership Interest.
"Ownership Interest" means, in the case of each Owner Participant, the
percentage of its undivided beneficial interest in the Trust Estate created by
this Trust Agreement, which percentage shall be: (i) in the case of the Original
Owner Participant (A) so long as it shall be the sole Owner Participant, 100%
and (B) if it shall no longer be the sole Owner Participant, the percentage of
such undivided interest in the Trust Estate which it shall not have transferred
to any Subsequent Owner Participant; and (ii) in the case of any Subsequent
Owner Participant, the percentage of such undivided interest in the Trust Estate
specified in the agreement pursuant to which such Subsequent Owner Participant
becomes an Owner Participant as provided in the definition of "Subsequent Owner
Participant" which it shall not have transferred to any Subsequent Owner
Participant.
"Subsequent Owner Participant" means any entity to which the Original
Owner Participant or any transferee from the Original Owner Participant or any
Subsequent Owner Participant shall have transferred at any time after the
Delivery Date all or any part of the undivided right, title and interest
originally held by the Original Owner Participant in the Trust Estate, provided
that any such transfer: (i) shall be effected by a written agreement, in form
and substance reasonably satisfactory to the Owner Trustee in its individual
capacity, among such transferee, its transferor and the Owner Trustee, which
shall (A) specify the percentage of the Ownership Interest of such transferee so
transferred to it and (B) provide that such transferee thereby becomes a party
to, and beneficiary of, this Trust Agreement and an Owner Participant for all
purposes hereof and that such transferee assumes all of the obligations of its
transferor under this Trust Agreement to the extent of such transferee's
Ownership Interest; and (ii) so long as the Lease shall be in effect, such
transferee and its transferor shall have complied with all of the terms of
Section 8(h) of the Participation Agreement.
"Trust Estate" means all estate, right, title and interest of the
Owner Trustee in and to the Aircraft, the Lease,
2
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[Trust Agreement (1995 777 C)]
any Lease Supplement, the Purchase Agreement, the Consent and Agreement, 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, or to the Owner
Participants, 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 Participants, 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 such term in the
Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the Lease.
"Trust Supplement" means a supplement to the Trust Agreement and Trust
Indenture substantially the form of Exhibit A to the Trust Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. The Original Owner
------------------------------
Participant hereby authorizes and directs the Owner Trustee to execute and
deliver the Operative Documents and any other agreements, instruments or
documents to which the Owner Trustee is a party in the respective forms thereof
in which delivered from time to time by the Majority in Interest of Owner
Participants to the Owner Trustee for execution and delivery and, subject to the
terms hereof, to exercise its rights 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 Participants, subject, however, to the Lien created
by the Trust
3
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[Trust Agreement (1995 777 C)]
Indenture and 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
------------------------------------------
Original Owner Participant hereby authorizes and directs the Owner Trustee to,
and the Owner Trustee agrees for the benefit of the Owner Participants 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 the 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 amount
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
4
<PAGE>
[Trust Agreement (1995 777 C)]
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 Original Owner Participant, as the Original Owner
Participant may deem necessary or advisable in connection with the
transactions contemplated hereby, the taking of any such action by the
Owner Trustee in the presence of the Original Owner Participant or its
counsel to evidence, conclusively, the direction of the Original Owner
Participant.
SECTION 3.02. Conditions Precedent. The right and obligation of the
--------------------
Owner Trustee to take the action required by Section 3.01 hereof with respect
to the Aircraft shall be subject to the following conditions precedent: (a)
the Original Owner Participant shall have made the full amount of its
Commitment available to the Owner Trustee, in immediately available funds, in
accordance with Sections 1 and 2 of the Participation Agreement; and (b) the
terms and conditions of Section 4 of the Participation Agreement shall have
been either fulfilled to the satisfaction of or waived by the Original 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)
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
5
<PAGE>
[Trust Agreement (1995 777 C)]
provisions of Article III 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
Participants 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 the Owner Trustee; Other Parties. Any payment
--------------------------------------------
received by the Owner Trustee that are not payable to the Indenture
Trustee pursuant to Section 4.01(a) hereof (other than Excluded Payments)
received by the Owner Trustee, any payments received from the Indenture
Trustee other than 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
-----
ratably to each Owner Participant in proportion to such Owner
Participant's Ownership Interest.
(c) Certain Distributions to the Owner Participants. Notwithstanding
-----------------------------------------------
anything herein contained to the contrary, all amounts from time to time
distributable by the Indenture Trustee to each Owner Participant pursuant
to the Trust Indenture shall, if paid to the Owner Trustee, be distributed
by the Owner Trustee to such Owner Participant in accordance with the
provisions of Section 3.06 of the Trust Indenture.
(d) Excluded Payments. Notwithstanding any other provision hereof,
-----------------
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.
6
<PAGE>
[Trust Agreement (1995 777 C)]
SECTION 4.02. Method of Payments. The Owner Trustee shall make
------------------
distributions or cause distributions to be made to each Owner Participant
pursuant to this Article IV by transferring or causing the Indenture Trustee to
transfer by wire transfer the amount to be distributed to such account or
accounts of such Owner Participant as such Owner Participant may designate from
time to time in writing to the Owner Trustee. Notwithstanding the foregoing,
the Owner Trustee will, if so requested by such Owner Participant in writing,
pay any or all amounts payable to such Owner Participant pursuant to this
Article IV either (i) by crediting such amount or amounts to an account or
accounts maintained by such Owner Participant with the Owner Trustee in its
individual capacity in immediately available funds, (ii) by payment at the
Trust Office of the Owner Trustee, in immediately available funds, or (iii) by
mailing an official bank check or checks in such amount or amounts payable to
such Owner Participant at such address as such Owner Participant shall have
designated in writing to the Owner Trustee. Subject to Section 4.01, the Owner
Trustee shall, when and as instructed in writing by any Owner Participant,
direct the Indenture Trustee and Lessee to pay all of such Owner Participant's
pro rata amounts otherwise payable to the Owner Trustee by the Indenture
Trustee pursuant to the Indenture or by the Lessee pursuant to the Lease
directly to such Owner Participant.
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 Indenture Event of Default) State
Street Bank and Trust Company will cause the Owner Trustee to give to the
Indenture Trustee, each Owner Participant and the Lessee prompt telephonic or
telecopier notice thereof followed by prompt confirmation thereof by certified
mail, postage prepaid. 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 or Indenture Event of Default or other
event as the Owner Trustee shall be directed in writing by a Majority in
Interest of Owner Participants. If the
7
<PAGE>
[Trust Agreement (1995 777 C)]
Owner Trustee shall not have received instructions as above provided within 20
days after the mailing of such notice to the Owner Participants, the Owner
Trustee until instructed otherwise in accordance with the preceding sentence
may, but shall be under no duty to, take or refrain from taking such action
with respect to such Lease Event of Default or other event as it shall deem
advisable in the best interests of the Owner Participants. 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 Corporate Trust
Department 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 or
Indenture Event of Default or other event referred to in this Section 5.01
unless notified in writing by the Indenture Trustee, any Owner Participant or
the 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 a Majority in Interest of Owner Participants, 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 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, or
take such other action, as shall be specified in such instructions (including
entering into agreements referred to in clause (i) of the definition of
"Subsequent Owner Participant"); (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 a
Majority in Interest of Owner Participants, the Owner Trustee shall not approve
any such matter as satisfactory to it; and (iv) subject to the rights of the
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 retain,
lease or otherwise dispose of, or from time to time take such other action with
respect to, the Aircraft 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
8
<PAGE>
[Trust Agreement (1995 777 C)]
(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 Participants,
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 a Majority in Interest of Owner
Participants shall have directed the Owner Trustee to take any such action or
refrain from taking any action, each Owner Participant, jointly and severally,
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, jointly and severally, 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 a
Majority in Interest of Owner Participants received pursuant to the terms of
Section 5.01 or 5.02, and no implied duties or obligations shall be read into
this Trust Agreement against the Owner Trustee. State Street Bank and Trust
Company 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 agrees that it will
-----------
9
<PAGE>
[Trust Agreement (1995 777 C)]
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 a Majority in Interest of Owner Participants
pursuant to Section 5.01 or 5.02 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. State Street Bank and
-------------------------------
Trust Company 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 Bank and Trust Company 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(j) 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 Bank and Trust Company 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 Bank and Trust Company 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
10
<PAGE>
[Trust Agreement (1995 777 C)]
supplied by Lessee pursuant to any of the Operative Documents, complete and
timely submit (and furnish each 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 Participants 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 each of the Owner Participants, promptly upon receipt
thereof, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to the Owner
Trustee hereunder or under the Lease or any other Operative Document to which a
responsible officer of the Owner Trustee reasonably believes have not been
delivered to said parties.
SECTION 6.03. No Representations or Warranties as to Certain
----------------------------------------------
Matters. NEITHER THE OWNER TRUSTEE NOR STATE STREET BANK AND TRUST COMPANY
-------
MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, VALUE, AIRWORTHINESS, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE
AIRCRAFT OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH
RESPECT TO THE AIRCRAFT WHATSOEVER, except that State Street Bank and Trust
Company in its individual capacity warrants that on the Delivery Date the Owner
Trustee shall have received whatever title was conveyed to it by the Lessee and
that the Aircraft shall during the Lease Term be free of Lessor Liens
attributable to State Street Bank and Trust Company 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 Bank and Trust Company in its individual
capacity or by the Owner Trustee as the case may be and except that State
Street Bank and Trust Company in
11
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[Trust Agreement (1995 777 C)]
its individual capacity hereby represents and warrants that this Trust
Agreement has been, and (assuming due authorization, execution and delivery by
the Original 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 a legal, valid and binding obligation of
State Street Bank and Trust Company or the Owner Trustee, as the case may be,
enforceable against State Street Bank and Trust Company or the Owner Trustee,
as the case may be, in accordance with its terms.
SECTION 6.04. No Segregation of Monies Required; No Interest.
----------------------------------------------
Except as otherwise provided herein or in the Lease or the Trust Indenture,
monies received by the Owner Trustee hereunder need not be segregated in any
manner except to the extent required by law, and may be deposited under such
general conditions as may be prescribed by law, and the Owner Trustee shall
not, except as provided in Section 22 of the Lease, 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 to be genuine and reasonably believed by it to be signed by the
proper party or parties. Unless other evidence in respect thereof is
specifically prescribed herein, any request, direction, order or demand of the
Owner Participants 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 a person purporting to be 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
12
<PAGE>
[Trust Agreement (1995 777 C)]
rely on a certificate signed by a person purporting to be 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 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 and 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.
SECTION 6.07. Fees; 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. Except as provided in
Section 5.03 or 7.01 hereof, the Owner Trustee agrees that it shall have no
right against the Owner Participants for any fee as compensation for its
services hereunder. The aforesaid obligations shall constitute indebtedness
hereunder and the Owner Trustee is hereby granted, and said obligations shall
be secured by, a lien
13
<PAGE>
[Trust Agreement (1995 777 C)]
on the Trust Estate entitling the Owner Trustee to priority as to payment
thereof over payment to any other person under this Trust Agreement. Pursuant
to the last paragraph of Section 7(c) of the Participation Agreement and
subject to Section 16 thereof, the Lessee shall be required to pay the 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 Participants nor the Trust Estate shall
have any liability for any such fees and expenses; provided, however, the Owner
Participants 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 agreement
contemplated hereby. The Owner Participants shall be responsible for causing
to be prepared and filed all income tax returns required to be filed by the
Owner Participants. The Owner Trustee shall be responsible for causing to be
prepared, at the request of an Owner Participant, all income tax returns
required to be filed with respect to the trust created hereby and shall execute
and file such returns. Each Owner Participant, upon request, will furnish the
Owner Trustee with all such information as may be reasonably required from any
such Owner Participant in connection with the preparation of such income tax
returns.
ARTICLE VII
INDEMNIFICATION OF STATE STREET BANK AND TRUST COMPANY
BY OWNER PARTICIPANTS
SECTION 7.01. Owner Participants to Indemnify State Street Bank and
-----------------------------------------------------
Trust Company. The Owner Participants hereby jointly and severally agree,
-------------
whether or not any of the transactions contemplated hereby shall be
consummated, to assume liability for, and hereby indemnify, protect, save and
keep harmless State Street Bank and Trust Company in its individual capacity
and its successors, assigns, legal representatives,
14
<PAGE>
[Trust Agreement (1995 777 C)]
agents and servants, from and against any and all liabilities, obligations,
losses, damages, penalties, taxes (excluding any taxes payable by State Street
Bank and Trust Company in its individual capacity on or measured by any
compensation received by State Street Bank and Trust Company in its individual
capacity for its services hereunder), claims, actions, suits, costs, expenses
or disbursements (including, without limitation, reasonable ongoing fees of the
Owner Trustee, 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 Bank and Trust Company 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) 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 Bank and
Trust Company 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 Bank and Trust Company in its individual capacity in the
performance or nonperformance of its duties hereunder or (b) those resulting
from the inaccuracy of any representation or warranty of State Street Bank and
Trust Company in its individual capacity (or from the failure of State Street
Bank and Trust Company in its individual capacity to perform any of its
covenants) in Section 6.03 hereof, in Section 4 of the Lease, in Sections 8(b),
8(c) or 8(r) of the Participation Agreement or elsewhere in any of the other
Operative Documents or (c) as may result from a breach by State Street Bank and
Trust Company in its individual capacity of its covenant in the last sentence
of Section 5.04 or the first sentence of Section 5.01 hereof or (d) in the case
of the failure to use ordinary care on the part of the Owner Trustee or State
Street Bank and Trust Company in its individual capacity in the disbursement of
funds. Without limiting the foregoing, State Street Bank and Trust Company
agrees that, prior to seeking indemnification from the Owner Participants, it
will demand, and take such action as it may in its discretion determine to be
reasonable to pursue, indemnification available to State Street Bank and Trust
Company
15
<PAGE>
[Trust Agreement (1995 777 C)]
from Lessee under the Lease or the Participation Agreement. The indemnities
contained in this Section 7.01 extend to State Street Bank and Trust Company
only in its individual capacity and shall not be construed as indemnities of
the Trust Indenture Estate or Trust Estate (except to the extent, if any, that
State Street Bank and Trust Company in its individual capacity has been
reimbursed by the Trust Indenture Estate or 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 Bank and Trust Company 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 Participants or others, but without releasing any of them from their
respective agreements of reimbursement; and to secure the same State Street
Bank and Trust Company 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 Participants. 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 AN OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interests. All provisions of Section 8(1)
---------------------
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 any Owner Participant of any of its right, title or
interest in and to the Participation Agreement, the Trust Estate or this Trust
Agreement.
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 each Owner Participant, the
Indenture Trustee and Lessee, such resignation
16
<PAGE>
[Trust Agreement (1995 777 C)]
to be effective upon the acceptance of appointment by the successor Owner
Trustee under Section 9.01(b) hereof. In addition, a Majority in Interest of
Owner Participants may at any time remove the Owner Trustee without cause by a
notice in writing delivered to the Owner Trustee, all other Owner Participants
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
resignation or removal of the Owner Trustee, a Majority in Interest of Owner
Participants may, in consultation with the Lessee, appoint a successor Owner
Trustee by an instrument signed by such Owner Participants. If a successor
Owner Trustee shall not have been appointed within 30 days after such notice of
resignation or removal, the Owner Trustee, any Owner Participant or Lessee 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.
17
<PAGE>
[Trust Agreement (1995 777 C)]
(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, 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. No such successor
trustee shall (i) be located in a jurisdiction which creates adverse
consequences for the Lease (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
Participants agree with Lessee that, notwithstanding the last paragraph of
Section 7(c) of the Participation Agreement, they and not the Lessee shall be
liable for such excess).
(d) Merger, etc. Any corporation into which the Owner Trustee may
------------
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Owner Trustee may be transferred, shall,
subject to the terms of Section 9.01(c) 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, being advised by counsel, shall determine
that it is so necessary or prudent in the interest of the Owner Participants or
the Owner Trustee, or the Owner Trustee shall have been directed to do so by a
Majority in Interest of Owner Participants, the Owner Trustee and each 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" as defined in Section 101(16) of the Federal
Aviation Act) approved by the Owner Trustee and a Majority in Interest of Owner
Participants, 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 Participants shall not have joined in the execution of such
agreements supplemental hereto within ten days after the
18
<PAGE>
[Trust Agreement (1995 777 C)]
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 Participants; and the Owner
Participants hereby appoint the Owner Trustee their agent and attorney-in-fact
to act for them 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) all 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; and
(E) a Majority in Interest of Owner Participants, at any time, by an
instrument in writing may remove any such additional trustee. In the event
that the Owner Participants 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 Participants; and
the Owner Participants hereby
19
<PAGE>
[Trust Agreement (1995 777 C)]
appoint the Owner Trustee their agent and attorney-in-fact for them in such
connection in such contingency.
(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 Operative Documents, including, without limitation,
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) Supplement and Amendments. Subject to Section 10 of the Participation
-------------------------
Agreement and Section 10.05 hereof, this Trust Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
the Owner Trustee and a Majority in Interest of Owner Participants. 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 a Majority in Interest
of Owner Participants, 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; and provided that, without the prior written
consent of each Owner Participant, (i) no such supplement, amendment or
modification shall (A) modify any of the provisions of this Section 10.01, the
definition of "Majority in Interest of Owner Participants" in Section 1.01
hereof or Article IV hereof, (B) reduce, modify or amend any indemnities in
favor of any Owner Participant as set forth in Section 7 of the Participation
Agreement or in the Tax Indemnity Agreement, (C) reduce the amount or extend
the time of payment of Basic Rent, Supplemental Rent, Termination Value or
Stipulated Loss Value for the Aircraft as set forth in the Lease (except in
accordance with Section 3 of the Lease) and (ii) no such supplement, amendment
or modification shall require any Owner Participant to invest or advance funds
or shall entail any additional personal liability or the surrender of any
indemnification, claim or individual right on the part of any Owner Participant
with respect to any agreement or obligation.
20
<PAGE>
[Trust Agreement (1995 777 C)]
(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. Absence of Requirements as to Form. It shall not be
----------------------------------
necessary for any written request furnished pursuant to Section 10.01 hereof to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
SECTION 10.04. Distribution of Documents. Promptly after the
-------------------------
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, the Owner Trustee shall mail, by certified mail, postage prepaid,
a conformed copy thereof to each Owner Participant, but the failure of the
Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.05. No Request Needed as to Lease Supplement and Trust
--------------------------------------------------
Supplement. No written request pursuant to Section 10.01 hereof shall be
----------
required to enable the Owner Trustee to enter into the Lease Supplement
covering the Aircraft with Lessee pursuant to the terms of the Lease and
Section 3.01 hereof and the Trust Supplement pursuant to Section 3.01 hereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement. This Trust Agreement
------------------------------
and the trusts created hereby shall be of no further force or effect upon the
earlier of (a) 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
21
<PAGE>
[Trust Agreement (1995 777 C)]
property constituting part of the Trust Estate and the final distribution by
the Owner Trustee of all monies or other property or proceeds constituting part
of the Trust Estate in accordance with Article IV hereof, provided that at such
time Lessee shall have fully complied with all of the terms of the Lease and
the Participation Agreement or (b) twenty-one years less one day after the
death of the last survivor of all of the descendants 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 trusts
created hereby shall be or become authorized under applicable law to be valid
for a period commencing on the 21st 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 trusts created hereby for a period in gross exceeding the period for which
this Trust Agreement and the trusts created hereby are hereinabove stated to
extend and be valid), then this Trust Agreement and the trusts created hereby
shall not terminate under this subsection (b) but shall extend to and continue
in effect, but only if such nontermination and extension shall then be valid
under applicable law, until the day preceding such date as the same shall,
under applicable law, cease to be valid; otherwise this Trust Agreement and the
trusts created hereby shall continue in full force and effect in accordance
with the term hereof, subject to the Owner Participants' right to revoke such
trusts and cause the Trust Estate (subject to the Lien of the Trust Indenture,
to the rights of Lessee and any Sublessee created pursuant to the Lease and
subject to the right of Lessee to approve such revocation, which consent Lessee
shall not unreasonably withhold) to be distributed.
SECTION 11.02. Owner Participants Have No Legal Title in Trust
-----------------------------------------------
Estate. The Owner Participants 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 Participants 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 Participants 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
pursuant to the terms hereof or of the Lease or the Participation Agreement
shall bind the Owner Participants and shall be effective to transfer or convey
all right, title and interest of the Owner Trustee and the Owner
22
<PAGE>
[Trust Agreement (1995 777 C)]
Participants 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 Participants 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 Participants.
SECTION 11.05. Citizenship of the Owner Participant. If at any time
------------------------------------
there shall be more than one Owner Participant, and if the right to exercise
voting or similar rights hereunder by an Owner Participant 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 would adversely affect the United States registration of the
Aircraft, any such Owner Participant shall have no such right.
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 or the Original Owner Participant, to the respective
addresses set forth on Schedule I to the Participation Agreement, or (B) if to
a Subsequent Owner Participant, addressed to such Subsequent Owner Participant
at such address
23
<PAGE>
[Trust Agreement (1995 777 C)]
as such Subsequent Owner Participant shall have furnished by notice to the
parties hereto.
SECTION 11.07. Severability. Subject to Sections 11.06 and 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 Participants, their
successors and, to the extent permitted by Article VIII hereof, their assigns.
Any request, notice, direction, consent, waiver or other instrument or action
by an Owner Participant shall bind its successors and assigns. Any Owner
Participant which shall cease to have any Ownership Interest shall thereupon
cease to be a party hereto or an Owner Participant for any reason and shall
have no further obligations hereunder.
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 State of Massachusetts, including all matters of construction, validity and
performance.
* * *
24
<PAGE>
[Trust Agreement (1995 777 C)]
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:____________________________
<PAGE>
[Trust Agreement (1995 777 C)]
Aircraft N767UA
--------------------------------------------
FIRST AMENDMENT TO TRUST AGREEMENT
(1995 777 C)
Dated February __, 1996
between
---------------------------------,
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
---------------------------------------------
United Air Lines, Inc.
1995 777 C Equipment Trust
One Boeing 777-222 Aircraft
---------------------------------------------
<PAGE>
[Trust Agreement (1995 777 C)]
FIRST AMENDMENT TO TRUST AGREEMENT (1995 777 C)
THIS FIRST AMENDMENT TO TRUST AGREEMENT (1995 777 C) dated February
__, 1996 (this "Amendment") between THE ________________________________, a
Delaware corporation (the "Owner Participant"), and STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association
(for purposes of the Trust Agreement and this Amendment, in its individual
capacity, "State Street Connecticut", and otherwise not in its individual
capacity but solely as trustee hereunder with its permitted successors and
assigns called the "Owner Trustee"), as assignee of State Street Bank and Trust
Company (the "Original Owner Trustee"), amends that certain Trust Agreement
(1995 777 C) dated as of May 1, 1995 (the "Trust Agreement") between the Owner
Participant and the Original Owner Trustee.
W I T N E S S E T H:
WHEREAS, a counterpart of the Trust Agreement was attached to the Original
Indenture (as defined in the First Amendment to Lease Agreement (1995 777 C)
dated February __, 1996 between United Air Lines, Inc., as lessee ("Lessee"),
and the Owner Trustee) which was recorded with the Federal Aviation
Administration on May 31, 1995 and assigned Conveyance No. P02548; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement (1995
777 C) dated January 16, 1996 between the Owner Trustee and the Original Owner
Trustee, the Original Owner Trustee assigned to the Owner Trustee, and the
Owner Trustee assumed, all of the obligations of the Original Owner Trustee
under the Operative Documents; and
WHEREAS, in connection with a refinancing of the Loan Certificates
contemplated by Section 20 of the Participation Agreement, the parties hereto
desire to amend the Trust Agreement in certain respects; and
WHEREAS, except as otherwise defined in this Amendment, the capitalized
terms used herein shall have the meanings attributed thereto in the Trust
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
SECTION 1. Amendments to Article I. Section 1.01 of the Trust
-----------------------
Agreement is hereby amended in the following manner:
(a) The definition of "Corporate Trust Department" is hereby added to
the Trust Agreement, which definition shall be and read in its entirety as
follows:
""Corporate Trust Department" has the meaning which the term
"Trust Office" has in the Trust Indenture."
(a) The definition of "Indenture Event of Default" is hereby amended
to be and read in its entirety as follows:
""Indenture Event of Default" has the meaning ascribed such term
in the Trust Indenture."
(b) The definition of "Trust Indenture Estate" is hereby amended to be
and read in its entirety as follows:
""Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture."
SECTION 2. Amendments to Article IV. Section 4.01(a) of the Trust
------------------------
Agreement is hereby amended by deleting the reference to "Article III" which
appears therein and inserting a reference to "Article 3" in lieu thereof.
SECTION 3. Amendment to Article V. The first sentence of Section
----------------------
5.01 of the Trust Agreement is hereby amended to be and read in its entirety as
follows:
"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), State Street
Connecticut will cause the Owner Trustee to give to the Owner
Participant and Lessee prompt telephonic or telecopy 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 paragraphs (b) and (c) 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
2
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
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."
SECTION 4. Amendments to Articles VI and VII. Sections 6.01, 6.02,
---------------------------------
6.03 and 7.01 of the Trust Agreement are hereby amended by deleting the words
"State Street Bank and Trust Company" each time such words appear therein and
inserting the words "State Street" in lieu thereof.
SECTION 5. Amendment to Article VIII. Section 8.01 of the Trust
-------------------------
Agreement is hereby amended by deleting the reference to "Section 8(l) of the
Participation Agreement" which appears therein and inserting a reference to
"Section 8(h) of the Participation Agreement" in lieu thereof.
SECTION 6. Amendments to Article XI. Article XI of the Trust
------------------------
Agreement is hereby amended in the following manner:
(a) Section 11.01 is hereby amended to be and read in its entirety as
follows:
"Section 11.01. Termination. (a) This Trust Agreement has been
-----------
entered into in part to induce the Indenture Trustee and the
Certificate Holders from time to time to participate in the
transactions contemplated hereby, and State Street Connecticut and the
Owner Participant agree that the Indenture Trustee and the Certificate
Holders from time to time are third party beneficiaries hereof to the
extent set forth in Article VIII, Article IX, Section 5.01 and Section
11.01 hereof. This Trust Agreement and the trust created hereby shall
be of no further force or effect upon the earlier of (a) 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 in accordance with Article IV
hereof, provided that at such time Lessee shall have fully complied
with all of the terms of the Lease and the Participation Agreement or
(b) twenty-one years less one day after the death of the last survivor
of all of the descendants of the grandparents of David C. Rockefeller
living on the date of the earliest
3
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
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 21st 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 trusts created hereby shall not terminate under this
subsection (b) but shall extend to and continue in effect, but only if
such nontermination and extension shall then be valid under applicable
law, until the day preceding such date as the same shall, under
applicable law, cease to be valid. This Trust Agreement and the
trusts created hereby shall terminate and the Trust Estate shall be
distributed to the Owner Participant, and this Trust Agreement shall
be of no further force and effect, upon the election of the Owner
Participant by notice to the Owner Trustee to revoke the trusts
created hereby; provided, however, that until the Lien of the Trust
-------- -------
Indenture on the Trust Estate shall have been discharged pursuant to
the terms thereof and until payment in full of the principal of,
premium if any, and interest on the Certificates and all other amounts
owed to Holders under the Trust Indenture, no such revocation shall be
effective without the consent of the Indenture Trustee.
(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 Trust created hereby."
4
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
(b) Section 11.12 is hereby amended by deleting the phrase "State of
Massachusetts" which appears therein and inserting the phrase "State of
Connecticut" in lieu thereof.
SECTION 7. Ratification. Except as amended hereby, the Trust
------------
Agreement as heretofore supplemented continues and shall remain in full force
and effect in all respects.
SECTION 8. Miscellaneous. This Amendment 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. All covenants and agreements
contained herein and in the Trust Agreement shall be binding upon, and inure to
the benefit of, the Owner Trustee and its successors and assigns, and the Owner
Participants, their successors and, to the extent permitted by Article VIII of
the Trust Agreement, their assigns.
Any request, notice, direction, consent, waiver or other instrument or action
by an Owner Participant shall bind its successors and assigns. The headings of
the various Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. This Amendment shall in
all respects be governed by, and construed in accordance with, the internal
laws of the State of Connecticut, including all matters of construction,
validity and performance.
* * *
5
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
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 OF
CONNECTICUT, NATIONAL ASSOCIATION
By:_______________________________
Title:____________________________
6
<PAGE>
[First Amendment to [Trust Agreement (1995 777 C)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
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 OF
CONNECTICUT, NATIONAL ASSOCIATION
By:_______________________________
Title:____________________________
6
<PAGE>
*
Doc. No. 1.05
Aircraft N106UA
--------------------------------------------
TRUST AGREEMENT
(1994 747 B)
Dated as of August 1, 1994
between
__________________________,
Owner Participant
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Owner Trustee
---------------------------------------------
United Air Lines, Inc.
1994 747 B Equipment Trust
One Boeing 747-451 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
SECTION 4.02. Method of Payments................................... 5
ARTICLE V
DUTIES OF THE OWNER TRUSTEE................... 6
SECTION 5.01. Notice of Event of Default........................... 6
i
<PAGE>
SECTION 5.02. Action Upon Instructions............................. 6
SECTION 5.03. Indemnification...................................... 7
SECTION 5.04. No Duties Except as Specified in
Trust Agreement or Instructions...................... 7
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............................ 8
SECTION 6.03. No Representations or Warranties
as to Certain Matters................................ 9
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................................ 11
SECTION 6.08. Tax Returns.......................................... 12
ARTICLE VII
INDEMNIFICATION OF FIRST SECURITY BANK
OF UTAH, NATIONAL ASSOCIATION
BY OWNER PARTICIPANT...................... 13
SECTION 7.01. Owner Participant to Indemnify
First Security Bank of Utah,
National Association................................. 13
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST............. 15
SECTION 8.01. Transfer of Interest................................. 15
ARTICLE IX
ii
<PAGE>
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
(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
Supplements Certain
Parties........................................ 19
SECTION 10.02. Discretion as to Execution of
Documents............................................ 19
SECTION 10.03. Distribution of Documents............................ 19
ARTICLE XI
MISCELLANEOUS........................ 20
SECTION 11.01. (a) Termination of Trust
Agreement........................................ 20
(b) Termination at Option of the
Owner Participant................................ 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. [Intentionally Reserved for
Potential Future Use]................................ 21
SECTION 11.06. Notices.............................................. 21
iii
<PAGE>
SECTION 11.07. Severability......................................... 22
SECTION 11.08. Waivers, etc......................................... 22
SECTION 11.09. Counterparts......................................... 22
SECTION 11.10. Binding Effect, etc.................................. 22
SECTION 11.11. Headings; References................................. 22
SECTION 11.12. Governing Law........................................ 22
SECTION 11.13. Performance by Owner Participant..................... 23
iv
<PAGE>
TRUST AGREEMENT (1994 747 B)
This TRUST AGREEMENT (1994 747 B) dated as of August 1, 1994 between
__________________________, a Delaware corporation (the "Owner Participant"),
and FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association (in its individual capacity, "First Security Bank of Utah, National
Association", 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 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 without definition 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:
"Excluded Payments" has the meaning ascribed to such term in the Trust
Indenture.
"Indenture Event of Default" has the meaning which the term "Event of
Default" has in the Trust Indenture.
"Lease" means that certain Lease Agreement (1994 747 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.
"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, the Consent and Agreement and the Owner Trustee's Purchase
Agreement, the Owner
<PAGE>
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale, including,
without limitation, all amounts of Interim Rent, 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 such term in the
Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the Trust
Indenture.
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 (i) 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, (ii) subject to the terms hereof, exercise its rights (upon
instructions received from the Owner Participant) and perform its duties under
said Operative Documents and instruments and other agreements as set forth
therein in accordance with the terms thereof, (iii) take all actions required in
connection with obtaining or amending any approval, license, registration or
certificate in connection with any of the foregoing Operative Documents,
instruments or agreements, (iv) take whatever action shall be required to be
taken by the Owner Trustee by the terms of, and subject to the terms of, this
Trust Agreement and (v) subject to the terms of this Trust Agreement, take such
other action in connection with the foregoing as the Owner Participant may from
time to time direct, the taking of any such action in the presence of the
2
<PAGE>
[Trust Agreement (1994 747B)]
Owner Participant or its counsel on the Delivery Date to evidence, conclusively,
the direction of the Owner Participant.
SECTION 2.02. Declaration of Trust. First Security Bank of Utah,
--------------------
National Association hereby declares that the Owner Trustee will hold the Trust
Estate upon the trust 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 to the Original Loan Participant the
Loan Certificates in the amount 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
3
<PAGE>
[Trust Agreement 1994 747 B)]
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 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 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
4
<PAGE>
[Trust Agreement (1994 747 B)]
distribution in accordance with the provisions of Article III 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. All payments and
----------------------------------------
amounts received by the Owner Trustee that are not payable to the Indenture
Trustee pursuant to 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 Operative
Documents; 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 III of the Trust Indenture.
(d) Excluded Payments. Notwithstanding any other provision hereof,
-----------------
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.
SECTION 4.02. Method of Payments. All amounts payable to the Owner
------------------
Participant pursuant to this Trust Agreement shall be paid by the Owner Trustee
to the Owner Participant by transferring or causing the Indenture Trustee to
transfer by wire
5
<PAGE>
[Trust Agreement (1994 747 B)]
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. Subject to Section
4.01, the Owner Trustee shall, when and as instructed in writing by the Owner
Participant, direct the Indenture Trustee and Lessee to pay all amounts payable
to the Owner Trustee by the Indenture Trustee pursuant to the Indenture or the
Lessee pursuant to the Lease directly to the Owner Participant.
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), First
Security Bank of Utah, National Association, will cause the Owner Trustee to
give to the Indenture Trustee, the Owner Participant and Lessee prompt
telephonic or telex notice thereof followed by prompt confirmation thereof by
certified mail, postage prepaid. 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 or 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, in the absence of Actual
Knowledge by a responsible officer of the Corporate Trust Department 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 or Indenture Event of
Default 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:
6
<PAGE>
[Trust Agreement (1994 747 B)]
(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; and (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.
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 or Lessee, 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
7
<PAGE>
[Trust Agreement (1994 747B)]
into this Trust Agreement against the Owner Trustee. First Security Bank of
Utah, National Association 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. First Security Bank
-------------------------------
of Utah, National Association accepts the trust 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. First Security
Bank of Utah, National Association 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
8
<PAGE>
[Trust Agreement (1994 747 B)]
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 First Security Bank of Utah,
National Association 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
First Security Bank of Utah, National Association 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 hereunder or
under 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 FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION
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 First Security Bank of Utah, National Association in its
9
<PAGE>
[Trust Agreement (1994 747 B)]
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 First
Security Bank of Utah, National Association 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 First
Security Bank of Utah, National Association in its individual capacity or by the
Owner Trustee, as the case may be, and except that First Security Bank of Utah,
National Association 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
First Security Bank of Utah, National Association or the Owner Trustee, as the
case may be, enforceable against First Security Bank of Utah, National
Association or the Owner Trustee, as the case may be, in accordance with its
terms.
SECTION 6.04. No Segregation of Monies; Interest. Except as
----------------------------------
otherwise provided herein or in the Lease or the Trust Indenture, 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
10
<PAGE>
[Trust Agreement (1994 747 B)]
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.
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
11
<PAGE>
[Trust Agreement (1994 747 B)]
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; provided, however, the Owner Trustee shall send a completed copy of
such return to the Owner Participant as soon as practicable after receipt by the
Owner Trustee of all information necessary to complete such return and in any
event before the due date of such return, so long as such information is
received by the Owner Trustee in sufficient time reasonably to complete such
return prior to the due date. 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.
12
<PAGE>
[Trust Agreement (1994 747 B)]
ARTICLE VII
INDEMNIFICATION OF FIRST SECURITY BANK
OF UTAH, NATIONAL ASSOCIATION
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify First Security Bank of
-----------------------------------------------------
Utah, National Association. 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 First
Security Bank of Utah, National Association, 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 First Security Bank of Utah, National
Association in its individual capacity on or measured by any compensation
received by First Security Bank of Utah, National Association 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 First Security Bank of
Utah, National Association, 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; provided, however,
-------- -------
that to the extent First Security Bank of Utah, National Association, in its
individual capactiy, actually receives and retains any other indemnification
payment, First Security Bank of Utah, National Association in its individual
capacity, shall not be entitled to claim the same amount under this Section) 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 First Security Bank of Utah,
National Association, in its individual capacity, hereunder, except that the
Owner Participant shall not be required to indemnify First Security Bank of
Utah, National Association in its individual capacity for any liability,
13
<PAGE>
[Trust Agreement (1994 747 B)]
obligation, loss, damage, penalty, tax, claim, action, suit, cost, expense or
disbursement (i) arising or resulting from any of the matters described in the
last sentence of Section 6.01 hereof or (ii) as otherwise excluded by the terms
of Section 7(b) or 7(c) of the Participation Agreement from Lessee's general
indemnity or general tax indemnity to the Owner Trustee or First Security Bank
of Utah, National Association in its individual capacity, as the case may be,
thereunder (disregarding, for this purpose, Sections 7(b)(ii)(5)(i) (to the
extent that it results from the willful misconduct or gross negligence of the
Owner Participant being imputed to the Owner Trustee), 7(b)(ii)(8) and 7(c)(10)
of the Participation Agreement); provided, however, that the exception set forth
in clause (ii) 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 express
written directions given to the Owner Trustee by the Owner Participant
specifying such action to be taken or omission to be made, and provided further
that the Owner Participant shall not be required to indemnify any Person under
this Section unless the Lessee has failed to satisfy its obligations under the
Operative Documents to indemnify such Person within a reasonable time after
demand for payment in respect thereof by such Person. The indemnities contained
in this Section 7.01 extend to First Security Bank of Utah, National Association
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
First Security Bank of Utah, National Association 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, First Security Bank of Utah, National
Association 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, First Security Bank of Utah, National Association 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.
14
<PAGE>
[Trust Agreement (1994 747 B)]
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.
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 Partici-pant,
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 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; provided,
however, that the approval by Lessee under this sentence shall be limited
to those situations where (i) Lessee reasonably believes that such
successor Owner Trustee will cause an administrative or similar burden on
Lessee or (ii) the fees imposed by the successor Owner Trustee are greater
than the fees imposed by the original or a previously approved Owner
Trustee, unless the Owner Participant agrees to be responsible for such
excess fees). If a successor Owner Trustee shall not have been appointed
within 30 days after such notice of resignation or removal, the Owner
Trustee or the Owner Participant may apply to any court of competent
jurisdiction to appoint a successor Owner Trustee
15
<PAGE>
[Trust Agreement (1994 747 B)]
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" within the meaning of Section
101(16) of the Federal Aviation Act 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
16
<PAGE>
[Trust Agreement (1994 747 B)]
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 First Security Bank of
------------
Utah, National Association may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which First Security Bank of Utah, National Association
shall be a party, or any corporation to which substantially all the
corporate trust business of First Security Bank of Utah, National
Association 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" as defined in Section 101(16) of the Federal Aviation Act) 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.
17
<PAGE>
[Trust Agreement (1994 747 B)]
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
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
18
<PAGE>
[Trust Agreement (1994 747 B)]
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 First Security Bank of Utah, National Association, 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.
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
19
<PAGE>
[Trust Agreement (1994 747 B)]
Trustee to mail such conformed copy shall not impair or affect the validity of
such document.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. (a) Termination of Trust Agreement. This Trust
------------------------------
Agreement and the trust created hereby shall be of no further force or
effect upon the earlier of (a) 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 in accordance with Article
IV hereof, provided that at such time Lessee shall have fully complied with
all of the terms of the Lease and the Participation Agreement or (b)
twenty-one years less one day after the death of the last survivor of all
of the descendants 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 21st 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 trusts created
hereby shall not terminate under this subsection (b) but shall extend to
and continue in effect, but only if such nontermination and extension shall
then be valid under applicable law, until the day preceding such date as
the same shall, under applicable law, cease to be valid; otherwise this
Trust Agreement and the trust created hereby shall continue in full force
and effect in accordance with the term hereof, subject to the Owner
Participant's right to revoke such trust and cause the Trust Estate
(subject to the Lien of the Trust Indenture, to the rights of Lessee and
any Sublessee created pursuant to the Lease and subject to Section 8(v) of
the Participation Agreement) to be distributed.
(b) Termination at Option of the Owner Participant. Notwithstanding
----------------------------------------------
Section 9.01(a) above, this Trust Agreement
20
<PAGE>
[Trust Agreement (1994 747 B)]
and the trust created hereby shall terminate and the Trust Estate shall be
distributed to the Owner Participant and this Trust Agreement shall be of
no further force and effect, upon the election of the Owner Participant by
notice to the Owner Trustee, if such notice shall be accompanied by the
written agreement of the Owner Participant assuming all the obligations of
the Owner Trustee under or contemplated by the Operative Documents and all
other obligations of the Owner Trustee incurred by it as trustee hereunder.
SECTION 11.02. Owner Participant Has No Legal Title in Trust Estate.
----------------------------------------------------
The Owner Participant shall have no 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 sole and exclusive benefit of the Owner Trustee and the Owner
Participant.
SECTION 11.05. [Intentionally Reserved for Potential Future Use].
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
21
<PAGE>
[Trust Agreement (1994 747 B)]
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
received. 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) set forth on Schedule I to the
Participation Agreement.
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 State of Utah, including all matters of construction, validity and
performance.
22
<PAGE>
[Trust Agreement (1994 747 B)]
SECTION 11.13. Performance by Owner Participant. Any obligation of
--------------------------------
the Owner Trustee hereunder or under the Lease or any other document
contemplated herein may be performed by the Owner Participant if the Owner
Trustee has failed to perform such obligation pursuant to this Trust Agreement,
the Lease or such other document, as the case may be and any such performance
shall not be construed as a revocation of the trusts created hereby.
* * *
23
<PAGE>
[Trust Agreement (1994 747 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:__________________________________
FIRST SECURITY BANK OF UTAH, NATIONAL
ASSOCIATION
By:_____________________________________
Title:__________________________________
24
<PAGE>
[Trust Agreement (1994 747 B)]
Aircraft N106UA
--------------------------------------------
FIRST AMENDMENT TO TRUST AGREEMENT
(1994 747 B)
Dated February __, 1996
between
____________________________,
Owner Participant
and
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
---------------------------------------------
United Air Lines, Inc.
1994 747 B Equipment Trust
One Boeing 747-451 Aircraft
---------------------------------------------
<PAGE>
FIRST AMENDMENT TO TRUST AGREEMENT (1994 747 B)
THIS FIRST AMENDMENT TO TRUST AGREEMENT (1994 747 B) dated February
__, 1996 (this "Amendment") between ________________________________, a Delaware
corporation (the "Owner Participant"), and STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, "State Street Connecticut", and otherwise not in its
individual capacity but solely as trustee hereunder with its permitted
successors and assigns called the "Owner Trustee") as assignee of First Security
Bank of Utah, National Association ("Original Owner Trustee"), amends that
certain Trust Agreement (1994 747 B) dated as of August 1, 1994 (the "Trust
Agreement") between the Owner Participant and the Original Owner Trustee.
W I T N E S S E T H:
WHEREAS, a counterpart of the Trust Agreement was attached to the Original
Indenture (as defined in the Second Amendment to Lease Agreement (1994 747 B)
dated February __, 1996 between United Air Lines, Inc., as lessee ("Lessee"),
and the Owner Trustee) which was recorded with the Federal Aviation
Administration on August 8, 1994 and assigned Conveyance No. Y39808; and
WHEREAS, pursuant to that certain Assignment and Assumption Agreement (1994
747 B) dated January __, 1996 between the Owner Trustee and the Original Owner
Trustee, the Original Owner Trustee assigned to the Owner Trustee, and the Owner
Trustee assumed, all of the obligations of the Original Owner Trustee under the
Operative Documents; and
WHEREAS, in connection with a refinancing of the Loan Certificates
contemplated by Section 20 of the Participation Agreement, the parties hereto
desire to amend the Trust Agreement in certain respects; and
WHEREAS, except as otherwise defined in this Amendment, the capitalized
terms used herein shall have the meanings attributed thereto in the Trust
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
SECTION 1. Amendments to Article I. Section 1.01 of the Trust
-----------------------
Agreement is hereby amended in the following manner:
(a) The definition of "Indenture Event of Default" is hereby amended
to be and read in its entirety as follows:
<PAGE>
[First Amendment to Trust Agreement (1994 747 B)]
""Indenture Event of Default" has the meaning ascribed such term
in the Trust Indenture."
(b) The definition of "Trust Indenture Estate" is hereby amended to be
and read in its entirety as follows:
""Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture."
SECTION 2. Amendment to Article IV. Section 4.01(a) of the Trust
-----------------------
Agreement is hereby amended by deleting the reference to "Article III" which
appears therein and inserting a reference to "Article 3" in lieu thereof.
SECTION 3. Amendment to Article V. The first sentence of Section
----------------------
5.01 of the Trust Agreement is hereby amended to be and read in its entirety as
follows:
"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), State Street
Connecticut will cause the Owner Trustee to give to the Owner
Participant and Lessee prompt telephonic or telecopy 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 paragraphs (b) and (c) 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."
SECTION 4. Amendments to Articles VI and VII. Sections 6.01, 6.02,
---------------------------------
6.03 and 7.01 of the Trust Agreement are hereby amended by deleting the words
"First Security Bank of Utah, National Association" each time such words appear
therein and inserting the words "State Street Connecticut" in lieu thereof.
2
<PAGE>
[First Amendment to Trust Agreement (1994 747 B)]
SECTION 5. Amendments to Article XI. Article XI of the Trust
------------------------
Agreement is hereby amended in the following manner:
(a) Section 11.01 is hereby amended to be and read in its entirety as
follows:
"Section 11.01. Termination. (a) This Trust Agreement has been
-----------
entered into in part to induce the Indenture Trustee and the
Certificate Holders from time to time to participate in the
transactions contemplated hereby, and State Street Connecticut and the
Owner Participant agree that the Indenture Trustee and the Certificate
Holders from time to time are third party beneficiaries hereof to the
extent set forth in Article VIII, Article IX, Section 5.01 and Section
11.01 hereof. This Trust Agreement and the trusts created hereby
shall be of no further force or effect upon the earlier of (a) 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 in accordance with Article IV
hereof, provided that at such time Lessee shall have fully complied
with all of the terms of the Lease and the Participation Agreement or
(b) twenty-one years less one day after the death of the last survivor
of all of the descendants 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 21st 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 trusts created hereby shall not
terminate under this subsection (b) but shall extend to and continue
in effect, but only if such nontermination and extension shall then be
valid under applicable law, until the day preceding such date as the
same shall, under applicable law, cease to be valid. This Trust
Agreement and the trusts created
3
<PAGE>
[First Amendment to Trust Agreement (1994 747 B)]
hereby shall terminate and the Trust Estate shall be distributed to
the Owner Participant, and this Trust Agreement shall be of no further
force and effect, upon the election of the Owner Participant by notice
to the Owner Trustee to revoke the trusts created hereby; provided,
--------
however, that until the Lien of the Trust Indenture on the Trust
-------
Estate shall have been discharged pursuant to the terms thereof and
until payment in full of the principal of, premium if any, and
interest on the Certificates and all other amounts owed to Holders
under the Trust Indenture, no such revocation shall be effective
without the consent of the Indenture Trustee.
(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 Trust created hereby."
(b) Section 11.12 of the Trust Agreement is hereby amended by
deleting the phrase "State of Utah" contained therein and inserting the
phrase "State of Connecticut" in lieu thereof.
SECTION 6. Ratification. Except as amended hereby, the Trust
------------
Agreement as heretofore supplemented continues and shall remain in full force
and effect in all respects.
SECTION 7. Miscellaneous. This Amendment 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. All covenants and agreements
contained herein and in the Trust Agreement 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 of the
Trust Agreement, its assigns.
4
<PAGE>
[First Amendment to Trust Agreement (1994 747 B)]
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner Participant shall bind its successors and assigns. The headings of the
various Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. This Amendment shall in
all respects be governed by, and construed in accordance with, the internal laws
of the State of Connecticut, including all matters of construction, validity and
performance.
* * *
5
<PAGE>
[First Amendment to Trust Agreement (1994 747 B)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
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 OF CONNECTICUT, NATIONAL
ASSOCIATION
By:_____________________________________
Title:__________________________________
6
<PAGE>
Reg. No. 33-57192 Reg No. 33-46033
Exhibit No. Exhibit No.
----------- -----------
Exhibit 4(n)(6) Exhibit 4(b)(47)
<PAGE>
S&S DRAFT
1/22/96
- --------------------------------------------------------------------------------
REDEMPTION AND REFINANCING AGREEMENT (1995 777 C)
Dated as of January 1, 1996
Among
UNITED AIR LINES, INC.,
as Lessee
_____________________________,
as Owner Participant
THE MITSUBISHI TRUST AND BANKING CORPORATION,
ACTING THROUGH ITS NEW YORK BRANCH,
as Original Loan Participant
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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 777-222 Aircraft
N767UA
Leased to United Air Lines, Inc.
<PAGE>
(1995 777 C)
INDEX TO REDEMPTION AND REFINANCING AGREEMENT
(1995 777 C)
Page
----
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. Redemption and Refinancing of Original Certificate.............. 4
SECTION 2. Adjustments to Exhibits to the Lease............................ 6
SECTION 3. Conditions Precedent............................................ 6
SECTION 4. Representations and Warranties.................................. 12
SECTION 5. Notices......................................................... 25
SECTION 6. Expenses........................................................ 25
SECTION 7. Miscellaneous................................................... 26
</TABLE>
EXHIBIT A MATURITY DATES, PRINCIPAL AMOUNTS
AND INTEREST RATES OF SERIES
1995 777 C CERTIFICATES
EXHIBIT A-1 INSTALLMENT PAYMENT DATES AND
INSTALLMENT PAYMENT PERCENTAGES
EXHIBIT A-2 ISSUANCE OF SERIES 1995 777 C
CERTIFICATES
EXHIBIT B FORM OF AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
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 (1995 777 C)
This REDEMPTION AND REFINANCING AGREEMENT (1995 777 C), dated as of
January 1, 1996 and effective as of the Effective Date, 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 OF
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (as successor
to State Street Bank and 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 (1995 777 C), dated as of May 1,
1995, as amended by the First Amendment to Trust Agreement (1995 777 C), dated
February __, 1996 and effective as of the Effective Date, 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. 1996-A1 and 1996-A2 thereto, each dated as of January 1,
1996, creating the 1996-A1 Pass Through Trust and the 1996-A2 Pass Through
Trust, respectively (the Basic Agreement, as so supplemented, being the "1996-A1
Pass Through Trust Agreement" and the "1996-A2 Pass Through Trust Agreement",
respectively, each of the 1996-A1 Pass Through Trust Agreement and the 1996-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, 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 Amended and Restated Trust
Indenture and Mortgage (1995 777 C), dated as of January 1, 1996 and effective
as of the Effective Date (the "Amended and Restated Indenture"), and (vi) THE
MITSUBISHI TRUST AND BANKING CORPORATION, acting through its New York Branch
(the "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 (1995 777 C), dated as of May 1, 1995 (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 (1995 777 C), dated February __, 1996 and
<PAGE>
effective as of the Effective Date, being herein called the "Participation
Agreement"), providing for the sale and lease of one Boeing Model 777-222
aircraft, bearing U.S. registration number N767UA and Manufacturer's Serial
Number 26918 (the "Aircraft");
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, the Owner Participant entered into a Trust Agreement
(1995 777 C), dated as of May 1, 1995 (such Trust Agreement, as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement No. 1
(1995 777 C), dated May 31, 1995, being herein called the "Original Trust
Agreement"; the Original Trust Agreement, as amended by the First Amendment to
Trust Agreement (1995 777 C), dated February __, 1996 and effective as of the
Effective Date, 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 Security Agreement (1995 777 C), dated as of May 1,
1995 (such Trust Indenture and Security Agreement, as supplemented by Trust
Agreement and Trust Indenture and Security Agreement Supplement No. 1 (1995 777
C), dated May 31, 1995 (the "Trust Supplement"), 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 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 (the "Original Certificate") was issued to the
Original Loan Participant as evidence of the loan then being made by the
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 (1995 777 C), dated as of May 1, 1995 (such Lease Agreement, as
supplemented by Lease Supplement No. 1 (1995 777 C), dated May 31, 1995, being
herein called the "Original Lease"; the Original Lease, as amended by the First
Amendment to Lease Agreement (1995 777 C), dated February __, 1996 and effective
as of the Effective Date, 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
<PAGE>
Agreement (1995 777 C), dated as of May 1, 1995 (the "Original Tax Indemnity
Agreement"), and in connection with the refinancing contemplated hereby, the
Lessee and the Owner Participant are entering into the First Amendment to Tax
Indemnity Agreement (as defined below) (the Original Tax Indemnity Agreement, as
amended by the First Amendment to Tax Indemnity Agreement, being called herein
the "Tax Indemnity Agreement");
WHEREAS, the parties hereto wish to effect an optional redemption of
the Original Certificate issued to the Original Loan Participant pursuant to the
Original 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 Original Certificate issued to the Original Loan Participant
pursuant to the Original Indenture, to issue Equipment Notes substantially in
the form set forth in Exhibits A-1 and A-2 to the Amended and Restated Indenture
(for the purposes hereof, "Equipment Notes" shall have the meaning set forth for
the term "Series 1995 777 C Certificates" in the 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 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 Original
Certificate issued to the Original Loan Participant pursuant to the Original
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 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 to the
Lease so as to reflect such adjustments;
<PAGE>
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 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 Lessee shall, on the Business Day preceding the Refinancing
Date, deposit with the Indenture Trustee an amount sufficient to pay
accrued but unpaid interest on the Original Certificate that shall be owing
to the Original Loan Participant on the Refinancing Date;
(ii) the Owner Trustee shall, in accordance with Section 2.01 of the
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;
(iii) the Indenture Trustee shall authenticate such Equipment Notes
pursuant to Section 2.02 of the Amended and Restated Indenture, and deliver
such Equipment Notes to the Pass Through Trustees as specified in Exhibit
A-2 against payment by the Pass Through Trustees of the amounts specified
in Exhibit A (the aggregate amounts being the "Refinancing Amount");
(iv) the Lessee shall on or prior to 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;
(v) the Indenture Trustee shall disburse to the Original Loan
Participant the amount of principal, interest and Break Amount, if any,
owing to the Original Loan Participant on the Refinancing Date with respect
to the Original Certificate issued to the Original Loan Participant
pursuant to the Original Indenture in accordance with Section 2.11 of the
Original Indenture and Section 20 of the Original Participation Agreement;
and
<PAGE>
(vi) the Indenture Trustee shall disburse to the Owner Participant an
amount equal to the difference between (x) the sum of the amounts specified
in clauses (i) and (iv) above and (y) the amount specified in clause (v)
above.
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, but subject to paragraph (c) of this Section 1, to execute and
deliver this Agreement, the First Amendment to the Participation Agreement, the
First Amendment to Lease Agreement and the Amended and Restated Indenture and,
subject to the satisfaction or waiver of the conditions set forth herein, to
take all actions necessary or desirable to effect the issuance of the Equipment
Notes and the redemption of the Original Certificate issued to the Original Loan
Participant pursuant to the Original Indenture.
(b) On the Refinancing Date, subject to the receipt by the Original
Loan Participant of the aggregate amount provided for in Section 20 of the
Original Participation Agreement, the Original Loan Participant shall deliver
the Original Certificate issued to the Original Loan Participant to the Owner
Trustee for cancellation by the Indenture Trustee. The 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 Original Certificate issued to the 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 the Original Loan
Participant any amount in respect of the redemption of the Original Certificate
issued to the Original Loan Participant pursuant hereto other than Break Amount,
if any, resulting from a failure of such redemption to occur, which amount shall
be paid through a Supplemental Rent payment by the Lessee as provided in the
Lease and the other Operative Documents, (iii) none of the First Amendment to
the Participation Agreement, the First Amendment to Lease Agreement, the Amended
and Restated Indenture or the First Amendment to Tax Indemnity Agreement shall
be deemed to have been delivered and (iv) the Original Certificate issued to the
Original Loan Participant shall remain outstanding and in full force and effect
and shall continue to be subject to the terms of the Original 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
<PAGE>
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 Original Certificate issued to the Original Loan Participant as described
herein and not to the redemption or refunding of any Equipment Notes or any
other Certificate (as defined in the Amended and Restated Indenture) issued
under the 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 to 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 Original Loan Participant:
(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 on the Refinancing
Date in connection with the redemption of the Original Certificate issued to the
Original Loan Participant, and all such amounts shall have been paid to the
Original Loan Participant.
(b) The Equipment Notes shall have been issued and authenticated in
accordance with the Amended and Restated Indenture, and there shall have been
transferred
<PAGE>
to the Indenture Trustee in immediately available funds the amounts referred to
above in Sections 1(a)(ii)-(iii).
(c) The Owner Trustee and the Indenture Trustee shall have entered
into an Amended and Restated Indenture in substantially the form of Exhibit B
which shall have been duly filed for recording with the FAA.
(d) The Lessee and the Owner Trustee shall have entered into the
First Amendment to Lease Agreement in substantially the form of Exhibit C, 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 Amendment to Participation Agreement in substantially the form of Exhibit
D and (ii) the Lessee and the Owner Participant shall have entered into the
First Amendment to Tax Indemnity Agreement (the "First Amendment to Tax
Indemnity Agreement").
(f) The Owner Participant and the Owner Trustee shall have entered
into the First Amendment to the Trust Agreement in substantially the form of
Exhibit E, 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 State of Connecticut, 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 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 First Amendment to 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):
<PAGE>
(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 Amended and Restated 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 Agreements and that all
conditions precedent specified herein required to be satisfied by the
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 First Amendment to 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 Amended and Restated
Indenture), 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
(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 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).
<PAGE>
(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
Amendment to the Participation Agreement, the First Amendment to Lease
Agreement, the First Amendment to 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
<PAGE>
(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 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 First Amendment to Lease Agreement, the Amended and
Restated Indenture and the First Amendment to 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 same effect as the opinion delivered by it on
the Delivery Date pursuant to Section 4(a)(xi) of the Original Participation
Agreement, but expanded to cover this Agreement, the First Amendment to Lease
Agreement, the First Amendment to Tax Indemnity Agreement and any other document
to be executed by the Lessee in connection with the transactions contemplated
hereby.
(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, but expanded to cover this Agreement, the First Amendment to Lease
Agreement, the First Amendment to Tax Indemnity Agreement and any other
<PAGE>
documents to be executed by the Lessee in connection with the transactions
contemplated hereby.
(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, but expanded to cover this Agreement, the documentation relating to
the assumption by the Owner Trustee of the obligations of the Original Owner
Trustee under the Operative Documents, the First Amendment to Trust Agreement,
the First Amendment to Lease Agreement, the Amended and Restated Indenture and
any other documents to be executed by the Owner Trustee in connection with the
transactions contemplated hereby.
(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 (but with respect also to the Pass Through Trustees and the Pass Through
Trust Agreement) as the opinion delivered on the Delivery Date pursuant to
Section 4(a)(xvi) of the Original Participation Agreement, but expanded to cover
this Agreement, the documentation relating to the assumption by the Indenture
Trustee of the obligations of the Original Indenture Trustee under the Operative
Documents, the First Amendment to Lease Agreement, the Amended and Restated
Indenture and any other documents to be executed by the Pass Through Trustees
and the Indenture Trustee in connection with the transactions contemplated
hereby.
(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 White & Case, 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, but expanded to cover this Agreement, the First Amendment to Trust
Agreement, the First Amendment to Tax Indemnity Agreement, and any other
documents to be executed by the Owner Participant in connection with the
transactions contemplated hereby.
(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 Lytle Soule & Curlee, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the Amended and
Restated Indenture, the First Amendment to Lease Agreement and the First
Amendment to Trust Agreement, (i) as the opinion delivered by it pursuant to
Section 4(a)(xv) of the Original Participation Agreement
<PAGE>
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 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 by the
Amended and Restated Indenture, the First Amendment to Participation Agreement,
the First Amendment to Lease Agreement and the First Amendment to Trust
Agreement. Such report and certificates shall recognize the redemption of the
Original Certificate issued to the Original Loan Participant consummated
pursuant to this Agreement.
(w) The Original Loan Participant shall have executed and delivered a
receipt and release of indebtedness as to the Original Certificate issued to the
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
Amended and Restated Indenture, the First Amendment to Participation Agreement,
the First Amendment to Lease Agreement, the First Amendment to Trust Agreement
and the First Amendment to Tax Indemnity Agreement, respectively.
Promptly upon the recording with the FAA of the Amended and Restated
Indenture, the First Amendment to Lease Agreement and the First Amendment to
Trust Agreement, the Lessee will cause Lytle Soule & Curlee, 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:
<PAGE>
(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 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; has the
corporate power and authority to conduct its business as it is
presently being conducted and to hold under lease the Aircraft; and
has or had, as appropriate, the corporate power and authority to enter
into this Agreement, the Original Lease, the Lease Supplement covering
the Aircraft, the First Amendment to Lease Agreement, the Original
Participation Agreement, the First Amendment to Participation
Agreement, the Original Tax Indemnity Agreement, the First Amendment
to 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
First Amendment to Lease Agreement, the Original Participation
Agreement, the First Amendment to Participation Agreement, the
Original Tax Indemnity Agreement, the First Amendment to 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, or by the Refinancing Date will have been duly
obtained, and are, or as of the Refinancing Date will be, in full
force and effect, and does not
<PAGE>
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 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 First Amendment to Lease Agreement, the Original
Participation Agreement, the First Amendment to Participation
Agreement, the Original Tax Indemnity Agreement, the First Amendment
to 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, required or requires, as appropriate, 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(u) 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 First Amendment to Lease
Agreement, the Original
<PAGE>
Participation Agreement, the First Amendment to Participation
Agreement, the Original Tax Indemnity Agreement, the First Amendment
to 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 Amendment to Trust Agreement, the Original
Lease, the Lease Supplement covering the Aircraft, the First Amendment
to Lease Agreement, the Original Indenture, the Trust Supplement, the
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 or
presented in due form for filing with the appropriate filing office(s)
in the State of Illinois) and the Uniform Commercial Code of the State
of Connecticut (which financing statements have been duly filed or
presented in due form for filing with the appropriate filing office(s)
in the State of Connecticut) 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 First Amendment to
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>
(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 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;
<PAGE>
(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
Original Tax Indemnity Agreement, the First Amendment to Tax Indemnity
Agreement, the Original Trust Agreement and the First Amendment to
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
Original Tax Indemnity Agreement, the First Amendment to Tax Indemnity
Agreement, the Original Trust Agreement and the First Amendment to
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 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
<PAGE>
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,
contract, 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, if
determined adversely to the Owner Participant, would materially
adversely affect the financial condition of the Owner Participant or
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, assets of any "employee
benefit plan", as defined in Section 3(3) 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
(viii) neither the Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that none of the Lessee, the
Underwriters or Capstar Partners, Inc. is acting on behalf of the
Owner Participant) has directly or indirectly offered any Equipment
Notes or any interest in or any
<PAGE>
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 of Connecticut, National
Association, in its individual capacity ("SSBTC") 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 SSBTC or the Owner Trustee of any of the terms and
conditions of this Agreement, the Amended and Restated Indenture, the
First Amendment to Lease Agreement, the First Amendment to
Participation Agreement, the First Amendment to Trust Agreement and
the Equipment Notes 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 the transactions contemplated by this Agreement,
the Amended and Restated Indenture, the Lease Agreement, the
Participation Agreement or the Trust Agreement will violate any
federal or Connecticut law or regulation relating to the banking or
trust powers of SSBTC 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 or
instruments to which it is a party or by which its properties may be
bound or affected;
(ii) each of the First Amendment to Trust Agreement, this
Agreement, the Amended and Restated Indenture, the First Amendment to
Lease Agreement, the First Amendment to 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 SSBTC, and there are no Liens affecting the title of
the Owner Trustee to the Aircraft 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, the Participation
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;
(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)
<PAGE>
which has been caused by or relates to SSBTC and which is presently
continuing;
(v) SSBTC is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the corporate power and authority to enter into
this Agreement, the First Amendment to Trust Agreement, the First
Amendment to Participation Agreement, and to perform its obligations
under this Agreement, the Trust Agreement and the Participation
Agreement;
(vi) each of the First Amendment to Trust Agreement, this
Agreement, and the First Amendment to Participation Agreement has been
duly authorized by all necessary corporate action on its part;
(vii) each of this Agreement, the Trust Agreement and the
Participation Agreement on the Refinancing Date will constitute a
legal, valid and binding obligation of SSBTC enforceable against it in
accordance with the terms thereof;
(viii) the principal place of business of SSBTC and the Owner
Trustee 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 750 Main Street, Suite 1114, Hartford,
Connecticut 06103, Attention: Corporate Trust Department and SSBTC
agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, 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 Connecticut State or local governmental
authority or agency or any United States federal governmental
authority or agency regulating the banking or trust powers of SSBTC is
required for the execution and delivery of the First Amendment to
Trust Agreement, this Agreement or the First Amendment to
Participation Agreement by SSBTC or the Owner Trustee, as the case may
be, or for the consummation of the transactions contemplated by the
Trust Agreement, this Agreement or the Participation Agreement or any
other of the Operative Documents to which SSBTC or the Owner Trustee,
as the case may be, 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;
<PAGE>
(x) SSBTC 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, and no responsible officer or
responsible employee of SSBTC has knowledge of any such offer or
solicitation, except (A) for the Original Certificate, (B) as set
forth in Section 7(a)(xi) of the Participation Agreement and (C) as
contemplated hereby;
(xi) SSBTC is a "citizen of the United States" as defined in
Section 40102(a)(15) of the Act; and
(xii) there are no pending or, to the knowledge of SSBTC,
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 this Agreement, the Participation Agreement,
the Trust Agreement, the Lease, the Owner Trustee's Purchase Agreement
(as defined in the Participation Agreement), the Amended and Restated
Indenture, the Equipment Notes or any other documents executed by the
Owner Trustee or SSBTC in connection with the transactions
contemplated by the Operative Documents.
(II) State Street Bank and Trust Company of Connecticut, National
Association, solely in its capacity as Owner Trustee further represents and
warrants that:
(i) SSBTC is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the corporate power and authority to enter into
this Agreement, the First Amendment to Trust Agreement and the First
Amendment to Participation Agreement and to perform its obligations
under this Agreement, the Trust Agreement and the Participation
Agreement;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement and the First Amendment to Trust Agreement by the
Owner Participant, each of the First Amendment to Trust Agreement,
this Agreement, the Amended and Restated Indenture, the First
Amendment to Lease Agreement, the First Amendment to 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 Trust Agreement, the Lease, the Participation
Agreement and the Amended and Restated Indenture, on the Refinancing
Date, will constitute a legal, valid and
<PAGE>
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, and no responsible
officer or responsible employee of the Owner Trustee has knowledge of
any such offer or solicitation, except (A) for the Original
Certificate, (B) as set forth in Section 7(a)(xi) of the Participation
Agreement and (C) as contemplated hereby; and
(iv) there are no pending or, to the knowledge of SSBTC,
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 Participation Agreement,
the Trust Agreement, the Lease, the Owner Trustee's Purchase Agreement
(as defined in the Participation Agreement), the 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 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
Amended and Restated Indenture, and the First Amendment to
Participation Agreement, to perform its obligations under this
Agreement, the Amended and Restated Indenture, the 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
<PAGE>
Date and, in its capacity as Pass Through Trustee, execute,
authenticate and deliver the Pass Through Certificates;
(iii) this Agreement, the Amended and Restated Indenture, the
First Amendment to 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 Amended and Restated
Indenture, the 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 or instrument
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 Amended and Restated Indenture,
the First Amendment to 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 or, in the case of the Pass Through
Certificates, executed and 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 Amended and Restated Indenture, the Participation
Agreement and each Pass Through Trust Agreement constitutes on the
Refinancing Date the legal, valid and binding obligation of each of
the parties 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 and the Pass Through Certificates, the authentication or, in the
case of the Pass Through Certificates, the execution and
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 Amended and Restated Indenture, the
<PAGE>
First Amendment to Participation Agreement, the Pass Through Trust
Agreements, the Equipment Notes or the Pass Through Certificates, 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, by the Equipment Notes 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 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 and the Pass
Through Certificates, the authentication) and delivery by it as a
party in any such capacity to this Agreement, the Amended and Restated
Indenture, the First Amendment to Participation Agreement, any Pass
Through Trust Agreement, the Equipment Notes or the Pass Through
Certificates or performance by it as a party in any such capacity of
this Agreement, the Amended and Restated Indenture, the Participation
Agreement, the Pass Through Trust Agreements, the Equipment Notes or
the Pass Through Certificates (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 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 either Pass Through
Trustee 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
<PAGE>
the ability of FSBU, the Indenture Trustee or either Pass Through
Trustee to perform its respective obligations as a party in any such
capacity under, any of this Agreement, the Amended and Restated
Indenture, the Participation Agreement, the relevant Pass Through
Trust Agreement, the Equipment Notes or the Pass Through Certificates;
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 and no Pass Through Trustee is in
default under any respective Pass Through Trust Agreement.
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) 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 by the Owner Participant as contemplated by
Sections 16 and 20(a)(6) of the Participation Agreement.
(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;
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, the fees and expenses of its special counsel)
and the Lessee shall pay all other Transaction Expenses as aforesaid.
(c) SSBTC 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 SSBTC (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 SSBTC
-------- -------
shall be liable hereunder in its individual capacity to the
<PAGE>
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 SSBTC shall be released from all further duties and obligations hereunder,
without prejudice to any claims against SSBTC or such predecessor owner trustee
for any default by SSBTC 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, the Original Loan Participant, the Indenture Trustee and its
successors as Indenture Trustee (and any additional trustee appointed) under the
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 1996-A1 Pass Through Trust Agreement or the
1996-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 Original Loan Participant or
to have any rights or benefits hereunder. THIS AGREEMENT SHALL IN 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>
IN WITNESS WHEREOF, the parties hereto have caused this Redemption and
Refinancing Agreement (1995 777 C) 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
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except
as expressly provided for herein,
but solely as Owner Trustee
By:
-------------------------------------
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except
as expressly provided for herein,
but solely as Owner Trustee Parent Guarantor
By:
-------------------------------------
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, ACTING THROUGH ITS NEW
YORK BRANCH,
as Original Loan Participant
By:
-------------------------------------
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
as Pass Through Trustee
By:
-------------------------------------
Name:
Title:
<PAGE>
(1995 777C)
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-------------------------------------
Name:
Title:
<PAGE>
(1995 777 C)
Exhibit A to
Redemption and
Refinancing Agreement
(1995 777 C)
<TABLE>
<CAPTION>
Maturity Dates, Principal Amounts and
-------------------------------------
Interest Rates of Series 1995 777 C Certificates
------------------------------------------------
Principal Interest Rate
Maturity Date Amount Per Annum
------------- --------- -------------
<S> <C> <C> <C>
Series 1995 777 C1
Series 1995 777 C2
</TABLE>
<PAGE>
(1995 777 C)
Exhibit A-1 to
Redemption and
Refinancing Agreement
(1995 777 C)
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>
Installment Payment Installment Payment
------------------- --------------------
Date Percentage
---- ----------
<S> <C>
TOTAL %
</TABLE>
<PAGE>
A-1-2 (1995 777 C)
Installment Certificate No. 2 - Maturity Date:
<TABLE>
<CAPTION>
Installment Payment Installment Payment
------------------- --------------------
Date Percentage
---- ----------
<S> <C>
TOTAL %
</TABLE>
<PAGE>
(1995 777 C)
Exhibit A-2 to
Redemption and
Refinancing Agreement
(1995 777 C)
Issuance of Series 1995 777 C Certificates
------------------------------------------
The Series 1995 777 C Loan Certificates issued hereunder shall be
issued to and shall be payable to each of the Pass Through Trustees under the
[1996-A1] Pass Through Trust Agreement and the [1996-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:
[1996 A1] Trust:
____% Certificate due _________
[1996 A2] Trust:
____% Certificate due _________
<PAGE>
(1995 777 C)
Exhibit B to
Redemption and
Refinancing Agreement
(1995 777 C)
Form of
Amended and Restated Trust Indenture and Mortgage
-------------------------------------------------
<PAGE>
(1995 777 C)
Exhibit C to
Redemption and
Refinancing Agreement
(1995 777 C)
Form of
First Amendment to Lease Agreement
----------------------------------
<PAGE>
(1995 777 C)
Exhibit D to
Redemption and
Refinancing Agreement
(1995 777 C)
Form of
First Amendment to Participation Agreement
------------------------------------------
<PAGE>
(1995 777 C)
Exhibit E to
Redemption and
Refinancing Agreement
(1995 777 C)
Form of
First Amendment to Trust Agreement
----------------------------------
<PAGE>
(1994 747 B)
S&S DRAFT
1/25/96
- --------------------------------------------------------------------------------
REDEMPTION AND REFINANCING AGREEMENT (1994 747 B)
Dated as of January 1, 1996
Among
UNITED AIR LINES, INC.,
as Lessee
--------------------------------,
as Owner Participant
THE MITSUBISHI TRUST AND BANKING CORPORATION,
ACTING THROUGH ITS NEW YORK BRANCH,
as Original Loan Participant
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
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 747-451 Aircraft
N106UA
Leased to United Air Lines, Inc.
- --------------------------------------------------------------------------------
<PAGE>
(1994 747 B)
INDEX TO REDEMPTION AND REFINANCING AGREEMENT
(1994 747 B)
<TABLE>
<CAPTION>
page
----
<S> <C>
SECTION 1. Redemption and Refinancing of Original Certificate............. 4
SECTION 2. Adjustments to Exhibits to the Lease........................... 6
SECTION 3. Conditions Precedent........................................... 6
SECTION 4. Representations and Warranties................................. 12
SECTION 5. Notices........................................................ 25
SECTION 6. Expenses....................................................... 25
SECTION 7. Miscellaneous.................................................. 25
</TABLE>
EXHIBIT A MATURITY DATES, PRINCIPAL AMOUNTS
AND INTEREST RATES OF SERIES
1994 747 B CERTIFICATES
EXHIBIT A-1 INSTALLMENT PAYMENT DATES AND
INSTALLMENT PAYMENT PERCENTAGES
EXHIBIT A-2 ISSUANCE OF SERIES 1994 747 B
CERTIFICATES
EXHIBIT B FORM OF AMENDED AND RESTATED
TRUST INDENTURE AND MORTGAGE
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 (1994 747 B)
This REDEMPTION AND REFINANCING AGREEMENT (1994 747 B), dated as of
January 1, 1996 and effective as of the Effective Date, 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 OF CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association (as successor to State
Street Bank and 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 (1994 747 B), dated as of August
1, 1994, as amended by the First Amendment to Trust Agreement (1994 747 B),
dated February __, 1996 and effective as of the Effective Date, 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. 1996-A1 and 1996-A2 thereto, each dated
as of January 1, 1996, creating the 1996-A1 Pass Through Trust and the 1996-A2
Pass Through Trust, respectively (the Basic Agreement, as so supplemented, being
the "1996-A1 Pass Through Trust Agreement" and the "1996-A2 Pass Through Trust
Agreement", respectively, each of the 1996-A1 Pass Through Trust Agreement and
the 1996-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, 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 Amended and
Restated Trust Indenture and Mortgage (1994 747 B), dated as of January 1, 1996
and effective as of the Effective Date (the "Amended and Restated Indenture"),
and (vi) THE MITSUBISHI TRUST AND BANKING CORPORATION, acting through its New
York Branch (the "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 (1994 747 B), dated as of August 1, 1994 (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 (1994 747 B), dated February __, 1996 and
<PAGE>
2
effective as of the Effective Date, being herein called the "Participation
Agreement"), providing for the sale and lease of one Boeing Model 747-451
aircraft, bearing U.S. registration number N106UA and Manufacturer's Serial
Number 26474 (the "Aircraft");
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, the Owner Participant entered into a Trust Agreement
(1994 747 B), dated as of August 1, 1994 (such Trust Agreement, as supplemented
by Trust Agreement and Trust Indenture and Security Agreement Supplement No. 1
(1994 747 B), dated August 1, 1994, being herein called the "Original Trust
Agreement"; the Original Trust Agreement, as amended by the First Amendment to
Trust Agreement (1994 747 B), dated February __, 1996 and effective as of the
Effective Date, 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 Security Agreement (1994 747 B), dated as of August
1, 1994 (such Trust Indenture and Security Agreement, as supplemented by Trust
Agreement and Trust Indenture and Security Agreement Supplement No. 1 (1994 747
B), dated August 1, 1994 (the "Trust Supplement"), 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 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 (the "Original Certificate") was issued to the
Original Loan Participant as evidence of the loan then being made by the
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 (1994 747 B), dated as of August 1, 1994 (such Lease Agreement, as
supplemented by Lease Supplement No. 1 (1994 747 B), dated August 1, 1994, being
herein called the "Original Lease"; the Original Lease, as amended by the First
Amendment to Lease Agreement (1994 747 B), dated February __, 1996 and effective
as of the Effective Date, 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
<PAGE>
3
Agreement (1994 747 B), dated as of August 1, 1994 (the "Original Tax Indemnity
Agreement"), and in connection with the refinancing contemplated hereby, the
Lessee and the Owner Participant are entering into the First Amendment to Tax
Indemnity Agreement (as defined below) (the Original Tax Indemnity Agreement as
amended by the First Amendment to Tax Indemnity Agreement, being called herein
the "Tax Indemnity Agreement");
WHEREAS, the parties hereto wish to effect an optional redemption of
the Original Certificate issued to the Original Loan Participant pursuant to the
Original 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 Original Certificate issued to the Original Loan Participant
pursuant to the Original Indenture, to issue Equipment Notes substantially in
the form set forth in Exhibits A-1 and A-2 to the Amended and Restated Indenture
(for the purposes hereof, "Equipment Notes" shall have the meaning set forth for
the term "Series 1994 747 B Certificates" in the 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 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 Original
Certificate issued to the Original Loan Participant pursuant to the Original
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
<PAGE>
4
Participation Agreement, and to amend Exhibits B, C, D and H to 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 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
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;
(ii) the Indenture Trustee shall authenticate such Equipment Notes
pursuant to Section 2.02 of the Amended and Restated Indenture, and deliver
such Equipment Notes to the Pass Through Trustees as specified in Exhibit
A-2 against payment by the Pass Through Trustees of the amounts specified
in Exhibit A (the aggregate amounts being the "Refinancing Amount");
(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; and
(iv) the Indenture Trustee shall disburse to the Original Loan
Participant the amount of principal, interest and Break Amount, if any,
owing to the Original Loan Participant on the Refinancing Date with respect
to the Original Certificate issued to the Original Loan Participant
pursuant to the Original Indenture in accordance with Section 2.11 of the
Original Indenture and Section 20 of the Original Participation Agreement.
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 Amendment to the
Participation Agreement, the First Amendment to
<PAGE>
5
Lease Agreement and the 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 Original Certificate issued to the Original Loan Participant
pursuant to the Original Indenture.
(b) On the Refinancing Date, subject to the receipt by the Original
Loan Participant of the aggregate amount provided for in Section 20 of the
Original Participation Agreement, the Original Loan Participant shall deliver
the Original Certificate issued to the Original Loan Participant to the Owner
Trustee for cancellation by the Indenture Trustee. The 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 Original Certificate issued to the 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 the Original Loan
Participant any amount in respect of the redemption of the Original Certificate
issued to the Original Loan Participant pursuant hereto other than Break Amount,
if any, resulting from a failure of such redemption to occur, (iii) none of the
the First Amendment to the Participation Agreement, the First Amendment to Lease
Agreement and the Amended and Restated Indenture, the First Amendment to Tax
Indemnity Agreement shall be deemed to have been delivered and (iv) the Original
Certificate issued to the Original Loan Participant shall remain outstanding and
in full force and effect and shall continue to be subject to the terms of the
Original 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 Original Certificate issued to the Original Loan Participant as described
herein and not to the
<PAGE>
6
redemption or refunding of any Equipment Notes or any other Certificate (as
defined in the Amended and Restated Indenture) issued under the 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 to 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 Original Loan Participant:
(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 Original Certificate issued to the Original Loan
Participant on the Refinancing Date, and such amounts shall have been paid to
the Original Loan Participant.
(b) The Equipment Notes shall have been issued and authenticated in
accordance with the Amended and Restated Indenture, and there shall have been
transferred to the Indenture Trustee in immediately available funds the amounts
referred to above in Sections 1(a)(ii)-(iii).
(c) The Owner Trustee and the Indenture Trustee shall have entered
into an Amended and Restated Indenture in substantially the form of Exhibit B
which shall have been duly filed for recording with the FAA.
(d) The Lessee and the Owner Trustee shall have entered into the
First Amendment to Lease Agreement in substantially the form of Exhibit C, which
shall have been duly filed for recording with the FAA.
<PAGE>
7
(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 Amendment to Participation Agreement in substantially the form of
Exhibit D and (ii) the Lessee and the Owner Participant shall have entered into
the First Amendment to Tax Indemnity Agreement (the "First Amendment to Tax
Indemnity Agreement").
(f) The Owner Participant and the Owner Trustee shall have entered
into the First Amendment to the Trust Agreement in substantially the form of
Exhibit E, 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 State of Connecticut, 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 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 First Amendment to 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 market
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 Amended and Restated 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 Agreements and that all
conditions precedent specified herein required to be satisfied by the
Lessee prior to the issuance of the Equipment Notes have been
satisfied; and
<PAGE>
8
(iii) revised Exhibits B, C, D and H to the Lease, as provided
for in the First Amendment to 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 Amended and Restated
Indenture), 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
(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 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
<PAGE>
9
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
Amendment to the Participation Agreement, the First Amendment to Lease
Agreement, the First Amendment to 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:
<PAGE>
10
(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 First Amendment to Lease Agreement, the Amended and
Restated Indenture and the First Amendment to 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 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 (but with respect also to the Pass Through Trustees and the Pass Through
Trust Agreement) 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
<PAGE>
11
them from Hunton & Williams, 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 Lytle Soule & Curlee, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the Amended and
Restated Indenture, the First Amendment to Lease Agreement and the First
Amendment to 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 opinion
addressed to them from Vedder, Price, Kaufman & Kammholz, special counsel for
the Lessee, substantially to the same effect as the opinion delivered pursuant
to Section 5 of the Underwriting Agreement, dated January __, 1996 (the
"Underwriting Agreement"), among the Lessee, Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and NatWest Capital Markets Limited) (the
"Underwriters").
(w) 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 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 by the
Amended and Restated Indenture, the First Amendment to Participation Agreement,
the First Amendment to Lease Agreement and the First Amendment to Trust
Agreement. Such report and certificates shall recognize the redemption of the
Original Certificate issued to the Original Loan Participant consummated
pursuant to this Agreement.
(x) The Original Loan Participant shall have executed and delivered a
receipt and release of indebtedness as to the Original Certificate issued to the
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
<PAGE>
12
"Participation Agreement", the "Lease", the "Trust Agreement" or the "Tax
Indemnity Agreement" shall be to such documents as amended by the Amended and
Restated Indenture, the First Amendment to Participation Agreement, the First
Amendment to Lease Agreement, the First Amendment to Trust Agreement and the
First Amendment to Tax Indemnity Agreement, respectively.
Promptly upon the recording with the FAA of the Amended and Restated
Indenture, the First Amendment to Lease Agreement and the First Amendment to
Trust Agreement, the Lessee will cause Lytle Soule & Curlee, 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 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; has the
corporate power and authority to conduct its business as it is
presently being conducted and to hold under lease the Aircraft; and
has or had, as appropriate, the corporate power and authority to enter
into this Agreement, the Original Lease, the Lease Supplement covering
the Aircraft, the First Amendment to Lease Agreement, the Original
Participation Agreement, the First Amendment to Participation
Agreement, the Original Tax Indemnity Agreement, the First Amendment
to Tax Indemnity Agreement, the Basic Agreement, each Pass Through
Trust Agreement Supplement and the
<PAGE>
13
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
First Amendment to Lease Agreement, the Original Participation
Agreement, the First Amendment to Participation Agreement, the
Original Tax Indemnity Agreement, the First Amendment to 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 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 First Amendment to Lease Agreement, the Original
Participation Agreement, the First Amendment to Participation
Agreement, the Original Tax Indemnity Agreement, the First Amendment
to 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, required or requires, as appropriate, 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
<PAGE>
14
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 First Amendment to Lease
Agreement, the Original Participation Agreement, the First Amendment
to Participation Agreement, the Original Tax Indemnity Agreement, the
First Amendment to 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 Amendment to Trust Agreement, the Original
Lease, the Lease Supplement covering the Aircraft, the First Amendment
to Lease Agreement,
<PAGE>
15
the Original Indenture, the Trust Supplement, the 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 State of Connecticut (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 First
Amendment to 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;
(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 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,
<PAGE>
16
(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;
(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
Original Tax Indemnity Agreement, the First Amendment to Tax Indemnity
Agreement, the Original Trust Agreement and the First Amendment to
Trust Agreement and to perform its obligations under this Agreement,
the Participation Agreement, the Tax Indemnity Agreement and the Trust
Agreement;
<PAGE>
17
(ii) each of this Agreement, the Original Participation
Agreement, the First Amendment to Participation Agreement, the
Original Tax Indemnity Agreement, the First Amendment to Tax Indemnity
Agreement, the Original Trust Agreement and the First Amendment to
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 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, if
determined adversely to the Owner Participant, would materially
adversely affect the financial condition of the Owner Participant or
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;
<PAGE>
18
(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
(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 of Connecticut, National
Association, in its individual capacity ("SSBTC") 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 SSBTC or the Owner Trustee of any of the terms and
conditions of this Agreement, the Amended and Restated Indenture, the
First Amendment to Lease Agreement, the First Amendment to
Participation Agreement, and the Equipment Notes will violate any
federal or Connecticut law or regulation relating to the banking or
trust powers of SSBTC, 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 Amendment to Trust Agreement, this
Agreement, the Amended and Restated Indenture, the First Amendment to
Lease Agreement, the First Amendment to 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;
<PAGE>
19
(iii) 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 resulting from any act or claim
against SSBTC 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 SSBTC
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 SSBTC
or the Owner Trustee and which is presently continuing;
(v) SSBTC is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the corporate power and authority to enter into
this Agreement, the First Amendment to Trust Agreement, the First
Amendment to Participation Agreement, and to perform its obligations
under this Agreement, the Trust Agreement and the Participation
Agreement;
(vi) each of the First Amendment to Trust Agreement, this
Agreement, and the First Amendment to 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
SSBTC of any of the terms and conditions of this Agreement, the First
Amendment to Trust Agreement, the First Amendment to Participation
Agreement will violate any federal or Connecticut 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 Amendment to Trust Agreement, this
Agreement and the First Amendment to Participation Agreement has been,
or on the Refinancing Date will have been, duly executed and delivered
by it, and each of this Agreement, the Trust Agreement and the
Participation Agreement on the Refinancing Date will constitute a
legal, valid and binding obligation of SSBTC enforceable against it in
accordance with the terms thereof;
<PAGE>
20
(viii) the principal place of business of SSBTC and the Owner
Trustee 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 750 Main Street, Suite 1114, Hartford,
Connecticut 06103, Attention: Corporate Trust Department and SSBTC
agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, 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 Connecticut State or local governmental
authority or agency or any United States 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, of any of the transactions contemplated by the First Amendment
to Trust Agreement, this Agreement, the First Amendment to
Participation Agreement, or of any of the transactions contemplated by
any other of the Operative Documents to which SSBTC 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) SSBTC 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 Original Loan Participant and
the Owner Participant; and SSBTC 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) SSBTC 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 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 this Agreement,
the Participation Agreement, the Trust Agreement, the Lease, the Owner
Trustee's Purchase Agreement (as defined in the Participation
Agreement), the Amended and Restated Indenture,
<PAGE>
21
the Equipment Notes or any other documents executed by the Owner
Trustee or SSBTC in connection with the transactions contemplated by
the Operative Documents.
(II) State Street Bank and Trust Company of Connecticut, National
Association, solely in its capacity as Owner Trustee further represents and
warrants that:
(i) SSBTC is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the corporate power and authority to enter into
this Agreement, the First Amendment to Trust Agreement and the First
Amendment to Participation Agreement and to perform its obligations
under this Agreement, the Trust Agreement and the Participation
Agreement;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement and the First Amendment to Trust Agreement by the
Owner Participant, each of the First Amendment to Trust Agreement,
this Agreement, the Amended and Restated Indenture, the First
Amendment to Lease Agreement, the First Amendment to 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 Trust Agreement, the Lease, the Participation
Agreement and the 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 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; and
(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 Participation Agreement, the Trust Agreement, the
Lease, the Owner Trustee's Purchase
<PAGE>
22
Agreement (as defined in the Participation Agreement), the 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 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
Amended and Restated Indenture, and the First Amendment to
Participation Agreement, to perform its obligations under this
Agreement, the Amended and Restated Indenture, the 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 and, in its capacity as Pass Through Trustee,
execute, authenticate and deliver the Pass Through Certificates;
(iii) this Agreement, the Amended and Restated Indenture, the
First Amendment to 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 Amended and Restated
Indenture, the 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
<PAGE>
23
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 Amended and Restated Indenture,
the First Amendment to 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 or, in the case of the Pass Through
Certificates, executed and 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 Amended and Restated Indenture, the Participation
Agreement and each Pass Through Trust Agreement constitutes on the
Refinancing Date the legal, valid and binding obligation of each of
the parties 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 and the Pass Through Certificates, the authentication or, in the
case of the Pass Through Certificates, the execution and
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 Amended and Restated Indenture, the First
Amendment to Participation Agreement, the Pass Through Trust
Agreements, the Equipment Notes or the Pass Through Certificates, 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, by the Equipment Notes 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 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 and the Pass
Through Certificates, the authentication) and delivery by it as a
party in any such capacity to this Agreement, the Amended and Restated
Indenture, the First Amendment to Participation Agreement, any Pass
Through Trust Agreement, the Equipment
<PAGE>
24
Notes or the Pass Through Certificates or performance by it as a party
in any such capacity of this Agreement, the Amended and Restated
Indenture, the Participation Agreement, the Pass Through Trust
Agreements, the Equipment Notes or the Pass Through Certificates
(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 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 Amended and Restated Indenture, the Participation
Agreement, the relevant Pass Through Trust Agreement, the Equipment
Notes or the Pass Through Certificates; 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 and no Pass Through Trustee is in
default under any respective Pass Through Trust Agreement.
<PAGE>
25
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, the fees and
expenses of its special counsel) and the Lessee shall pay all other Transaction
Expenses as aforesaid.
(c) SSBTC 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 SSBTC (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 SSBTC
-------- -------
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 SSBTC shall be
released from all further duties and obligations hereunder, without prejudice to
any claims against SSBTC or such predecessor owner trustee for any default by
SSBTC 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
<PAGE>
26
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,
the Original Loan Participant, the Indenture Trustee and its successors as
Indenture Trustee (and any additional trustee appointed) under the 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 1996-A1 Pass Through Trust Agreement or the 1996-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 Original Loan Participant or to
have any rights or benefits hereunder. THIS AGREEMENT SHALL IN 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>
(1994 747 B)
IN WITNESS WHEREOF, the parties hereto have caused this Redemption and
Refinancing Agreement (1994 747 B) 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
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except
as expressly provided for herein,
but solely as Owner Trustee
By:
------------------------------------------
Name:
Title:
<PAGE>
(1994 747 B)
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except
as expressly provided for herein,
but solely as Owner Trustee Parent Guarantor
By:
------------------------------------------
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, ACTING THROUGH ITS NEW
YORK BRANCH,
as Original Loan Participant
By:
------------------------------------------
Name:
Title:
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
as Pass Through Trustee
By:
------------------------------------------
Name:
Title:
<PAGE>
(1994 747 B)
FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
------------------------------------------
Name:
Title:
<PAGE>
30
(1994 747 B)
Exhibit A to
Redemption and
Refinancing Agreement
Maturity Dates, Principal Amounts and
-------------------------------------
Interest Rates of Series 1994 747 B Certificates
------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Rate
Maturity Date Amount Per Annum
------------- --------- -------------
<S> <C> <C> <C>
Series 1994 747 B1
Series 1994 747 B2
</TABLE>
<PAGE>
A-1-1
(1994 747 B)
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:
<TABLE>
<CAPTION>
Installment Payment Installment Payment
------------------- --------------------
Date Percentage
---- ----------
<S> <C>
TOTAL %
</TABLE>
<PAGE>
A-1-2
(1994 747 B)
Installment Certificate No. 2 - Maturity Date:
<TABLE>
<CAPTION>
Installment Payment Installment Payment
------------------- --------------------
Date Percentage
---- ----------
<S> <C>
TOTAL %
</TABLE>
<PAGE>
(1994 747 B)
Exhibit A-2 to
Redemption and
Refinancing Agreement
Issuance of Series 1994 747 B Certificates
------------------------------------------
The Series 1994 747 B Loan Certificates issued hereunder shall be
issued to and shall be payable to each of the Pass Through Trustees under the
1996-A1 Pass Through Trust Agreement and the 1996-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:
[1994 B1] Trust:
____% Certificate due _________
[1994 B2] Trust:
____% Certificate due _________
<PAGE>
(1994 747 B)
Exhibit B to
Redemption and
Refinancing Agreement
Form of
Amended and Restated Trust Indenture and Mortgage
-------------------------------------------------
<PAGE>
(1994 747 B)
Exhibit C to
Redemption and
Refinancing Agreement
Form of
First Amendment to Lease Agreement
----------------------------------
<PAGE>
(1994 747 B)
Exhibit D to
Redemption and
Refinancing Agreement
Form of
First Amendment to Participation Agreement
------------------------------------------
<PAGE>
(1994 747 B)
Exhibit E to
Redemption and
Refinancing Agreement
Form of
First Amendment to Trust Agreement
----------------------------------
